Funding Essentials

National Competitive Bidding: Cause & Effect

Medicare beneficiaries in nine areas of the country who use certain medical equipment and supplies will see average savings of about 32 percent off the current cost of those items come January. The savings will be realized through the first round of the new competitive bidding program that will determine the price that Medicare pays for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). The program replaces Medicare’s existing fee schedule amounts with market-based prices in those nine areas.

The first round of the program is scheduled to begin on Jan. 1, 2011, for beneficiaries in:

  • Charlotte/Gastonia/Concord (North Carolina and South Carolina)
  • Cincinnati/Middletown (Ohio, Kentucky and Indiana)
  • Cleveland/Elyria/Mentor (Ohio)
  • Dallas/Fort Worth/Arlington (Texas)
  • Kansas City (Missouri and Kansas)
  • Miami/Fort Lauderdale/Pompano Beach (Florida)
  • Orlando/Kissimmee (Florida)
  • Pittsburgh (Pennsylvania)
  • Riverside/San Bernardino/Ontario (California)

The product categories are:

  • Oxygen, oxygen equipment & supplies
  • Standard power wheelchairs, scooters & related accessories
  • Complex rehabilitative power chairs & related accessories (Group 2 only)
  • Mail-order diabetic supplies
  • Enteral nutrients, equipment & supplies
  • CPAP & respiratory assist devices (RADs) & related supplies & accessories
  • Hospital beds & related accessories
  • Walkers & related accessories
  • Support surfaces (Group 2 mattresses & overlays in Miami/Ft. Lauderdale- Pompano Beach, Florida, only)

Medicare claims that beneficiaries in these areas will see substantially lower prices than they are paying now, and ensures continued access for beneficiaries to high-quality products from accredited suppliers that meet stringent quality and financial standards, which will help reduce fraud. The program is expected to save more than $17 billion over 10 years.

Great Expectations?

Economists and a select number of members of Congress beg to differ with at least part of that statement. Studies have shown that the program could have a negative impact on price, quality, access and service for Medicare beneficiaries. Freedom of choice will be challenged in terms of types of suppliers and equipment that will be available. The number of DMEPOS suppliers could be reduced by as much as 90 percent, which will limit choice as well as disrupt lifelong relationships and continuity of care.

The bid evaluation process ensures that there will be a sufficient number of suppliers, including small suppliers, to meet the needs of the beneficiaries living in the competitive bidding areas. Small suppliers, those with gross revenues of $3.5 million or less, made up about 48 percent of the suppliers that were offered contracts.

Economists say that as the number of suppliers is reduced and payments are lowered, beneficiaries may experience problems obtaining quality equipment and services. There may not be sufficient protection from supplier unavailability and delayed response times, which could lead to costly hospital discharge delays and increased numbers of emergency room visits. Suppliers may not be able to afford to continue providing high-quality products and services that allow beneficiaries to maintain the mobility and the quality of life they have grown to expect.

The Impact on Beneficiaries

To take advantage of these savings, beneficiaries living in the nine first-round communities who use certain medical equipment and supplies may have to choose a new Medicare contract supplier if they want to have Medicare help pay for the item. Medicare will work with local partners and healthcare providers to inform beneficiaries about the changes. Suppliers that are not contract suppliers may continue to provide certain rented medical equipment to beneficiaries who are clients at the time the program begins — if the suppliers elect to continue furnishing the items as “grandfathered” suppliers.

One important fact about being a grandfathered supplier: Part of the agreement requires accepting the single-payment amount as payment in full for services provided, which means as much as 32 percent less in reimbursement. This is where disruption in long-term relationships begins, as non-contract suppliers will have to determine whether they can afford to take that type of reduction in payment to retain their customer. Furthermore, beneficiaries who rely on equipment suppliers for more than one type of service may now be subjected to utilizing multiple suppliers, since it is likely most contract suppliers won’t be full-service providers under the competitive bidding program.

The Centers for Medicare & Medicaid Services (CMS) began mailing contract offers to winning bidders in July 2010. For any contract offers not accepted, CMS offered contracts to other bidders as needed to meet beneficiary demand. Suppliers that were not contract suppliers for this round of the competitive bidding program may bid in round two in 2011 and in future rounds.

For additional information about the Medicare DMEPOS Competitive Bidding Program, visit

CMS has posted on the CBIC Web site the single-payment amounts for round 1. To access the prices for the nine bid areas, go to and click on “Single Payment Amounts” in the block on the left margin.

This article originally appeared in the November 2010 issue of Mobility Management.

About the Author

Jim Stephenson is Reimbursement & Coding Manager for the Rehab Department of Invacare Corp.

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