Let DMEPOS Competitive Bidding Proceed While Addressing Identified Problems and Concerns

Medicare’s Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program is once again under attack.  Many questions have been raised about whether the program is fair to providers and whether beneficiaries will be able to obtain needed DMEPOS items.  Since its inception, the program has been repeatedly started and stopped by Congress.  While the current DMEPOS Competitive Bidding Program is far from perfect, it should be given a chance to prove its worth as a cost containment approach.  Even so, the Centers for Medicare and Medicaid Services (CMS) should continue to work to address concerns about the complexity of the program and step up its education activities.

Currently, there is a broad Congressional effort to delay or curtail the DMEPOS Competitive Bidding Program.[1]  While there are valid concerns that need to be addressed for the program to be successful, the Center for Medicare Advocacy (the Center) urges HHS to move forward with the demonstration using caution and care.  Implementation should proceed with close monitoring. The DMEPOS Competitive Bidding Program has the potential to reduce fraud and save Medicare millions of dollars. However, it is important that beneficiaries are not unnecessarily confused and harmed.  Congress should continue to strive toward mechanisms that preserve the integrity of the Medicare program while assuring that beneficiaries have access to necessary DMEPOS and services.

Combating Fraud

DMEPOS competitive bidding is seen as a tool for combating fraud.  In his September 15, 2010, testimony before the House Energy and Commerce Committee, Subcommittee on Health, Daniel R. Levinson, Inspector General of the U.S. Department of Health & Human Services, noted with respect to DMEPOS that “over the past three decades, OIG [Office of the Inspector General] has identified significant levels of fraud and abuse related to this important Medicare benefit.”[2]  He identified several factors that promote fraud and abuse in the DMEPOS program, principally low barriers to becoming a DMEPOS supplier, weak oversight and enforcement of enrollment standards, and misalignment with market prices, all of which make fraud in the DMEPOS arena particularly lucrative.[3] Mr. Levinson noted in his testimony that “[t]hus far in fiscal year 2010, OIG investigations of DMEPOS fraud have resulted in more than 80 convictions with ordered recoveries of more than $90 million.”[4]

Background on the DMEPOS Competitive Bidding Program

Section 302 of the Medicare Modernization Act of 2003 (MMA) established requirements for Medicare’s Competitive Bidding Program for certain DMEPOS.[5]  This supplier level competitive bidding program required DMEPOS suppliers to compete to become Medicare contract suppliers by submitting bids to furnish certain items in competitive bidding areas (CBAs) and required CMS to award contracts to enough suppliers to meet beneficiary demand for the items subject to the bidding process.[6]

Competition under the program was to begin in 10 geographic areas in 2007.  CMS conducted the Round One competition in 10 areas and for 10 DMEPOS product categories, and implemented the program on July 1, 2008.  Two weeks later, however, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) placed a moratorium on implementation of the program.[7]  MIPPA also required that the competition for Round Two occur in 2011 in 70 additional metropolitan statistical areas (MSAs) and authorized competition for national mail order items and services after 2010.[8]  The Affordable Care Act of 2010 (ACA) expanded the number of Round Two MSAs from 70 to 91 and mandated that all areas of the country would be subject either to DMEPOS competitive bidding or payment rate adjustments using competitively bid rates by 2016.[9]

CMS is required by law to have a new competition for contracts for the DMEPOS Competitive Bidding Program at least once every three years. The Round One Rebid contract period for all product categories except mail-order diabetic supplies expires on December 31, 2013.  CMS is conducting the “Round One Re-compete” in the same CBAs as the Round One Rebid.[10]

Ongoing DMEPOS Competitive Bidding Concerns

As CMS continues to roll out its DMEPOS Competitive Bidding Program to cover more areas of the country and subject more DMEPOS categories to competitive bidding, implementation and access problems must be addressed.  Among them are making sure that:

