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Comments on Proposed Rule CMS-1270-P; Competitive Acquisition of Certain DMEPOS Under the Medicare P

To: Mark McClellan, M.D., Ph.D. Administrator Centers for Medicare and Medicaid Services Department of Health and Human Services

Attention: CMS-1270-P Mail Stop C4-26-05 7500 Security Boulevard Baltimore, Maryland 21244-1850

Re: Comments on Proposed Rule CMS-1270-P; Competitive Acquisition of Certain DMEPOS Under the Medicare Program

Dear Dr. McClellan:

Thank you for the opportunity to comment on the proposed regulations governing the competitive acquisition of certain durable medical equipment, prosthetics, orthotics and supplies (“DMEPOS”) as well as the implementation of quality standards in this important area. We are writing on behalf of the Orthotic and Prosthetic Alliance (“the O&P Alliance”), a recently formed coalition of the four primary organizations representing the field of orthotics and prosthetics (“O&P”). The four organizations include the American Academy of Orthotists and Prosthetists (AAOP), the American Board for Certification in Orthotics and Prosthetics (ABC), the American Orthotic & Prosthetic Association (AOPA), and the National Association for the Advancement of Orthotics and Prosthetics (NAAOP). Together, the O&P Alliance represents the scientific, research, professional, business, and quality improvement aspects of the orthotic and prosthetic field.

As discussed below, the O&P Alliance believes that off-the-shelf (“OTS”) orthoses should be exempt from the competitive bidding program since the minimal program savings to be gained by competitive bidding of such services will be offset by the significant administrative burden. However, the O&P Alliance supports the proposed use of quality standards and mandatory accreditation for the provision of all DMEPOS to ensure that Medicare beneficiaries receive the highest quality care possible from the most highly qualified suppliers. It is through this mechanism that we believe CMS will achieve both higher quality and lesser expenditures for OTS orthoses. Also attached is an addendum with additional comments related to competitive bidding that are not specific to orthotics and prosthetics.

I. Quality Standards

The O&P Alliance strongly supports the establishment of quality standards and mandatory accreditation for all suppliers of orthotic and prosthetic services and devices. Medicare beneficiaries are entitled to receive quality orthotic and prosthetic care from a supplier with the O&P qualifications to provide such care, regardless of the type of supplier that furnishes the services. For this reason, no supplier should be exempt from Medicare’s quality standards and accreditation requirements. To do so would contravene the statutory language of the Medicare Modernization Act, potentially put patients at risk of poor quality care, and subject the Medicare program to the threats (e.g., fraud and abuse, overutilization, poor patient care) that the quality standards requirement was intended to address.

The O&P Alliance believes strongly that the level of complexity and sophistication of the orthotic or prosthetic service being provided to the patient should directly correlate to the quality standards and accreditation requirements. For instance, a supplier that is qualified to provide off-the-shelf orthoses may be completely unqualified to provide the full range of comprehensive orthotic care. This is largely a result of significant changes in recent years in the provision of low-level orthotics, which are now routinely provided in non-traditional supplier settings (i.e., not in orthotic patient care clinics and facilities). The accreditation requirements and quality standards that are yet to be published by CMS must recognize this distinction if the intent of the statute is to be realized.

The O&P Alliance, therefore, requests CMS to require organizations that accredit orthotic and prosthetic suppliers to adopt varying levels of credentials that comport with the complexity and clinical expertise required to provide the wide scope of orthotic and prosthetic care. We have previously submitted to CMS documents stating our collective view that there are four basic levels of orthotic care and the qualifications of suppliers that provide these services and devices must comport with the varying levels. These levels are as follows:

  1. Off-the-Shelf Orthotics: A prefabricated device sized and/or modified for interim, evaluative or short term use by the patient in accordance with a prescription and which does not require clinical judgment and alteration for appropriate use.

