The Round 2 “Recompete”
What should we expect to see from this –
and future – rounds of competitive bidding?
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Van G. Miller: 1948 - 2015
• I am very sorry to inform you that our leader, Van G. Miller,
passed away Sunday afternoon. Van was the founder, heart
and soul of VGM Group and will be sorely missed. He was
67 years old and had just celebrated the marriage of his
youngest son, Christopher, on Saturday. It appears he died
of a massive heart attack at his home in Waterloo. Van
founded VGM in 1986 and has been the Chairman and CEO
ever since. Please keep Van and his family in your thoughts
and prayers.
• Van built a great company in VGM. He was very proud of
the VGM team, 850+ associates, who serve our members,
clients, partners, referral sources and patients whenever
and wherever there is a need or an opportunity to make a
positive impact.
• We’ll need to rely on the lessons Van taught us and the
values he instilled in our company in these coming days and
weeks as we go forward without him.
• Fortunately, Van had prepared the Company for transition
beginning years ago. Acts like setting up the ESOP,
activating a strong Board and Trustee group, delegating
responsibilities and decision-making across the
organizational structure and teaching so many important
lessons to our team members all helped set our Company
up for stability and success going forward.
• We are a strong Company. Today we all lost a great man,
leader, mentor and friend. But we need to rally, focus on
doing our jobs and serving our customers – because that’s
what Van would have expected us to do.
Some background…
• The Centers for Medicare & Medicaid Services (CMS) is
required by law to recompete contracts under the Durable
Medical Equipment, Prosthetics, Orthotics, and Supplies
(DMEPOS) Competitive Bidding Program at least once every
three years.
• The “Round 2” (and a national diabetic supply mail-order
program) contract period will expire on June 30, 2016.
• The Round 2 “Recompete” and the national mail-order
recompete contracts are scheduled to become effective on
July 1, 2016, and will expire on December 31, 2018.
Where are the “Round 1” bidding areas?
•
•
•
There are 9 “metropolitan statistical areas” (MSA), and the bidding areas (CBAs)
are separated by state line. There are currently 9 CBAs in the Round 1 Recompete.
These MSAs cover about 6% of eligible fee for service (traditional Medicare)
beneficiaries.
Beneficiaries who enroll in Part C “Medicare Advantage Plans” contracted with
HMO’s (e.g., Humana) are NOT included in the program.
1.
• Charlotte – Gastonia – Rock Hill (North Carolina and South Carolina)
2.
• Cincinnati – Middletown (Ohio, Kentucky and Indiana)
3.
• Cleveland – Elyria – Mentor (Ohio)
4.
• Dallas – Fort Worth – Arlington (Texas)
5.
• Kansas City (Missouri and Kansas)
6.
• Miami – Fort Lauderdale – Pompano Beach (Florida)
7.
• Orlando – Kissimmee – Sanford (Florida)
8.
• Pittsburgh (Pennsylvania)
9.
• Riverside – San Bernardino – Ontario (California)
• The competitive bidding areas (CBAs) within these MSAs are identified by counties and ZIP
codes. The CBA is the area wherein only contract suppliers may furnish competitively bid
items to beneficiaries unless an exception is permitted by regulations.
Where are “Round 2” bidding areas?
• There are 90 additional MSAs, and the CBAs are now
separated by state line. There are 117 CBAs in the Round 2
Recompete.
• These MSAs cover about 45% of eligible fee for service
(traditional Medicare) beneficiaries.
• Again, beneficiaries who enroll in Part C “Medicare
Advantage Plans” contracted with HMO’s (e.g., Humana)
are NOT included in the program.
• The national mail-order recompete (mail-order diabetic
testing supplies) CBA includes all ZIP codes in all parts of
the United States, including the 50 states, the District of
Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and
American Samoa.
• “To achieve Medicare savings for DME, the
Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 required that
CMS implement the CBP for certain DME. The
first completed CBP round—the round 1
rebid—operated in nine competitive bidding
areas.
• CMS reported total savings of more than $580
million at the end of the round 1 rebid’s 3-year
term due to lower payments and decreased
utilization.
As you know…
• Contracts awarded in CBP's round 1 rebid were effective on
January 1, 2011, and ended on December 31, 2013.