  • All DMEPOS bid winners are licensed in their states;
  • All  bid winners provide high quality and variety of  items and high quality customer service;
  • Sufficient suppliers are available to meet the DMEPOS needs of Medicare beneficiaries;
  • DMEPOS suppliers in each CBA accept Medicaid;
  • Medicare beneficiaries are sufficiently informed about the DMEPOS program; and
  • There is a meaningful process to address beneficiary concerns and complaints

As the DMEPOS Competitive Bidding Program impacts more areas of the country, it is important to remain attentive to the above concerns.  Some providers awarded competitive bidding contracts have not complied with state licensure requirements; a serious issue.  It raises questions about the quality of the bidding process as well as concerns about the capacities of various suppliers to provide and service the DMEPOS items that beneficiaries need.  CMS has asserted that it is correcting this problem.  As to the sufficiency of the number of DMEPOS suppliers in a given CBA, we have not heard specific reports of beneficiaries being unable to find suppliers.  Should specific instances arise, it is imperative that CMS address those concerns immediately.

In the State of Connecticut, not one of the competitive bid winners currently accepts Medicaid.  This will obviously create significant access issues. CMS must work with the suppliers and appropriate state agencies to address this glaring problem.[11]

Making sure that beneficiaries are informed about the DMEPOS Competitive Bidding Program is important.  The DMEPOS Competitive Bidding Program has an ombudsman who is essential to to educating beneficiaries, working with providers, and helping to make sure that there is effective communication with stakeholders and within CMS.  The ombudsman can be reached at:  CompetitiveAcquisitionOmbudsman@cms.hhs.gov.

CMS is expanding its website offerings and tools for finding appropriate suppliers.  CMS has also embarked on a web- and telephone-based series of conference calls with people and organizations, including the network of State Health Insurance Counseling Programs.  A further critical element of the need for education is the upcoming July 1, 2013 roll out of DMEPOS Competitive Bidding Program for mail-order diabetic testing supplies.[12] Making sure that beneficiaries understand how best to get their necessary supplies is essential.

Center for Medicare Advocacy Congressional Testimony on DMEPOS, May 9, 2012

In its testimony about the DMEPOS program on May 9, 2012, before the House Ways and Means Committee, Subcommittee on Health, the Center emphasized the importance of the following:

  1. The Committee’s continued focus on DMEPOS;
  2. Ongoing vigilance about access to services;
  3. Appropriate beneficiary education about DMEPOS; and
  4. The cost saving achieved thus far with the DMEPOS Competitive Bidding Program.[13]

Further, the Center expressed hope that over time the cost-savings would increase and that beneficiary access to a wide range of product categories would not decrease.  The testimony also stressed that beneficiaries should not be inappropriately required to change brands or types of DMEPOS.[14]  The Center noted that it was pleased to see CMS’s April 2012 assessment of projected saving to the Medicare Part B Trust Fund of $25.7 billion between 2013 and 2022 and beneficiary coinsurance savings of $17.1 billion during this same period.[15]

The Center provided the following recommendations to the Subcommittee on the DMEPOS program:[16]

  1. The Congress must mandate better information for beneficiaries: including how to repair and replace their DMEPOS items either in their MSA or while traveling outside that area.
  2.  There must be better information about how to find suppliers and about the forms of acceptable notice about program rules, as well as more specific information about how to initiate complaints and appeals when problems occur.
  3. CMS must make clear whether and to what extent the DMEPOS rules affect beneficiaries who do not reside in an MSA or a CBA currently covered by the DMEPOS Competitive Bidding Program.
  4. Congress and the Medicare agency must protect unsuspecting beneficiaries from DMEPOS suppliers who do not participate in the Medicare program.
  5. It will continue to be critical to provide clear information when new MSAs – and the CBAs within them – are added to the DMEPOS Competitive Bidding Program.
  6. There needs to be more clarity for beneficiaries about the DMEPOS rules for “grandfathered” suppliers – suppliers in CBAs who can continue to sell DMEPOS outside of the competitive bidding process.
  7. Congress and CMS must clearly state the rules of the program, including the limits placed on supplier registration, certification, advertising, and on supplier solicitation of beneficiaries.
  8. With respect to beneficiaries, data analysis of the DMEPOS program must look broader than a comparison of the number of beneficiary complaints filed.  Over the years, our experience has been that even when serious access to service problems occur, few beneficiaries file complaints and even fewer enter Medicare’s administrative appeals process.