  2. Custom Fitted Device (Low): A prefabricated device sized and/or modified for use by the patient in accordance with a prescription and which requires substantial clinical judgment (involving medium Patient Assessment and Formulation of the Treatment Plan and Follow Up Treatment Plan skills) and substantive alteration (involving low Technical Implementation skills) for appropriate use.

  3. Custom Fitted Device (High): A prefabricated device sized and/or modified for use by the patient in accordance with a prescription and which requires substantial clinical judgment (involving high Patient Assessment and Formulation of the Treatment Plan and Follow Up Treatment Plan skills) and substantive alteration (involving medium Technical Implementation skills) for appropriate use.

  4. Custom Fabricated Device: A device fabricated to comprehensive measurements and/or a mold or patient model for use by a patient in accordance with a prescription and which requires clinical and technical judgment in its design, fabrication and fitting.

It is important to note that the term “prefabricated” is not synonymous with the term “off-the-shelf.” There are many orthoses that begin as prefabricated devices or prefabricated portions of devices that require high levels of clinical judgment and technical skills to properly design and fit an appropriate permanent orthosis. The levels suggested above explicitly recognize this distinction.

In the proposed rule, CMS explicitly requests public comment on the issue of identifying which HCPCS L-Codes will be considered to represent “off-the-shelf” orthotics, thereby subjecting those orthoses to competitive bidding. With virtually hundreds of L-codes in the HCPCS system, this is a task that requires an intimate understanding of the L-Code system and the practice of orthotics. Led by AOPA’s Coding Committee, the O&P Alliance has already undertaken this formidable task and submitted to CMS on two previous occasions a comprehensive list of L-Codes that are divided into the four categories listed above. We request that CMS strongly consider these recommendations as they are the product of many hours of analysis and discussion by experts in the O&P field.

The fact that CMS has not yet published the final quality standards or the accreditation requirements for DMEPOS has made commenting further on this aspect of the proposed rule very difficult. There are significant unknown factors at this point that will be critical to an efficient system of quality standards and accreditation in the DMEPOS benefit. In our view, CMS’s main challenge with the O&P benefit is to strike the proper balance between setting the bar too low (and permitting unqualified suppliers to provide comprehensive O&P services to Medicare beneficiaries) and setting the bar too high (and compromising access to orthotic and prosthetic care, particularly in difficult-to-serve areas of the country).

Because of the importance of these issues, the O&P Alliance requests that CMS publish the accreditation requirements on DMEPOS suppliers as a proposed rule, thereby permitting the public to analyze and comment before final implementation. We believe that mandatory accreditation and quality standards, if properly designed and implemented, are the preferred method of achieving both program savings and higher quality in the Medicare OTS orthotic benefit, rather than a competitive bidding model.

II. Exempt Off-the-Shelf Orthotics from Competitive Bidding Based on Low Potential for Savings (Criteria for Item Selection)

When Congress enacted the Medicare Modernization Act of 2003 (MMA), Pub. Law 108-173, lawmakers granted CMS the authority to exempt certain items from a Medicare competitive bidding program that were not likely to result in significant savings. See Section 1847(a)(3)(B) of the Social Security Act. In CMS’ discussion of this issue in the Notice of Proposed Rulemaking (NPRM), the agency proposes to “exempt items outright or on an area by area basis using area-specific utilization data.” See 71 Fed. Reg. 25,670.

We urge CMS to exempt outright all OTS orthotics from the Medicare competitive bidding program on the basis that inclusion of OTS orthotics in a competitive bidding program will not produce significant savings to the Medicare program.

