An Update on Competitive Bidding in O&P

Round one rebid of DMEPOS competitive bidding is slated to open in the fall.

Early this summer, the Centers for Medicare & Medicaid Services (CMS) outlined the next steps for implementing the round one rebid of the Medicare competitive bidding program for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), mandated by the Medicare Modernization Act of 2003 (MMA). The bidder registration period was slated to begin this summer, with the bid window scheduled to open in the fall, and a detailed timeline for the program was scheduled to be released sometime this summer after the DMEPOS competitive bidding Program Advisory and Oversight Committee met in early June.

Educational efforts

As part of the round one rebid implementation process, CMS has started educational efforts to increase supplier awareness on the general pre-bidding process as well as on the key steps that suppliers need to take to be ready for registration and bidding. These steps include getting appropriate state licenses, updating Medicare enrollment files with the National Supplier Clearinghouse, and getting accredited and bonded. CMS noted that several process improvements, such as an upgraded on-line bid submission system and increased oversight of bidders that are new to product categories or competitive bidding areas (CBAs), have been made for the round one rebid.

“Congress mandated that competition for the round one rebid occur in 2009. CMS is announcing the next steps to implement the DMEPOS competitive bidding program now to give the supplier community ample time to prepare as well as inform other stakeholders,” Charlene Frizzera, CMS acting administrator, said in a press release. “This program generated substantial savings for Medicare and beneficiaries who used these items and supplies in the competitive bidding areas last summer and is consistent with CMS’ goal to pay appropriately for Medicare items and services.”

Review process

The round one rebid was mandated under the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), which authorized a temporary delay of the DMEPOS competitive bidding program and made limited changes in the program. Under MIPPA, CMS was required to terminate contracts awarded in round one and to conduct the competition for the round one rebid in 2009. The act also established a financial document review process and a requirement for contract suppliers to report subcontract relationships with other suppliers.

In addition, MIPPA excluded certain DMEPOS items and areas from competitive bidding and provided an exemption to the program for hospitals that furnish certain types of DMEPOS items to patients. However, MIPPA did not fundamentally change the nature of the competitive bidding program as established by the MMA or the existing competitive bidding regulations that were finalized in 2007.

Round one of the DMEPOS competitive bidding program was implemented on July 1, 2008, in 10 CBAs, as mandated by the MMA. Under the program, only DMEPOS suppliers who submitted winning bids and signed a contract with CMS were be able to provide services to Medicare beneficiaries in these CBAs.

According to a recent CMS press release, the round one competitive bidding process resulted in average savings of 26% compared to the prices Medicare would have paid for the competitive bid items under the existing DMEPOS fee schedule in 2008. These lower prices would have translated directly in lower out-of-pocket costs for Medicare beneficiaries, who are responsible for 20% coinsurance on these items and services after any unmet Part B deductible.

O&P Professionals Offer Perspective on Competitive Bidding

Professionals in the O&P industry were asked to comment on the impact the DMEPOS competitive bidding program would have on the O&P industry if it is extended to include orthoses and prostheses. Here are some of their comments:

“One of the major concerns is that competitive bidding would require a large administrative commitment, and everything would have to be handled in a precise manner with no room for errors or interpretations. This would make it extremely difficult for many smaller providers to meet the stringent bidding requirements. After contracts were awarded, a great deal of ongoing work would be required to comply, which means that the lower reimbursement fees and added administrative requirements would cause internal costs to rise while revenues would decline.

There is an even larger concern for the welfare of patients served by the O&P industry. Competitive bidding seeks to identify and target the needs of the “average patient.” Average patients do not exist in orthotics and prosthetics. Each and every patient has very specific needs, requirements and goals. Competitive bidding for custom O&P devices would likely limit the ability of a practitioner to fully address specific patient needs.”

Michael Burton, vice president of Orthotic and Prosthetic Group of America (OPGA) and O&P Business News Industry Advisory Council member.

