Seating & Competitive Bidding: Does It Make Dollars & Sense?

On April 10, 2007, the Centers for Medicare & Medicaid Services (CMS) published its final rule for the national competitive bidding (NCB) of Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) in the Federal Register. The remainder of 2007 included a multitude of activities, including the selection of 10 product categories and metropolitan statistical areas (also abbreviated as MSAs) for inclusion in the first round of bidding and the actual bidding process. As we began 2008 (and also as we went to press), we waited in anticipation for the announcement of the bid winners and winning bid rates for round one. In addition, we are also awaiting additional news and deadlines regarding round two of competitive bidding, which will expand the scope of competitive bidding to an additional 70 metropolitan areas and have its own set of product categories (announced in January).

At this juncture it would seem appropriate to ensure that ample time and analysis is given to identifying lessons learned from round one and that those lessons are applied in round two. Unfortunately, given the current political climate, such an analysis appears unlikely. It is far more likely that the bidding process for round two will start before round one is fully implemented.
However, some lessons can be identified from what has transpired in round one so far, and I hope that the time will be taken to learn from these lessons and that they will be applied to round two. In this article we will look at one such lesson learned related to seating, and whether seating products are appropriate for competitive bidding.

The Argument Against Including Seating in NCB
In my opinion, there is compelling evidence to argue that seating products are not appropriate for competitive bidding, especially given current Medicare Healthcare Common Procedure Code System (HCPCS) coding configurations and the current structure of competitive bidding product categories. Seating products were included in two of the product categories that CMS created for bidding in round one:

• Standard Power Wheelchairs, Scooters and Related Accessories
• Complex Rehabilitative Power Wheelchairs and Related Accessories

Seating products were included in these product categories as “related accessories.” Considering that all seating products are included in the Medicare “Wheelchair Seating” medical policy, such an association appears logical, but as we all know, “the devil is in the details.”

Let’s consider the following questions:

• Do seating products truly fit in a competitive bidding product category that’s associated with wheelchairs? On page 18072 of the Federal Register publication of the Final Rule, the following comment is included relative to competitive bidding product categories:
Based on public comments, we have revised the proposed definition of the term “product category” in §414.402 to mean, “a grouping of related items that are used to treat a similar medical condition.”
On the surface it may appear reasonable to assume that power wheelchairs and “wheelchair” seating are “used to treat a similar medical condition”; however, once you get past the title, is this really true? Clearly, the medical condition being treated by a wheelchair pertains to mobility; however, in order for a beneficiary to meet the medical necessity requirements to qualify for many seat cushions, they must have a skin integrity/wound care issue (specifically seat cushions assigned to HCPCS codes K0734, K0735, K0736, K0737, E2603, E2604, E2607 and E2608).

“Mobility” and “skin protection” are certainly not similar medical conditions. Further, it is quite likely that other clinicians and caregivers will be involved in the selection and delivery of skin protection products than for mobility products. Finally, it is likely that the need for such products would occur at different moments in time. Different medical conditions, with different participants involved, occurring at different times do not appear to meet the “similar medical condition” requirement.

• Do the potential benefits derived from bidding “accessory” items outweigh the additional costs and complexity associated with including them in a competitive bidding product category? The round one competitive bidding product categories associated with power wheelchairs included products assigned to 108 different HCPCS codes in the standard power wheelchair category and 142 different HCPCS codes in the complex rehab power wheelchair category. When we look at the detail associated with these product categories and the codes assigned to them, we discover that an overwhelming portion of the Medicare expenditure is associated with a very small group of codes.

For example, in the standard power wheelchair product category, two power wheelchair codes (K0822 and K0823) represent approximately 70 percent of the total category bid weight, and only seven codes had a bid weight of two percent or more. That means that 101 of the 108 codes (94 percent of the codes) included in the standard power wheelchair product category made up approximately 16 percent of the total category bid weight (on average, that means each of these 101 codes represented 0.16 of the bid weight).