Concerns about H.R. 1717 (Medicare DMEPOS Market Pricing Program Act of 2013)

H.R. 1717 would replace the current competitive billing structure with a market pricing program at the manufacturer level for DMEPOS under Medicare Part B.[17]  The type of system envisioned by H.R. 1717 (essentially an auction type of approach to establishing market pricing for covered DMEPOS) was discussed at the May 2012 hearing.

In response to questions raised at the hearing, CMS officials noted that they had reviewed the proposal and found it inappropriate for CMS’s use.  Indeed, the proposal calls for auction experts and monitors to conduct auctions to establish the cost of covered DMEPOS.  The approach leaves CMS largely out of the picture except to participate in a design conference (which would also include beneficiary representatives), arrange future auctions once the auction pricing system is fully implemented, assure the involvement of stakeholders of the auction system, and pay for DMEPOS at the auction pricing system’s established rates.[18]


As the Center has expressed in its Congressional testimony and other writings, it remains hopeful that the DMEPOS Competitive Bidding Program will be able to make a positive difference in access to and costs of DMEPOS.  As with the roll-out of any new program of this size and scale, there will be glitches along the way.  Advocates, along with CMS, must make sure that the program is implemented efficiently, reduces costs, and assures beneficiaries’ continued access to necessary DMEPOS and services.

