National Competitive Bidding &Washington Update

June 2, 2011

Cara C. BachenheimerCara C. Bachenheimer

Sr. Vice President, Government RelationsSr. Vice President, Government Relations

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2011 Political & Policy Context in D.C.

• 2011 and 2012 Budgets

• Employment & Jobs

• Deficit Reduction

• Health Care Reform– Repeal and Replace?– Amend and Improve?

• “Doc Fix” Redux– The one “must pass” piece of legislation this

year (aside from debt ceiling bill)

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President’s Proposed FY 2012 Budget

• Announced February 14, 2011• Require Prepayment Review for All

Power Wheelchairs– $240 million over 10 years.

• Reduce State Medicaid Program DME rates Based on Medicare Competitive Bidding Program– Would tie Medicaid reimbursement rates for

HME to the results of the Medicare “competitive” bidding program in the state.

– $6.4 billion over 10 years.3

FY 2012 GOP Budget Proposal – April 5

• “The Path to Prosperity”• Would save more than $6 trillion over 10 years• Federal share of Medicaid funding into block

grants• Transform Medicare into a voucher program

– Starting in 2022 for those under 55– Seniors would get a credit to buy coverage from private

insurers

• Repeal the health care law (counting $1.4 trillion in savings over 10 years) — but keep the Affordable Care Act's Medicare cuts and retain those savings to keep Medicare solvent

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2011 - The Big Issues for HME

• New Health Reform Law

• Competitive Bidding

• Oxygen?

• Power Mobility– Separate Benefit for Complex Rehab

• Fraud & Abuse

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Health Reform Law Provisions Impacting DME Industry

Patient Protection and Accountable Care Act (PPACA/ACA)

• Device Manufacturer Excise Tax

• Power Wheelchair Provisions

• Competitive Bidding Provisions

• Payment Reductions

• Fraud & Abuse Provisions

• Medicare Commission

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ACA - Device Manufacturer Excise Tax

• $20B over 10 years• 2.3% excise tax• Exempts contacts, eyeglasses, hearing aids • Exempts devices generally purchased by the public at retail

– Secretary of Treasury must determine what devices meet the exemption

• Effective sales starting January 1, 2013• Tax deductible• IRS Guidance (draft?) later this year• Bills to Repeal

– H.R. 436 - Paulsen – 147 co-sponsors– H.R. 488 (Gerlach PA +12) & H.R.734 (Bilbray CA +4) – S. 17 - Hatch – +15 co-sponsors– S. 262 Scott Brown +2 co-sponsors

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ACA - Standard Power Wheelchairs

• Eliminated first month purchase option for standard power

• Does not impact complex chairs

• Maintains the option for Group 3 and above

• Payment in months 1- 3 = 15% of purchase price; & is 6% for remaining 10 months

• K0813-K0829

• Effective January 1, 2011

• Does not impact Round 1 of the bid program

– First month purchase option intact for Round 18

ACA – DME Competitive Bid Provisions

• Accelerates bidding program by adding 21 more MSAs to Round 2

• By 2016, HHS must bid nationwide OR apply bid rates in non-bid areas

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ACA - Reductions to DME Fee Schedules

• Elimination of Additional 2% Payment in 2014• Productivity Adjustment

– Starts in CY 2011, goes forever– Estimated impact: -1% per year– Per CMS Final Medicare Physician Payment

rule: CY 2011 -1.2%– CPI is 1.1% for CY 2011– Therefore – 2011 DMEPOS fee schedules got

-.1% “update” (reduction)

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ACA - Accreditation Issues

• CMS implemented exemption• “Small” pharmacies exempt from mandatory

accreditation requirement• “Small” = <5% of revenues from DMEPOS• Until Secretary develops pharmacy-specific

standards• Must:

– Have had Medicare billing number for 5 years– No final adverse actions in 5 years– Agree to submit documentation required during

random audits

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ACA - Surety Bond Issues

• Secretary has authority to increase bond amount commensurate with volume of billing, up to $500,000 and, if necessary, impose moratoria on the enrollment of certain groups of new providers or suppliers to prevent fraud.– CMS has implemented

• Secretary could also increase the bond amount for “at risk” suppliers

• 2011 Bills already introduced to increase surety bond for DMEs – e.g., Rep. Cliff Stearns (up to $500,000)

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ACA - Fraud, Waste & Abuse

“Face-to-Face” Exam for All DME

• Requires a physician “face-to-face” exam for all DME prescriptions

• Exam must be within 6 months of physician order

• Secretary can apply the requirement to state Medicaid programs

• No Effective Date in law• CMS implementing HHA requirement April 1,

2011 • CMS to issue proposed rule to implement DME

provision – When?13

ACA - Fraud, Waste, and Abuse

• Mandatory compliance programs for DME suppliers.