• The CBP is currently operating as the round 1 recompete in nine
competitive bidding with contracts awarded effective January 1,
2014, through December 31, 2016
• “Round 2” is in an additional 100 competitive bidding areas
(with contracts awarded effective July 1, 2013, through June 30,
2016), and as the national mail-order program for diabetic
testing supplies - competed at the same time as the round 2
contracts, with the same effective contract dates.
What GAO Found
• GAO found that a similar percentage of bidding suppliers—between
30 and 43 percent—were awarded contracts in the round 1 rebid,
round 1 recompete, and round 2.
• Fewer bidding suppliers—7 percent—were awarded a contract in
the national mail-order program. Although the percentages of bids
submitted that resulted in contracts varied by round, the reasons
for bid disqualification—such as unacceptable financial
documentation or failure to meet all state licensure requirements—
were generally similar across CBP rounds.
• Many bidding suppliers benefited from submitting their paperwork
by a certain date—known as the covered document review date—
after which CMS informed them of any missing financial
documentation and allowed them the opportunity to provide it.
Bidding suppliers in the round 1 recompete and round 2 had a benefit from a provision in the
Medicare Improvements for Patients and Providers Act of 2008. It requires that, for bidding
suppliers that submit their financial documentation by a certain date—known as the covered
document review date or CDRD—CMS provide feedback about missing financial documentation.
We have reason to believe that substantially more Round 2 recompete bidders submitted their
documents prior to the CDRD. See actual data below. This will likely decrease the number of
disqualifications from the upcoming Round 2 recompete.
Number of Suppliers with Round 2 Disqualified Bids, by
Reason for Disqualification
Percentages of Bids That Resulted in Contracts Varied across Rounds,
but Reasons for Bid Disqualifications Were Generally Similar
•
•
•
•
The percentages of total bids submitted that resulted in contracts between CMS
and suppliers were very similar in the round 1 recompete and round 2—29 percent
and 28 percent, respectively.
These percentages were higher than the round 1 rebid, at 20 percent, and
significantly higher than the national mail-order program, at 7 percent.
Ten percent or less of the contract offers CMS made to bidding suppliers in the
round 1 recompete, round 2, and national mail-order program were rejected by
suppliers. Specifically, for the round 1 recompete, 111, or 10 percent, of the 1,108
bids that resulted in contract offers made to suppliers as of October 31, 2013—the
date that CMS announced contract winners—were rejected.
For round 2, 1,232, or 8 percent, of the 14,740 bids that resulted in offers made to
suppliers as of April 9, 2013—the date that CMS announced contract winners—
were rejected.
What GAO Found
• CMS identified suppliers during its post-bid review process that
were disqualified incorrectly, and some suppliers with initially
disqualified bids were ultimately offered a contract.
• GAO found that the single payment amounts (SPA) for 28 high
utilization Healthcare Common Procedure Coding System (HCPCS)
codes common to the round 1 rebid, round 1 recompete, and round
2 generally decreased through all CBP rounds as compared to the
average Medicare 2010 fee-for-service payment for the same
codes.
• For a majority of the codes, the largest overall decreases occurred
in round 1 rebid average SPAs compared to the average Medicare
2010 fee-for-service payments for the same codes, with relatively
smaller SPA decreases in subsequent rounds.
Atlanta – Sandy Springs – Marietta, GA
CPAP
Total Suppliers
39
Average Distance (miles) 443.84
Less than 50 miles
14
Out of state
23
Manual Power Chair
Total Suppliers
28
Average Distance (miles) 297.09
Less than 50 miles
10
Out of state
14
Oxygen
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Hospital Beds
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
ENES
Total Suppliers
Average Distance (miles)
Less than 50 miles
42
318.3
18
16
28
247.9
11
12
34
479.9
11
Mail Order Diabetic
Total Suppliers
Average Distance (miles)
Less than 50 miles
23
n/a
n/a
Out of state
n/a
NPWTP
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Support Surfaces
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Walkers
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
24
401.3
8
9
22
219.78
7
9
27
267.58
9
13
Atlanta – Sandy Springs – Marietta, GA
CPAP
Total Suppliers
Average Distance (miles)
Oxygen
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
42
318.3
18
16
39
443.84
Less than 50 miles
14
Out of state
23
Augusta – Richmond County, GA - SC
CPAP
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Manual Power Chair
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Oxygen
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Hospital Beds
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
ENES
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
29
430.23
4
16
22
343.73
4
12
33
342.88
13
12
22
234.85
7
8
27
500.04
5
15
Mail Order Diabetic
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
NPWTP
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Support Surfaces
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Walkers
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
23
n/a
n/a
n/a
13
535.29
6
7
16
359.88
4
7
22
230.72
6
8
Augusta – Richmond County, GA - SC
CPAP
Total Suppliers
29
Average Distance (miles) 430.23
Less than 50 miles
4
Out of state
16
Oxygen
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
42
318.3
18
16
Chattanooga, TN - GA
CPAP
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Manual Power Chair
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Oxygen
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Hospital Beds
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
ENES
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
17
386
4
14
400.07
4
10
19
229.88
10
4
15
290.41
6
8
21
310.32
4
10
Mail Order Diabetic
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
NPWTP
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Support Surfaces
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
Walkers
Total Suppliers
Average Distance (miles)
Less than 50 miles
Out of state
23
n/a
n/a
n/a
7
266.16
2
4
13
524.96
4
9
16
288.31
6
9
Important Factor –
The Combination of Categories!
