CMS has adopted a number of changes to its Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) policies for 2017, including new competitive bidding program (CBP) requirements and revisions to the methodology for updating Medicare DMEPOS fee schedule amounts based on CBP pricing.

With regard to the CBP, the final rule implements a Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) provision requiring entities bidding in the DMEPOS competitive bidding program to submit proof of an authorized “bid surety bond” for each competitive bidding area (CBA) in which the supplier is bidding. Under the final rule, the surety bond amount will be set at $50,000 – rather than $100,000 as proposed — for each CBA associated with the bid. If the bidder is offered but declines a contract for any product category in the CBA, and the supplier’s bid for the product category was at or below the median composite bid rate used to calculate single payment amounts, the bid bond will be forfeited, and CMS will collect on the bond. In all other cases, the bid bond will be returned to the bidder within 90 days of CMS’s public announcement of the contract suppliers for the CBA. The rule establishes penalties for bidders that provide falsified surety bonds or accept a contract offer and then renege on it in order to avoid surety bond forfeiture.

The final rule also implements a MACRA provision that prevents a contract from being awarded to a bidding entity unless the bidding entity meets applicable state licensure requirements (with “bidding entity” defined as the entity whose legal business name is identified in the ‘‘Form A: Business Organization Information” section of the bid). CMS observes that this does not represent a change in policy, since CMS already requires suppliers to meet applicable state licensure requirements.

Furthermore, CMS has adopted its proposal to expand contract suppliers’ appeal rights in the event of a breach of contract action by CMS. Under the final rule, the appeals process will apply to all CMS breach of contract actions, rather than just contract terminations.

The final rule also changes how CMS sets CBP bid limits for individual items based on associated DMEPOS fee schedule amounts. In light of separate CMS policies that reduce DMEPOS fee schedule amounts based on bid prices, CMS is clarifying that future bid limits will be based on fee schedule amounts prior to adjustment based on CBP information. According to CMS, this policy will “avoid a downward trend where the new, lower bid limits apply to each subsequent round of bidding based on fee schedule rates adjusted using bidding information from the previous round.”

In addition, CMS has adopted complex methodological changes to address “price inversions” among similar products that sometimes occur in the CBP, whereby the single payment amount (SPA) for an item with fewer features is higher than the SPA for the item with more features (e.g., non-powered versus powered mattress). To “prevent situations where beneficiaries receive items with fewer features at a higher price than items with more features,” CMS has adopted its proposed “lead item” methodology. Under this policy, all HCPCS codes for similar items with different features will be grouped together and priced relative to the bid for the “lead item” – defined as the item in the grouping with the highest allowed services during a specified base period. This policy applies only to certain enumerated items (including specific groups of codes for hospital beds, mattresses and overlays, power wheelchairs, seat lift mechanisms, TENS devices, and walkers).

Finally, CMS adopted its proposal to address the potential impact of inverted bidding prices on adjustments to Medicare DMEPOS fee schedule amounts outside of CBAs. Under the final rule, CMS will use the weighted average of the prices for the similar items in a product category as the revised price for the items that will then be used to adjust the fee schedule amounts.

The DMEPOS policies are included in the 2017 Medicare end stage renal disease prospective payment system final rule.