• New enrollment process for providers and suppliers, including an application fee ($505); data matching and data sharing across federal health care programs; increased CMPs; increased authority to suspend payment during creditable investigations of fraud; and new procedures to disclose and repay overpayments.

• Enrollment Disclosure Requirements: must disclose affiliations with any enrolled entity that has uncollected Medicare or Medicaid debt; Secretary would be authorized to deny enrollment in Medicare if these affiliations pose an undue risk to the program.

• OIG/CMS Final Rule Effective March 25, 2011

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OIG-CMS Final Rule

• Issued February 2, 2011, effective March 25, 2011

• Implementing PPACA fraud and abuse provisions

• Additional provider screening – 3 levels– High (fingerprints) – new enrollees– Moderate (unscheduled site visits)– Limited (verification of Medicare requirements, licensure,

database checks)– Newly enrolling suppliers – high

• Guidance for states re termination of providers from Medicaid & CHIP if terminated by Medicare or another state Medicaid or CHIP

• New application fees ($505)

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OIG-CMS Final Rule

• Temporary moratoria on supplier enrollment– Rule has criteria CMS will use to impose temporary 6 month

moratorium on enrollment by provider type

• Requirements for suspension of payments– How CMS will suspend payment, in consultation with OIG

when there is a pending investigation of credible fraud allegation

• Fraud hotline complaints, claims data mining, patterns identified through audits, false claim cases, and investigations

• Allegations are considered to be credible when they have indicia of reliability

• Compliance programs– CMS/OIG to do separate rulemaking

• Guidance re termination from Medicare if terminated by a state Medicaid program

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ACA - Fraud, Waste, and Abuse

• Payment: maximum period for submission of Medicare claims reduced from 36 months to not more than 12 months. Also, the Secretary, in consultation with the HHS OIG and CMS, can suspend payments pending an investigation of credible allegations of fraud.

• Overpayments: The 60 days providers and suppliers have to repay Medicare overpayments is modified to either 60 days after the date on which the overpayment was made or the date the corresponding cost report is due.

• Providers and suppliers required to repay any Medicare or Medicaid overpayment identified through an internal compliance audit.

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ACA - Fraud, Waste, and Abuse

• Section 6406 – Requirement for Physicians to Provide Documentation on Referrals to Programs at High Risk of Waste and Abuse - allows the Secretary to revoke enrollment for a period of not more than one year for each act for a physician or supplier who fails to maintain or does not provide access to documentation relating to written orders of requests for payment for DME (also applies to home health services). Effective July 6, 2010

• 90-day period of Enhanced Oversight for Initial Claims of DME Suppliers. Effective January 1, 2011

• Allows HHS to withhold payment for 90 days and conduct enhanced oversight in cases where the HHS Secretary identifies a significant risk of fraud among initial claims of DME suppliers.

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PECOS

• Current – on indefinite hold, although has loose deadline of July 2011

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IMAC – Independent Medicare Commission

• 15-member commission of appointees

• Beginning in 2014, will identify cuts to Medicare, if the plan exceeds a preset rate for growth.

• Congress would have an opportunity to amend the proposal or pass an alternative proposal with an equivalent amount of budgetary savings.

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IMAC – Independent Medicare Commission

• If Congress does not pass an alternative measure, the HHS Secretary will be required to implement the provisions included in the original IMAC proposal.

• Key Republican priority to repeal.

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ACA – Accountable Care Organizations

• CMS Proposed Rule March 31, 2011, ACOs begin January 1, 2012 – 3 year period

• Goal: Improve Care, Lower Costs via Integrated Delivery Systems

• ACO shares in cost savings • Minimum 5000 beneficiaries

• Assigned retrospectively based on where/whom received care from

• Can choose to receive care from non-ACO providers• Spending benchmark based on beneficiaries historical

expenditures

• Have become very controversial (AHA, MGMA)

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• CMS proposed rule April 4, 2011

• Comments due June 3, 2011• Would revert to pre-August 2010 definition

of prohibition on “direct solicitation” • Eliminate CMS’ August 27, 2010 Final Rule expansion

of prohibition on unsolicited telephone contacts to include in-person, email and IM contacts; though “ongoing concern”

CMS Proposed Rule – Supplier Standards

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• Contractual Arrangements• Allow DMEPOS suppliers, including DMEPOS bid

program contract suppliers, to contract with licensed agents to provide DMEPOS supplies unless prohibited by State law;

• Remove the requirement for compliance with local zoning laws

• Leave to states to enforce local zoning rules

• Modify certain State licensing requirement exceptions

• Limited to O&P licensed professionals; minimum hours dna to outpatient PT/OT services

CMS Proposed Rule – Supplier Standards

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Audits..Audits..Audits

• ZPIC pre-payment

• ZPIC post-payment

• DME MACs

• RACs

• PSCs

• State Medicaids, Etc.