1. Respiratory Equipment and Related Supplies and
Accessories (includes oxygen, oxygen equipment, and
supplies; continuous positive airway pressure (CPAP)
devices and respiratory assist devices (RADs) and related
supplies and accessories)
2. Standard Mobility Equipment and Related Accessories
(includes walkers, standard power and manual wheelchairs,
scooters, and related accessories)
3. General Home Equipment and Related Supplies and
Accessories (includes hospital beds and related accessories,
group 1 and 2 support surfaces, commode chairs, patient
lifts, and seat lifts)
• For many Round 2 recompete bidding
companies, these product categories
combine products not typically furnished
by the supplier in the today’s marketplace.
• For example, HMEs furnishing oxygen and
oxygen equipment do not necessarily
furnish CPAP devices and RADs.
• The combining of product categories (e.g., oxygen and CPAP)
might result in a reduction in the amount of out-of-area bidders,
who, in previous rounds, bid CPAP in virtually all areas of the
country.
• Delivery of CPAP supplies have seen, arguably, an increase in
drop-shipments. Now that the bidding supplier must also offer
oxygen and oxygen equipment in the same CBAs (requiring
comparably more in-home service), I anticipate a decrease in the
number of out-of-area contracts offered (with a resulting
increase in reimbursement/single payment amounts).
• There are also about 17% less “traditional HME” supplier
locations in the marketplace. Note this FOIA report:
(Source: PDAC)
Supplier
Type Supplier Type Code Description
Code
Count of Suppliers
with Active Med ID
(11/01/2010)
Count of Suppliers
with Active Med ID
(11/01/2011)
Count of Suppliers
with Active Med ID
(11/01/2012)
Count of Suppliers
with Active Med ID
(11/01/2013)
Count of Suppliers
with Active Med ID
(11/01/2014)
54
MED SUPPLY COMPANY
9,438
9,503
8,880
8,222
7,881
A6
MEDICAL SUPPLY COMPANY WITH RESPIRATORY THERAPIST
2,109
1,972
1,941
1,876
1,793
53
MEDICAL SUPPLY COMPANY WITH ORTHOTIC-PROSTHETIC
701
698
704
679
764
51
MEDICAL SUPPLY COMPANY WITH ORTHOTIC PERSONNEL
416
403
391
361
358
52
MEDICAL SUPPLY COMPANY WITH PROSTHETIC PERSONNEL
313
287
269
248
242
B3
MEDICAL SUPPLY COMPANY WITH PEDORTHIC PERSONNEL
61
74
99
113
104
B1
OXYGEN & EQUIPMENT
66
81
96
93
93
58
MEDICAL SUPPLY COMPANY WITH REGISTERED PHARMACIST
59
70
74
87
91
13,163
13,088
12,454
11,679
11,326
TOTAL
From CMS-1614-F
(and this issue is especially troubling)…
(Source:)
Frequently Asked Questions on Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) 2015 Medicare Payment Final Rules
(CMS-1614-F)
Adjusting DMEPOS Payment Amounts Using Competitive Bidding
Information– 42 CFR 414.210(g)
•
2Q. When CMS uses competitive bidding information to adjust the
DMEPOS fee schedule amounts in accordance with the
methodologies established under this rule, would the bid limits for
competitions under the competitive bidding program(s) that begin
after the adjusted fee schedule amounts are implemented be based
on the adjusted fee schedule amounts?