What cost savings and benefits can be derived from bidding items that have such an insignificant impact on overall expenditures? One argument given by CMS officials was that these products/codes were included to ensure that beneficiaries could get all of the available options and accessories for power wheelchairs from a single bid winner. Yet, this logic seems to be contradicted by the fact that under competitive bidding, a beneficiary requiring products from multiple product categories (say oxygen, power wheelchairs and hospital beds) would very likely have to go to multiple sources to obtain all of the products they need. In addition, surely a bid winner would be happy to provide a beneficiary with other, related products that were not competitively bid when they purchase or rent a bid item. This would be a way for the provider to offset some of the margin they sacrificed to win the bid.

• Do the potential benefits derived from bidding specific items outweigh the additional costs and complexity associated with including them in “multiple” competitive bidding product categories?

 For example, there are 88 seating, option and accessory codes that are included in both of the power wheelchair competitive bidding product categories. We’ve already identified that the potential savings associated with these products is insignificant. Including them in multiple competitive bidding categories compounds the problems. This will lead to even greater confusion, as we now have to differentiate which provider can deliver the item and at what price based on which type of wheelchair the beneficiary has. Ultimately, under this situation it is quite possible that seating and accessory items will have three separate pricing structures within each competitive bid area (CBA), and access to those accessories will have at least four different variables: 1) included with a standard power wheelchair; 2) included with a rehab power wheelchair; 3) included with a manual wheelchair; and 4) provided separately.

• Is the actual Medicare expenditure for seating products enough to warrant competitively bidding them?

 The total annual expenditure for wheelchair seat cushions is less than $40 million. In addition, since the implementation of the new wheelchair seating medical policy in 2004, the actual expenditures for seat cushions have dropped by more than 30 percent. How much more of a reduction can be derived from bidding the seating codes? And won’t the cost to administer the bidding of them offset any savings? If Medicare actually saved an additional 10 percent nationwide by bidding seating products, it could produce an additional “gross savings” of approximately $4 million. At the same time, numerous articles have estimated the cost to heal a wound at $5,000 to $40,000.

Let’s assume that the average cost to heal a wound is $20,000. If competitive bidding of skin protection products caused a rise in wound incidence among Medicare beneficiaries by 200 cases annually, the entire $4 million “gross savings” would be consumed, and Medicare would actually experience a “net loss.”

The current HCPCS codes used to classify wheelchair seat cushions (E2601-E2609 and K0734-K0737) and wheelchair backs (E2611–E2617, E2620 and E2621) include a multitude of technologies and materials including air, gel, viscous fluids, foams and hybrids. These codes do not separate the various technologies into homogenous groups. Furthermore, each code includes a variety of product sizes (width, depth and height).

 For example, code K0734, Adjustable Skin Protection Wheelchair Seat Cushion, has more than 600 items assigned to it by the Statistical Analysis Durable Medical Equipment Regional Carrier (SADMERC), including a wide variety of materials, technologies and sizes. Why wouldn’t the bidding of such codes drive providers to select the least costly item from the group and dramatically restrict access to the actual products/technologies that the individual needs?

• Do seating products need individualized assessment and service?

Considering the number of choices to be made relative to the individual’s needs, appropriate technology, materials, shapes and sizes, and the fact that many of these products require unique adjustments to be made during the initial setup (note that “adjustable” is even in the code description for codes K0734, K0735, K0736 and K0737), individual assessment is very important, if not essential. Yet there is a disincentive for the provider to offer this level of service under competitive bidding. Bottom line: Service costs money and probably won’t be covered by the approved bid rate. This increases the risk that there will be a higher incidence of wounds as a result and, as we have seen, the potential “gross savings” can ill afford the creation of new expenses.

The Wider Implications Based on all this information I believe there is a very compelling case for excluding seating products from competitive bidding, or at the very least, not bidding them until they are classified by Medicare in more distinct, homogenous groups and within a bid category that passes the “similar medical condition test.” At the same time, shouldn’t the questions posed in this article be applied universally in the development of competitive bidding product categories and in determining which HCPCS codes should be included? I sincerely hope that CMS will apply these questions in the development of product categories for round two and subsequent rounds.

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