• Increased funding and authorities from PPACA

• Some upcoming congressional oversight

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COMPETITIVE BIDDING

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Washington

Oregon

NevadaCalifornia

Montana

Idaho

Wyoming

Utah

Arizona

Colorado

New Mexico

Texas

North Dakota

South Dakota

Nebraska

Kansas

Oklahoma

Minnesota

Iowa

Missouri

Arkansas

Louisiana

Mississippi

Alabama

Wisconsin

Illinois

Maine

New York

Pennsylvania

Michigan

Ohio

Indiana

WV

MD

Kentucky

Virginia

Tennessee

North Carolina

SouthCarolina

Georgia

Florida

VT NH

MA

NJ

CT

RI

DE

District of Columbia

DME MAC for Jurisdiction A

DME MAC for Jurisdiction B

DME MAC for Jurisdiction C

Includes: Puerto Rico, U.S. Virgin Islands

DME MAC for Jurisdiction D

Includes: Alaska, American Samoa, Hawaii,

Northern Mariana Islands

COMPETITIVE BIDDING - METROPOLITAN STATISTICAL AREAS

ROUND 1 – GREEN TRIANGLE (9) ROUND 2 – BLACK STAR (70)

ADDITIONAL MSAs PER PPACA

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21 Additional MSAs – Announced July 2010

• Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

• Washington-Arlington-Alexandria, DC-VA-MD-WV

• Boston-Cambridge-Quincy, MA-NH

• Phoenix-Mesa-Scottsdale, AZ

• Seattle-Tacoma-Bellevue, WA

• St. Louis, MO-IL

• Baltimore-Towson, MD

• Portland-Vancouver-Beaverton, OR-WA

• Providence-New Bedford-Fall River, RI-MA

• Buffalo-Niagara Falls, NY

• Rochester, NY

• Tucson, AZ

• Honolulu, HI

• Albany-Schenectady-Troy, NY

• Worcester, MA

• Oxnard-Thousand Oaks-Ventura, CA

• Springfield, MA

• Bradenton-Sarasota-Venice, FL

• Poughkeepsie-Newburgh-Middletown, NY

• Stockton, CA

• Boise City-Nampa, ID

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• CMS PR/Talking Points!

• 1287 contract offers made to 364 Suppliers in early July

• 1011 Suppliers Submitted Bids in 9 MSAs for 6215 bids

• vs. 1005 in 2008

• 329 signed contracts in 2008

• 1324 contract offers eventually

• 76% have experience in bid area in product category

• 97% have experience with the product

• 51% are small suppliers

• 32% average savings

• vs. 26% in 2008 (prior to 9.5% reduction)

ROUND 1 REBID - 2010

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• Analysis of 359 contract suppliers in the 9 bid areas

• 20.6% have very limited purchasing ability

• < $10,000 credit

• On credit hold

• In collections

• Meeting with CMS Fall of 2009

• Shared how Invacare financially evaluates

Invacare Analysis of Round 1 Bid Winners

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Summer 2011

* CMS to announce product categories for Round 2

* Begin pre-registration education for potential bidders

Fall 2011

* CMS to announce Bidding schedule and schedule of education events

* Begin bidder registration to obtain user IDs and passwords

* Begin bidder education

Winter 2012

* Registration ends

* Open bidding – 60 day bid window

PAOC Meeting - April 5, 2011

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Spring 2012

* Bidding closes

* Begin bid evaluation process

Fall 2012

* Bid evaluation ends

* Announce single payment amounts

* Begin contracting process

Spring 2013

* CMS to announce winners/contract suppliers

* Begin contract supplier education program

* Start beneficiary, referral agent, and general supplier education program

July 2013

* Implement Round 2 and National mail order program contract and prices

PAOC Meeting - April 5, 2011

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• Dr. Peter Cramton, University of MD, auction expert

• September 23, 2010

• Current program is flawed

– Bids must be binding commitments

– Median pricing method encourages low ball bids

– Composite bid method incentivizes bids that are not related to costs

– Lack of transparency: bidder’s quantity, quality standards and performance obligations are unclear

167 Economists

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167 Economists’ Statement – September 23

• “This collection of problems suggests that the program over time may degenerate into a “race to the bottom” in which suppliers become increasingly unreliable, product and service quality deteriorates, and supply shortages become common. Contract enforcement would become increasingly difficult and fraud and abuse would grow.”