• 2A.Yes. This issue is discussed in the November 6, 2014,
Federal Register at 79 FR 66232.
• The payment amounts that would be adjusted in
accordance with sections 1834(a)(1)(F)(ii) and (iii) of
the Act for DME, section 1834(h)(2)(H)(ii) of the Act for
orthotics, and section 1842(s)(2)(B) of the Act for
enteral nutrients, supplies, and equipment shall be
used to limit bids submitted under future competitions
and DMEPOS competitive bidding programs (CBPs) in
accordance with regulations at § 414.414(f).
• Section 1847(b)(2)(A)(iii) of the Act prohibits the awarding of contracts under a
CBP unless total payments made to contract suppliers in the competitive
bidding area (CBA) are expected to be less than the payment amounts that
would otherwise be made. In order to assure savings under a CBP, the fee
schedule amount that would otherwise be paid is used to limit the amount a
supplier may submit as their bid for furnishing the item in the CBA.
• The payment amounts that would be adjusted in accordance with sections
1834(a)(1)(F)(ii) and (iii) of the Act for DME, section 1834(h)(2)(H)(ii) of the Act
for orthotics, and section 1842(s)(2)(B) of the Act for enteral nutrients,
supplies, and equipment would be the payment amounts that would
otherwise be made if payments for the items and services were not made
through implementation of a CBP.
• Therefore, the adjusted fee schedule amounts would
become the new bid limits.
• Preparing for the Expansion of the
Competitive Bidding Program to
Rural America in 2016.
“The Affordable Care Act amended the Medicare
Modernization Act statute to mandate use of
information from the DMEPOS competitive bidding
program to adjust the fee schedule amounts for DME in
areas where competitive bidding programs are not
implemented by no later than January 1, 2016.”
Introduction…
• On October 31st, 2014, the Centers for Medicare & Medicaid
Services (CMS) released a “final rule” (CMS-1614-F) which
affects all durable medical equipment suppliers in the United
States.
• The Rule establishes a new reimbursement methodology that
makes national price adjustments to payments for Durable
Medical Equipment, Prosthetics, Orthotics, and Supplies
(DMEPOS) items currently paid under Medicare fee schedules.
• This affects all HCPCS codes currently included in the Round 1
and Round 2 geographic competitive bidding areas.
• Reimbursement for these items will be reduced
to an amount based on the current competitive
bid “single payment amounts”.
• There are eight “regions” within the United States
that CMS has created with each region having its
own unique “regional single payment amounts”.
• Examples of the new reimbursements are now
available for high utilization DME items, as well as
a link to a calculator which includes all affected
items, and the “add-on” rural ZIP codes.
• For the competitive bid DME items, the final rule phases in,
over 6 months, a new reimbursement rate for noncompetitive bidding areas (CBAs).
• On January 1, 2016, the reimbursement rate for these
claims (with dates of service from January 1, 2016 through
June 30, 2016) will be based on 50 percent of the unadjusted (current) fee schedule amount and 50 percent of
the adjusted (reduced) fee schedule amount which will be
based on the regional competitive bidding rates.
• Starting on July 1, 2016, reimbursement rate will be 100%
of the adjusted fee schedule amount which will be based
on regional competitive bidding rates.
• CMS estimates that by applying bid rates throughout the
entire United States it would save over $7 billion over FY
2016 through 2020.
• Under the Final Rule, CMS stated it attempted to “accounts
for regional variations in costs”, establishing Regional Single
Payment Amounts (“RSPAs”) calculated for each of eight
regions.
• CMS calculates the RSPA for each region using the
unweighted average of the SPAs for a DMEPOS item from all
CBAs that are fully or partially located in that region,
regardless of population.
• CMS also states that the unweighted average avoids giving
“undue weight” to SPAs in more heavily populated areas.
CMS then uses the average of each RSPA, weighted by the
number of states in that region, to calculate a national
average RSPA.
Let’s look at this more closely…
• Once more… CMS will adjust fee schedule amounts for states in
different regions of the country based on previous competitive bidding
round pricing in these “regions”.
• The regional prices would be limited by a national ceiling (110% of the
average of regional prices) and floor (90% of the average of regional
prices).
• There were originally three possible “Regions” in the proposed rule (see
next).