Medicare’s own data from the competitive bidding demonstration project in San Antonio, Texas strongly supports this conclusion. The Research Triangle Institute’s (RTI) Final Evaluation Report “Evaluation of Medicare’s Competitive Bidding Demonstration for DMEPOS” issued in November 2003 concluded,

“We believe that the product category of general orthotics is not as well-suited for competitive bidding as oxygen equipment and supplies, hospital beds and accessories, wheelchairs and accessories and nebulizer drugs. We reach this conclusion primarily on the basis of the relatively low potential for savings in the product category. We estimated that allowed charges on the demonstration items would have totaled only about $200,000 per year in San Antonio in the absence of the demonstration. At this level, even if competitive bidding reduced prices by 20 percent, the change in allowed charges would be relatively small. General orthotics had the fewest bidders of all the product categories included in the demonstration in San Antonio with only 14 suppliers submitting bids; 8 suppliers were selected as demonstration providers.” (page 253)

The actual data from the competitive bidding demonstration related to certain orthotics provides compelling support for our position. For the 23-month period (Feb. 1, 2001 – Dec. 31, 2002) during which competitive bidding for certain orthotics was tested in San Antonio, the Medicare program saved a total of $89,462, or less than $45,000 per year (page 92 of RTI’s Final Report). Moreover, since the conclusion of the San Antonio demonstration project in 2002, all orthotic and prosthetic services, including OTS orthotics, have been subject to a Medicare payment freeze as mandated by the MMA, effectively reducing reimbursement rates for Medicare OTS orthotics by 7.9 percent as compared to inflation.

In light of this data and because CMS determined through its proposed scoring methodology that San Antonio is one of the ten largest MSAs with the highest potential for DMEPOS savings (see 71 Fed. Reg. 25,666), we believe that other MSAs would likely yield even less savings than the original San Antonio demonstration.

Additionally, Section 1847(a)(1)(B)(ii) of the Social Security Act provides CMS the authority to phase-in competitive bidding “first among the highest cost and highest volume of items or those items that the Secretary determines have the largest savings potential.” Once again, OTS orthotics do not meet the underlying conditions of the statute. OTS orthotics are not high-cost or high-volume items nor do OTS orthotics have the largest potential for savings based on the San Antonio demonstration.

Rather, we believe that CMS’ focus on the OTS benefit should be aimed at designing, implementing and enforcing effective quality standards and mandatory accreditation requirements to help:

  1. improve the quality of orthotic and prosthetic services delivered to Medicare beneficiaries;

  2. ensure that orthotic and prosthetic suppliers are qualified to provide the level of orthotic and prosthetic care required by the individual patient;

  3. validate that services provided to beneficiaries are medically necessary;

  4. ensure that orthotic and prosthetic services are not miscoded;

  5. reduce unnecessary program expenditures for orthotics and prosthetics; and

  6. reduce opportunities for fraud and abuse in the program.

Again, we believe strongly that implementation and enforcement of effective quality standards and mandatory accreditation requirements is a far better course for CMS to take than competitive bidding of OTS orthotics. Whether or not CMS decides to ultimately include OTS orthotics in competitive bidding programs, we recommend a number of changes to the proposed competitive bidding regulations as detailed below and in the attached Addendum, which lists our more general concerns with the design of the competitive bidding program proposed by CMS.

III. Definition of Minimal Self-Adjustment (Criteria for Item Selection)

We recommend amending the proposed definition of “minimal self-adjustment” that is referenced in the preamble of the proposed rule. The Medicare Modernization Act defines OTS orthotics as:

“[o]rthotics described in section 1861(s)(9) for which payment would otherwise be made under section 1834(h) which require minimal self-adjustment for appropriate use and do not require expertise in trimming, bending, molding, assembling, or customizing to fit to the individual.” MMA, Pub. L. No. 108-173, § 302(b), codified at 42 U.S.C. § 1395w-3(a)(2)(C).

The statute does not define what is meant by “minimal self-adjustment” other than this statutory language. The definitions section of the proposed regulation (Section 414.402) is consistent with the statute with regard to the definition of “off-the-shelf orthotics.”