[1] See https://s3.amazonaws.com/aafh/downloads/266/Thompson-Braley_Dear_Colleague_Letter_with_Signers_061013.pdf?1370962970.
[2] See http://oig.hhs.gov/testimony/docs/2010/testimony_levinson_09152010.pdf.
[3] Id.
[4] Id.
[5] Section 302 of the Medicare Modernization Act of 2003 (MMA), Public Law 108-173,  added a new paragraph 1834(a)(20) to the Social Security Act (the Act), requiring the Secretary of Health and Human Services (the Secretary) to establish and implement quality standards for suppliers of DMEPOS. All suppliers that furnish such items or services set out at subparagraph 1834(a)(20)(D) as the Secretary determines appropriate must comply with the quality standards in order to receive Medicare Part B payments and to retain a supplier billing number. The quality standards are published on the CMS website at: http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/MedicareProviderSupEnroll/index.html?redirect=/medicareprovidersupenroll.  Pursuant to subparagraph 1834(a)(20)(D) of the Act, the covered items and services are defined in section 1834(a)(13), section 1834(h)(4) and section 1842(s)(2) of the Act. The covered items include: DME, medical supplies, home dialysis supplies and equipment, therapeutic shoes, parenteral and enteral nutrient, equipment and supplies, transfusion medicine, and prosthetic devices, prosthetics, and orthotics.  Id. Regulations providing standards for suppliers under the DMEPOS Competitive Bidding Program can be found at 42 C.F.R.§424.57(c), effective September 27, 2010.   See https://www.federalregister.gov/articles/2010/08/27/2010-21354/medicare-program-establishing-additional-medicare-durable-medical-equipment-prosthetics-orthotics.
[6] Id.  With respect to other approaches to competitive bidding, for example manufacturer-level bidding, Kathleen King, from General Accounting Office (GAO), in her May 31, 2011 letter to the Subcommittee on Health, Committee on House Ways and Means, sets out a number of important public policy and Medicare agency cautions that need to be understood and addressed in moving toward a manufacturer-level competitive bidding system for DMEPOS. See http://www.gao.gov/assets/100/97606.pdf.
[7] See §154, Public Law 110–275 (July 15, 2008) (Delay in and reform of Medicare DMEPOS competitive acquisition program).  MIPPA also called for a “Competitive Acquisition Ombudsman (CAO)”, Section 154(b) to respond to inquiries and complaints made by suppliers and individuals relating DMEPOS Competitive Bidding Program, under the leadership of the Office of the Medicare Beneficiary Ombudsman.  The DMEPOS ombudsman is Ms. Tangita Daramola.  For information about her role and function, see http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSCompetitiveBid/Competitive_Acquisition_Ombudsman.html.  To obtain information about upcoming seminars and webinars on DMEPOS, contact CMS at: training@cms.hhs.gov.
[8] Id.  For an overview of the concerns and successes of  the Round I rebid, see  the GAO, “Review of the First Year of CMS’s Durable Medical Equipment Competitive Bidding Program’s Round 1Rebid (May 2012).”  http://www.gao.gov/assets/600/590712.pdf.   The GAO noted that “relatively few CBP [competitive bidding program] contract suppliers (those awarded CBP contracts) had their contracts terminated by CMS, voluntarily canceled their contracts, or were involved in ownership changes. Under the CBP, non-contract suppliers (those not awarded CBP contracts) can grandfather certain rental DME for beneficiaries they were servicing prior to the implementation of CBP until CBP- covered beneficiaries’ rental periods expire. Also, some CBP contract suppliers entered into subcontracting agreements with non-contract suppliers to furnish certain services to CBP-covered beneficiaries in the round 1 rebid.”
[9] See §6410 of the ACA, Public Law 111-148 (March 23, 2010), amending 42 U.S.C. §1395w-3(a)(1). To find a DMEPOS supplier in your area, see: http://www.medicare.gov/SupplierDirectory/.
[10] See the timeline for various activities: http://www.dmecompetitivebid.com/palmetto/cbicrd1recompete.nsf/docsCat/Round%201%20Recompete~Important%20Dates~Timeline?open.
[11]  The Center and the State Health Insurance Counseling Program for Connecticut have reached out to the DMEPOS competitive bidding ombudsman for assistance in resolving this problem.  We are awaiting her response.
[12] For CMS’s factsheet on diabetic testing supplies, see: http://www.cms.gov/MLNProducts/downloads/DME_Mail_Order_Factsheet_ICN900924.pdf.  Likewise, the Center is preparing a “Weekly Alert on the DMEPOS Competitive Bidding Program for diabetic testing supplies.” The current DMEPOS series of fact sheets is available at:  http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/DMEPOS_Competitive_Bidding_Factsheets.pdf.
[13]  See http://waysandmeans.house.gov/uploadedfiles/chiplin_testimony_final_5-9-12.pdf.
[14] Chiplin testimony, see http://waysandmeans.house.gov/UploadedFiles/%0bChiplin_Testimony_Final_5-9-12.pdf.
[15]<span”> Id., and see CMS’ “Competitive Bidding Update—One Year Implementation Update April 17, 2012, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSCompetitiveBid/Downloads/Competitive-Bidding-Update-One-Year-Implementation.pdf.
[16] Chiplin testimony, see http://waysandmeans.house.gov/uploadedfiles/chiplin_testimony_final_5-9-12.pdf.
[17] For the text of the bill, see http://www.gpo.gov/fdsys/pkg/BILLS-113hr1717ih/pdf/BILLS-113hr1717ih.pdf. To track the bill, see http://www.govtrack.us/congress/bills/113/hr1717.   For a discussion of various competitive bidding approaches focusing on either providers/suppliers or manufacturers, see targeted to manufactures, providers and suppliers see the GAO report at: http://www.gao.gov/assets/100/97606.pdf.   As the GAO report notes, the several approaches are complicated and have their advantages and disadvantages.  Id.
[18]See Section 4 (Establishment of DMEPOS Market Pricing Program), http://www.gpo.gov/fdsys/pkg/BILLS-113hr1717ih/pdf/BILLS-113hr1717ih.pdf.