• “Implementation of the current design will result in a failed government program.”

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• Mock Auction Demonstration• Descending clock auction• Need Rational bidding behavior• Need to know your costs

• Tom Bradley, Chief Medicare Cost Estimator, CBO

• “Program will fail with near certainty”• “Program results in arbitrary pricing”

• Leavitt-Barker Wash Times Op-Ed, February 25, 2011

Cramton Auction Conference - April 1

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Last Congress - Meek Bill - H.R. 3790

• 257 Co-sponsors• Bill provided some “pay fors”:

– Eliminates current CPI increases in 2010-12 and replace with .25% payment cut

– 2014 – eliminate current 2% CPI bump– 2015 - .5% payment cut– Complex rehab excluded from cuts– Some “taken” by health care law

• CA – 14 signed on last year– Joe Baca (D-43), Brian Bilbray (R-50), Mary Bono (R-45), Ken

Calvert (R-44), Susan David (D-53), Sam Farr (D-17), Bob Filner (D-51), Jerry Lewis (R-41), Buck McKeon (R-25), Devin Nunes (R-21), Linda Sanchez (D-39), Adam Schiff (D-29), Mike Thompson (D-1), Diane Watson (33),

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This Congress: H.R. 1041

Fairness in Medicare Bidding Act

• Introduced March 11, 2011 by Reps. Glenn Thompson (R-PA) & Jason Altmire (D-PA)

• 107 co-sponsors– None from CA!

• WQs YOUR Member signed on?– Go to www. http://thomas.loc.gov/– Search by bill number: H.R. 1040

• Offset of $20B through rescission of unspent federal funds

• Senate companion bill coming soon

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Raising the Noise Level on the Hill!

• CMS Briefings early May– Senate Finance Committee– House Ways & Means Health Subcommittee– House Energy & Commerce Health Subcommittee

• March 1 Staff Briefing• March 15 Press Conference

– HR 1041 primary sponsors Reps. Thompson & Altmire

• May 24 House & Senate Staff Briefings– Dr. Peter Cramton

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May 24 Hill Staff Briefings

• House– 60 Staff attended

• Senate– 40 Senate offices attended

• Dr. Peter Cramton– CMS design is fatally flawed– There is complete consensus among auction experts– Median pricing + non-binding bids = low-ball bids– Lack of transparency allows CMS to manipulate prices– Result is a government administrative pricing system

that bears no relationship to providers costs

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Support from Consumers/Clinicians

• AARC• The ALS Association• American Association for People with Disabilities• American Foundation for the Blind • Christopher & Dana Reeve Foundation• International Ventilators Users Network• Muscular Dystrophy Association• National Council on Independent Living• National Emphysema/COPD Association• National Spinal Cord Injury Association• RetireSafe• Post-Polio Health International• United Spinal Association

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Consumer Impact Report –September 2010

• Dobson DaVanzo Consumer Impact Report:

• “unsustainable price erosion”• “eroding competition”• “a range of unintended consequences….medical

complication, increasing use of hospital, ER, and physician care, and losing their ability to live independently….”

The Risks to Medicare Beneficiaries of DMEPOS Competitive Bidding – Considerations for the Round 1 Re-Bid and BeyondAre Choice, Access, and Quality for Medicare’s Most Vulnerable Being Compromised?

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Reporting Issues with Bid Program

www.competitivebiddingconcerns.com

Toll Free 888-990-0499

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CMS Final Medicare Physician Payment Rule

• Posted November 2, 2010 on CMS web site, effective January 1, 2011.

• New appeals process for contracts terminated under the bid program.

• National bid program for mail order diabetic supplies.• 21 additional MSAs plus subdividing New York, Chicago

and Los Angeles.• Addition of Off-the-Shelf Orthotics to Bid Program

Exemption if Furnished by Physician.• Continuing CMS consideration of payment rules for

oxygen and capped rental items for transitioning patients.

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Proposed Physician Payment Rule

Proposed but not finalized policies: • CMS was reconsidering the minimum 10 months of

rental payments for oxygen under the competitive bid program.

• CMS also sought comments on whether contract suppliers should get fewer than 13 months of payment for CR items.

• In Final Rule posted November 2, CMS said it will take comments into account in future rulemaking…

• Factors:– Currently, Oxygen ownership does not transfer at 36

months

– Standard power chairs will now be capped rental

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Stark Request to GAO

Report on Competitive Bidding for Manufacturers

• Identify types of DME and supplies that would be appropriate for bidding under such a program.

