On November 6, 2014, the Centers for Medicare & Medicaid Services (CMS) published in the Federal Register a final rule entitled, “End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies” (Final Rule). The Final Rule incorporates several provisions related to durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).

In general, CMS finalized its earlier proposed rule to adjust DMEPOS fee schedule amounts for products subject to competitive bidding in non- competitive bidding areas (non-CBAs) by establishing regional payment amounts that are limited by national parameters. For dates of service occurring between January 1, 2016 and June 1, 2016, the fee schedule amounts in non-CBAs will be based on 50 percent of the un-adjusted fee schedule amount and 50 percent of the adjusted fee schedule amount. Beginning on July 1, 2016, the fully adjusted payment rates will apply.

  1. Contiguous United States: CMS finalized its proposal to establish a regional price (regional single payment amount or RSPA) for each state in the contiguous United States and the District of Columbia equal to theunweighted average of the single payment amounts (SPAs) for an item or service established for competitive bidding areas (CBAs) that are fully or partially located in the same region that contains the state or the District of Columbia. The RSPAs will be limited by a national ceiling (110%) and a national floor (90%) of the average of the national payment amounts.
  2. Rural Areas: The fee schedule amounts will be adjusted to 110 percent of the national average price for all areas within a state that meet the definition of a rural area. CMS defined “rural area” as “a geographic area represented by a postal zip code if at least 50 percent of the total geographic area of the area included in the zip code is estimated to be outside any metropolitan areas (MSA). A rural area also includes a geographic area represented by a postal zip code that is a low population density area excluded from a competitive bidding area….”
  3. Areas Outside the Contiguous United States: For items and services furnished in areas outside the contiguous United States, the fee schedule amounts will be set at the higher of (1) the average of the SPAs for the item or service for CBAs outside the contiguous United States; or (2) 110 percent of the national average RSPA applied to adjustments within the contiguous United States.
  4. Items Included in Ten or Fewer CBAs: For items or services included in no more than ten competitive bidding programs, the Final Rule reduces the fee schedule amounts for all areas within and outside the contiguous United States to 110 percent of the unweighted average of the SPAs for the areas where the competitive bidding programs are implemented.
  5. Accessories Used with Different Types of Base Equipment: Accessories or supplies that are used with different types of base equipment may be included in one or more product categories under competitive bidding. If a Healthcare Common Procedure code (HCPCS code) that describes an item used with different types of base equipment is included in more than one product category in a CBA, a weighted average of the SPAs for the item is computed for each CBA based on the total number of allowed services for the item on a national basis for the code from each product category prior to applying the payment adjustment methodologies.
  6. Unbalanced Bidding: Unbalanced bidding may occur in cases where there are several codes for an item that are distinguished by a “hierarchal feature(s).” CMS in the proposed and final rules identified two examples of such items: (1) enteral pumps with alarms and enteral pumps without alarms; and (2) portable power wheelchairs and power wheelchairs for less functionality than those commonly used by beneficiaries. The SPA for the item without the hierarchal feature (the enteral pumps without alarms and the power wheelchairs for less functionality) is greater than the SPA in the same CBA for the item with the hierarchal feature. The final rule requires that if unbalanced bidding occurs for enteral pumps, the SPA for the enteral pump without the alarm is adjusted to be equal to the SPA for the enteral pump with the alarm before the payment adjustments are applied. CMS finalized similar rules for power wheelchairs.

The Final Rule phases in bundled, continuous monthly rental payments for continuous positive airway pressure devices (CPAP) and standard power wheelchairs. Importantly, CMS did not finalize its proposal to phase in bundled, continuous monthly payments for enteral nutrition, oxygen and oxygen equipment, standard manual wheelchairs, respiratory assist devices or hospital beds. CMS acknowledged that subsequent rulemaking would be required to adopt special payment rules for other items or to expand the payment rules to more than 12 CBAs. 

CMS modified the rules related to changes of ownership by finalizing its proposed rule that enables a contract supplier to sell a distinct company (e.g., an affiliate, subsidiary, sole proprietor, corporation, or partnership) that furnishes a specific product category or services a specific CBA, and to transfer a portion of the contract initially performed by that company to a new qualified entity that meets all competitive bidding requirements if certain conditions are met. The Final Rule would not apply to existing contracts, but rather would be applicable to contracts issued in future rounds of the competitive bidding program.

The Final Rule includes clarifying language to highlight that a contact will automatically be terminated 45 days from the date of the notification letter unless the supplier files a timely hearing request or submits a corrective action plan within 30 days of the date of the notification letter. A contract supplier whose contract has been terminated is required to notify affected beneficiaries of the termination to no later than 15 days prior to the effective date of termination.

In addition, CMS finalized its proposal to include payments for infusion drugs in its regulation that requires CMS to determine that amounts to be paid to contract suppliers under the competitive bidding program are expected to be less than the amounts that would otherwise be paid. CMS highlighted that the Medicare Act includes infusion drugs as items subject to the DMEPOS competitive bidding program, although it acknowledged that there are not competitive bidding programs currently in effect that include infusion drugs. CMS indicated that the phase-in of infusion drugs will occur in future competitive bidding programs.