This evening, the Centers for Medicare and Medicaid Services (CMS) released the CY 2019 final payment rule for Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS) and for the End-Stage Renal Disease (ESRD) program. The rule contains changes to the DMEPOS competitive bidding program as well to DME fee schedule payments where competitive bidding is not in effect In addition, it contains a payment update for the ESRD Prospective Payment System, changes to the ESRD quality program, and an expansion of the ESRD Transitional Drug Add-on Payment Adjustment (TDAPA). These changes are addressed in a separate summary.

Revamped DME Bidding Methodology to Raise Prices on Some Items, Significantly Lower Others

Certain items of DME are subject to CMS’ Competitive Bidding Program (CBP), which sets prices based on the median of supplier bids for all items in a given DME category. In the FY 2016 ESRD/DME Final Rule, CMS outlined an alternative competitive bidding methodology, “lead item bidding,” where bidders submit bids on the most-common (by paid units of service) product in a category and reimbursement is defined based on the ratio of previous fee schedules (specifically FY 2015) for these items.

CMS is now finalizing its proposal to shift to mandatory lead item bidding in future competitions (i.e. those taking effect after January 1, 2019) in order to simplify the bidding process and avoid “price inversions,” where more complex items of DME are actually priced lower than more complex items.

CMS will also set single payment amounts (SPAs) based on the maximum winning bid for the lead item, in an effort to ensure access and long-term sustainability of the CBP. CMS expects the increased reimbursement resulting from this change to be partially offset by (significant) decreases in SPAs for non-lead items, with an overall increase to Medicare payments of $10 million from 2019-2023 and $3 million to beneficiaries over the same time period. The average beneficiary will see an increase in cost sharing of $1.50 over this period.

In response to comments, CMS will consider subdividing certain diverse product categories. Generally, feedback was negative on CMS’ request for comments on subdividing large bidding areas.

No Return in Sight for Competitive Bidding, Interim Pricing Finalized

Existing competitive bidding contracts will end on December 31, 2018 and CMS has not yet announced a replacement competition. Consequently, there a gap in the CBP will begin on January 1, 2019. Until a new CBP can be designed, announced, bid, and implemented, CMS will allow any willing provider to supply currently-competitively-bid DME to Medicare beneficiaries via three temporary payment methodologies:

For current CBAs:

• CMS will adjust amounts for items/services furnished in former CBAs based on the single payment amounts (SPAs) in effect in the CBA on the last day before the CBP contract ends, and increased by the projected percentage change in the Consumer Price Index (CPI) for all Urban Consumers (CPI-U) for the 12-month period after the contract period ends.
• If the gap in CBP lasts longer than 12 months, fee schedule amounts will increase once every 12 months based on projected percentage change.
• Fee schedule rates for non-mail order diabetic testing supplies will remain at the current SPA rates until new rates are established in the national mail order program.

For non- CBAs that are not rural areas and are in contiguous U.S from January 1, 2019 through December 31, 2020:

• Finalized fee schedule is 100 percent of the current adjusted payment amounts.
• CMS declined to implement its alternative proposal to apply 50/50 blended rates to these areas instead.

For items/services furnished from January 1, 2019 through December 31, 2020 in areas that are currently non- CBAs and are either rural areas or non-contiguous areas.

• Fee schedule will be a blend of 50 percent of the CBP-adjusted payment amounts and 50 percent of the unadjusted fee schedule amounts.

CMS estimates that these changes will cost Medicare $1.05 billion and beneficiaries $260 million (or $65 per beneficiary) between 2019 and 2020 compared to applying competitive bidding prices nationwide.

Changes to Oxygen and Ventilator Payment Methodology

In this rule, CMS is finalizing its proposal to separate the payment classes for portable gaseous oxygen equipment and portable liquid oxygen equipment, and to increase the add-on amount for portable liquid oxygen equipment so that it is equal to current add-on amounts for OGPE. Additionally, CMS will add a separate class for certain portable liquid oxygen contents. This change is estimated to be budget neutral. Finally, CMS is applying a budget neutrality offset to all oxygen, equipment classes, and HCPCS codes beginning January 1, 2019.

CMS will also implement a new payment method for multi-function ventilators effective on or after January 1, 2019. The monthly rental fee schedule amounts will include current amounts for ventilators plus additional payment for the average cost of the ventilator’s additional functions. The change is estimated to cost $15 million in Medicare benefit payments from January 2019-September 2023 but due to rounding is said to have no impact to Medicare beneficiary cost sharing.

New Requests for Information: New Product Categories in CBP

CMS is soliciting comments on additional product categories to phase into the next round of competitive bidding. Proposed new categories include ventilators and off-the-shelf knee and back braces. Comments are due to CMS by midnight on December 3, 2018.

OLD Requests for Information: Data Sources for Gap-Filling New DMEPOS Items

CMS received comments on the gap-filling process for new DMEPOS items, including discontinuing application of past CPI freezes, eliminating the 1987 base year (would require a legislative change), additional criteria for determining whether items are comparable, and additional HCPCS codes for new technology. CMS states that they will take these comments into consideration in future rulemaking.