• Recommendations on how to structure to promote fiscal responsibility while also ensuring beneficiary access to high quality equipment and supplies.

• Recommendations on a program could be phased-in and on what geographic level would bidding be most appropriate.

• In addition to price, recommendations on criteria that could be factored into the bidding process.

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Stark Request to GAO

Report on Competitive Bidding for Manufacturers

• Recommendations on how suppliers could be compensated for furnishing and servicing equipment and supplies.

• Compare the program to the current competitive bidding program under Medicare for DME, as well as any other similar Federal acquisition programs, such as the General Services Administration’s vehicle purchasing program.

• Any other consideration relevant to the acquisition, supply, and service of DME that is deemed appropriate.

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Oxygen Issues

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Proposed Changes to Oxygen Policy - July 2010

• CMS Proposed Medicare Physician Payment Rule, Federal Register, 7-16-10

• Proposes to revise the payment rules for oxygen to address situations where beneficiaries relocate outside the service area of a supplier during the 36-month rental payment cap period

• Proposes to change the regulation to require the supplier that furnishes the oxygen equipment and receives payment for month 18 or later to either furnish the equipment for the remainder of the 36-month rental payment period or, if the beneficiary has relocated outside the service area of the supplier, make arrangements for furnishing the oxygen equipment with another supplier for the remainder of the 36-month rental payment period. The supplier that is required to furnish the equipment on the basis of this requirement would also have to furnish the equipment after the 36-month rental payment period.

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Impact of Proposal?

• According to CMS, “only 38 percent” of beneficiaries are still on oxygen by the 18th month.

• “relocation between the 18th to the 36th month is not a common occurrence. Such relocation happens with less than 0.5 percent of the beneficiaries using oxygen equipment.”

• “between the 32nd and 35th month, relocation happens with the beneficiaries in about 0.06 percent of the time on average.”

• Good News – in November 2, 2010 CMS Final Rule on Physician Payment – CMS abandoned proposal – but states it will monitor beneficiaries traveling outside service area in months 18-36..

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New RUL - Oxygen

• MLN Article – MM7213

• New useful life policy for oxygen

• The “reasonable useful life” (RUL) of the stationary component governs the RUL of the portable

• Whether portable is provided with, before or after

• Effective May 8, 2011

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GAO Report on Medicare Payment for Home Oxygen

• Released Feb. 14, 2011• Requested by Chairmen of House Ways &

Means and House Energy & Commerce Committees.

• Objective: Compare Medicare payment for home oxygen with other payors.

• Recommendation: Medicare can reduce home oxygen rates

• Compares: private insurers, VA,

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Separate Benefit Initiative for

Complex Rehab

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New Benefit Category Complex Rehab

• AAHomecare, NCART, NRRTS & RESNA

• Clinicians & Consumers

• Why?– To improve and protect access

• Issues & Challenges– Coverage barriers to access– Regulatory challenges (e.g., documentation)– Inadequacy of HCPCS codes– Payment problems– Lack of upfront verification process– Quality Standards

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New Benefit Category Complex Rehab

• Goal– Bills introduced in House and Senate– CMS regulations

• Outcomes/Objectives– Clearer and more consistent coverage policies– Tighter provider standards– Recognition of depth of services required– Payment stability– Improved model for Medicaid and other payors

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Home Care is the future of Health Care

• “Why Health Care is Going Home,” Stephen H. Landers, MD, MPH (NEJM.com, Oct 20, 2010)

• Aging of the US population– By 2030, over 70M > 65

• Epidemics of chronic diseases– 90% of 65+ have 1, 70% have 2 or more

• Technological advances– Diagnostic & info technologies, remote monitoring

• Health care consumerism– Patient preferred

• Rapidly escalating health care costs

– Less costly

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Useful Web Sites

• www.cms.hhs.gov/Partnerships/03_DMEPOS_Toolkit.asp

• www.cms.hhs.gov/center/dme.asp• www.cms.hhs.gov/dmeposcompetitivebid• www.cms.hhs.gov/competitiveacqfordmepos/• www.dmecompetitivebid.com • www.cms.hhs.gov/medicareprovidersupenroll• www.invacare.com

• Policy & Funding, Hot Buttons – Regular updates• COMPETITIVE BIDDING RESOURCE CENTER

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Cara C. BachenheimerCara C. Bachenheimer

Sr. Vice President Government RelationsSr. Vice President Government Relations

Invacare CorporationInvacare Corporationcbachenheimer@invacare.com

440-329-6226440-329-6226

www.invacare.comwww.invacare.com

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