Competitive bidding is here to stay for medical suppliers
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The winds of change are blowing for all medical suppliers. The Centers for Medicare & Medicaid Services (CMS) recently proposed reforming the competitive bidding process for Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS) – a welcome development to home respiratory care providers and suppliers.

As suppliers across the spectrum prepare for changes to the competitive bidding program (CBP), a business-as-usual approach will no longer be sufficient to succeed. Instead, the industry must study the experience of home oxygen providers and adopt new practices so that companies can carefully adapt to the evolving regulatory environment without disrupting beneficiaries’ access to vital medical care and supplies.

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The competitive bidding program for DMEPOS like home oxygen equipment and supplies was mandated by Congress in 2003 and launched in 2011 with the goal of reducing Medicare costs. According to CMS, the CBP is supposed “to improve the effectiveness of the Medicare methodology for setting DMEPOS payment amounts, which will reduce beneficiary out-of-pocket expenses and save the Medicare program money while ensuring beneficiary access to quality items and services.” These are laudable goals that the home oxygen industry supports, yet weaknesses in the reimbursement rate methodology have created serious negative and sometimes catastrophic impacts for providers and patients in practice for the past several years.

Until recent reforms, winning bidders in competitive-bid areas had to accept the median (composite) price of all bids, which fell below their best-offer bids. This led to price inversions and significant financial pressures and many respiratory therapy providers had no choice but to stop serving the communities they had served for decades. According to a report by the Council for Quality Respiratory Care, there was a sharp 47 percent decrease in the number of home oxygen suppliers in the 10 largest states where the competitive bidding program operates in between 2013 and 2017. Consequently, the patients who require home respiratory therapy and equipment have considerably less choice and access to the life sustaining oxygen they need to maintain their independence and increase their quality of life. This is in fact confirmed by CMS statistics: the percentage of Medicare patients with COPD receiving oxygen therapy has declined 59 percent. Not only is this causing harm to patient’s health, it is also very costly to CMS: oxygen therapy costs less than $3 per day, but a COPD patient without oxygen therapy who ends up in the emergency room costs thousands of dollars per day.

Fortunately, CMS has been receptive to industry feedback and recently proposed implementing lead-item pricing structure that would approximate the efficient, market-clearing rate in a competitive system. By using maximum winning bids to set single payment amounts (SPAs), this commonsense reform will create a more functional market that benefits both patients and providers. Lead-item pricing will help create a level playing field in which providers can rest assured that they will be able to stay in business should they win bids.

But it is up to industry to make it work. It is important that care providers and medical suppliers take responsibility for their bids and are well-versed in what the new CBP requirements mean for them, as well as how they will impact the price of goods and services. To help the industry, many reputable organizations have begun engaging in educational efforts to inform affected companies.

For example, ResMed has been working with other industry stakeholders to prepare a comprehensive resource for understanding new competitive bidding program rules that are expected to be finalized in November. 

Considering the experience of the home oxygen industry, it is clear that old assumptions and past practices, such as bidding to stay in the market while hoping for an end to competitive bidding, will no longer work. Because competitive bidding is here to stay, it is up to care providers and medical suppliers to adapt to the new reality in order to continue serving the hospitals, physicians and patients that rely on them.

As an industry, we have worked hard with Congress and CMS to improve the competitive bidding process and we are encouraged by the progress. I applaud CMS for their work and encourage them to finalize the DMEPOS for 2019 (as proposed) to advance these important reforms. I hope Congress will urge CMS as well to finalize the proposed competitive bidding reforms as proposed to the benefit of providers, patients and the Medicare program.

The CQRC is a coalition of the nation's seven leading home oxygen therapy provider and manufacturing companies, providing in-home patient services and respiratory equipment to more than 600,000 of the more than one million Medicare beneficiaries who rely upon home oxygen therapy to maintain their independence and enhance their quality of life.