• CMS determines a regional price for each state equal
to the average of the single payment amount for an
item or service from the CBAs that are fully or
partially located in the same region where the state
is located.
• CMS determines a national average price equal to
the average of the regional prices.
• Adjust fee schedules annually using CPI-U
• Revise the SPA each time there is a new round of
bidding.
• BUT…to be clear, the current RSPAs have already
been determined using Round 2 (e.g., Atlanta)
and Round 1 recompete (e.g., Miami) single
payment amounts.
• And, CMS’ Joel Kaiser has suggested that if the
Round 2 recompete SPAs are determined prior to
the roll out, these prices will be used.
• “Although we believe that the costs of furnishing items
and services in rural areas are different than the costs of
furnishing items and services in urban areas, there is no
evidence to support a statement that the difference in
costs is significant.
• However, in order to proceed cautiously on this matter in
the interest of ensuring access to covered DMEPOS items
and services, we are proposing to phase in the price
adjustments, as explained below, so that we can monitor
the impact of the adjustments as they are gradually
phased in.”
• What this means: One half the reductions take effect
January 1, 2016; the remainder on July 1, 2016.
While not released…
• We have the current SPAs in all markets from
the current programs.
• As CMS has provided us the methodology to
determine the regional payment amounts
(RSPAs), and has confirmed that the “BEA”
regional array will be utilized, we can hence
estimate the RSPAs for Mideast and the other
regions now (*).
(*) This assumes the R2RC prices are not determined in a timely
manner; if they are, then the following estimates may not be accurate
Summary of Provisions
• As noted, the new adjusted pricing for DMEPOS CBP items will
begin on January 1, 2016. This will be a phase-in process over 6
months, allowables will be reduced by 50% on 1/1/16 and 100%
on 7/1/16.
• CMS finalized a pricing methodology for non-competitive bidding
areas.
• A rural area will be defined as a postal zip code that has more than
50 percent of its geographic area outside of a metropolitan area
(MSA) or a zip code that has a low population density area that
was excluded from a competitive bidding area. The payment
amount will be 110 percent of the average of the SPAs of all the
areas where CBPs are implemented.
• Let’s look at an example (Illinois):
On October 5, CMS released the actual rural zip codes that
will get a 10% adjustment to new bidding-derived fees
According to the USPS, there are nearly 43,000 zip
codes in the US. For purposes of the bidding program,
they break down as follows:
• Round 1 zip codes – 3,714 (approx. 8.6% of total US
zip codes)
• Round 2 zip codes – 13,902 (32.3%)
• Regional zip codes –– 9,099 (20.9%) – subject to new
bidding-derived rates (“RSPAs”) generated on a
regional basis
• Rural zip codes – 16,285 (37.8%) – subject to the
above mentioned bidding-derived rates, plus a 10%
positive adjustment to these rates.
• Put another way, about 64% of areas outside of a
CBA will be considered “rural”.
• You can access ALL the rural ZIPS (by state in
numerical order) here:
http://www.vgm.com/files/EmailPDF/FSS/DMERural
ZIP.pdf
• Back to my “map”…areas in a shaded red
metropolitan area but not included in any CBA
are paid at the RSPA.
• For example, if you were servicing the Mideast
region, and, using the averages of the E1390
oxygen single payment amounts in the of all
CBAs in this region, the reimbursement would
be $135.55 on January 1, 2016, and then
$90.18 on July 1, 2016.
• The yellow rural areas (see Excel file for exact ZIPs),
however, will be reimbursed at the adjusted fee
schedule amounts based on 110 percent of the
national average RSPA.
• Thus, the RSPA in rural areas for E1390 is $103.38.
Can we see (now) the likely RSPAs?
• Yes! AAH Regulatory Council has created a
document which includes the high utilization
codes. Go to:
http://www.vgmncbservices.com/Documents/FinalRuleCBExpansionAnalysis_Update
0715.pdf
And we have developed a
“calculator” for ALL bid codes
• This is the URL:
http://www.vgm.com/files/EmailPDF/RSPAALL-REGIONS.xlsx
• Click on it from any device and save.
• Let’s take a look!
You can select your area…
• “MPP” – The future of the
bidding program??
My Contact Information:
• Mark Higley, Vice President - Regulatory Affairs
[email protected] O: 888.224.1631 C: 319.504.9515