“Competitive bidding is inappropriate for health care services such as we provide. It is now quite clear that the promises by managed care of “lower costs without lower quality” were never kept, although it was a profitable experiment for insurance companies. If bidding were extended to O&P services, I would be extremely concerned because this would indicate that Congress is operating under the gross misconception that our profession provides “items” rather than individualized patient care that includes some tangible services. Similar to the orthopedic surgeon who performs a total hip replacement, our professional value goes far beyond merely the cost of the hardware that is provided as part of our care.”

John Michael, Med, CPO/L, president of CPO Services Inc. and O&P Business News Industry Advisory Council member.

“Current competitive bidding regulations exclude all custom orthoses and prostheses. Only “off-the-shelf orthoses” have the possibility of inclusion as a product category in the future, although they are not included today. The potential impact on any individual organization or provider will be limited to their percentage of off-the-shelf orthotic items. Steadfast monitoring of this issue will be in the profession’s best interest.”

Dennis E. Clark, CPO, president of OPGA.

“It appears that something will change in our field given the push toward fixing the Medicare program and the possibility of a government-sponsored insurance program. One solution may be expanded competitive bidding. My concern with competitive bidding is that it will limit competition and therefore limit choice and lower the standard of care. The lowest bidder will no doubt be forced to use the cheapest products to maintain a viable business.”

Andrew Steele, MBA, CPO, partner of Clark and Associates Prosthetics and Orthotics.


Competitive bidding areas

A CBA is defined by specific zip codes related to metropolitan statistical areas (MSAs), which are designated by the Office of Management and Budget, that include major cities and surrounding suburban areas. A CBA may be concurrent with, larger than or smaller than the related MSA, depending on a variety of considerations, for example, the exclusion of low population-density areas within an MSA or the inclusion of areas outside of an MSA that are part of a normal service area for suppliers in that MSA.

The MSAs for the round one rebid were designated by MIPPA, and with the exception of Puerto Rico, include all of the MSAs selected for round one. The round one rebid will take place in the following MSAs:

  • Charlotte-Gastonia-Concord, North Carolina-South Carolina
  • Cleveland-Elyria-Mentor, Ohio
  • Dallas-Fort Worth-Arlington, Texas
  • Kansas City, Missouri-Kansas
  • Miami-Fort Lauderdale-Miami Beach, Florida
  • Orlando, Florida
  • Pittsburgh, Pennsylvania
  • Riverside-San Bernardino-Ontario, California.

Round two competition, which was delayed under MIPPA, is slated to occur in 70 MSAs in 2011.

Product categories

The product categories for the round one rebid were designated by MIPPA and consisted of the same product categories included in round one with two exceptions. The first category excluded from the round one rebid was negative pressure wound therapy, and the second category excluded was group 3 complex rehabilitative wheelchairs; the latter also was excluded from all subsequent rounds of competition.

The following product categories are included in the round one rebid:

  • Oxygen supplies and equipment
  • Standard power wheelchairs, scooters and related accessories
  • Complex rehabilitative power wheelchairs and related accessories (group 2)
  • Mail-order diabetic supplies
  • Enteral nutrients, equipment and supplies
  • Continuous positive airway pressure devices, respiratory assist devices, and related supplies and accessories
  • Hospital beds and related accessories
  • Walkers and related accessories
  • Support surfaces (group 2 mattresses and overlays) in Miami.

Product categories for round two have not been determined.

O&P exemption

Under the current competitive bidding program, orthoses and prostheses are exempt. Orthotic and prosthetic devices were separated from DME by Congress for the competitive bidding program because the nature of O&P care is clinical and service-oriented. There has been concern, however, that the competitive bidding program will extend to O&P care at some point in the future.

For more information:

  • DMEPOS competitive bidding: Overview. Available at: Accessed June 19, 2009.
  • Houck K. Competitive bidding update: CMS issues the final rule to implement the first round of the competitive bidding program. O&P Business News. 2007.
  • Medicare begins supplier education for the competitive bidding program for certain medical equipment and supplies. CMS press release, May 29, 2009.
  • Romanow K. Congress considers changes to competitive bidding for DMEPOS. O&P Business News. 2008.

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