However, the preamble to the proposed regulation states that “[w]e are proposing that minimal self-adjustment would mean adjustments that the beneficiary, caretaker for the beneficiary, orsupplier of the device can perform without the assistance of a certified orthotist (that is, an individual certified by either the American Board for Certification in Orthotics and Prosthetics, Inc. or the Board for Orthotist/Prosthetist Certification).” [Emphasis added]. Accordingly, pursuant to this definition, OTS orthotics would include orthotics that require adjustments by a supplier (albeit not a certified orthotist).

We believe that the definition of OTS orthotics that appears in the definitions section of the proposed rule should not be modified by the preamble language. The definition of OTS orthotics should not include items that require the services of a supplier. CMS’s proposed definition of “minimal self-adjustment” conflicts with the plain-meaning of the statute. The term “self” in “self-adjustment” clearly indicates that the definition of “OTS orthotics” are intended to be orthotics which can be properly adjusted by the beneficiary, without assistance from a supplier. If an orthosis requires the assistance of a supplier, then it cannot be self-adjusted.

Accordingly, we request that CMS clarify that “minimal self-adjustment” means adjustments that the beneficiary or caretaker of the beneficiary can perform – it does not mean adjustments that require the involvement of a supplier. In addition, the definition of OTS orthotics must be established in the context of all levels of orthotic care, as described above.

On a related issue, we applaud CMS for recognizing in the preamble the ABC and BOC as the primary accrediting organizations in the field of orthotics and prosthetics. The field of orthotics and prosthetics is separate and distinct from durable medical equipment and supplies. The accrediting agencies that CMS determines are appropriate for suppliers of orthotics and prosthetics should reflect this distinction. Because of this distinction and the impact that the selected accrediting agencies will have on the quality of O&P care for Medicare beneficiaries, we recommend that CMS incorporate references to ABC and BOC in the regulations themselves, rather than relying on the preamble to establish this important distinction.

IV. New Gap-Filling Methodology

The preamble to the proposed rule discusses the use of three factors in its new method of determining fees for new items and services: (1) functional assessment; (2) price comparison analysis; and (3) medical benefit assessment. See 71 Fed. Reg. 25,687, to be codified at 42 C.F.R. § 414.210(g). Our comments and recommendations on these issues are as follows:

  1. Functional assessment— This assessment should only be used to ensure that “like is being compared to like” in determining a fee schedule amount. Any other use of a functional assessment is not appropriate, since it would enter the realm of medical necessity judgments.

  1. Price comparison analysis— This comparison is reasonable if an appropriate range of items are reviewed. However, in the past, we have found that CMS has used a very limited list of items, oftentimes comparing orthoses and prostheses to items and services that are not furnished by certified orthotists and prosthetists, to set HCPCS code fee schedule amounts. Most recently, this has occurred in setting fee schedule amounts for a number of orthoses.This is unreasonable and results in fee schedule amounts that may be accurate for devices often furnished by DME suppliers, but not for the services of certified orthotists and prosthetists. This type of fee setting tends to either force Medicare patients to use inexpensive, arguably inappropriate devices when a more appropriate device is both available and appropriate to treat the individual’s condition.

  1. Medical Benefit Assessment— We strongly protest the use of medical benefit assessment in relation to fee determinations. Certainly, a determination of medical necessity is required before any device can be paid by the Medicare program, however, this decision must be made separately from the calculation of fee schedule amounts.The medical benefit of a device is a coverage decision, not a fee determination. It is inappropriate to use the setting of fee schedule amounts as a backdoor method of determining coverage, which has its own protocols, either through the National Coverage Determination process or through the determination of medical necessity by the PSC medical directors at the Local Coverage Determination level. Historically, coverage, coding and reimbursement have been separate and distinct activities and it must remain so for the system to make fair and equitable judgments regarding new technologies.

Finally, the O&P Alliance requests that CMS clarify in the final regulations the statement included in the gap-filling discussion that states, “We can use the technology assessment process at any time to adjust prices on or after January 1, 2007 that were previously established using the gap-filling methodology if it is determined that those pricing methods resulted in payments amounts that do not reflect the cost of furnishing the item.” 71 Fed. Reg. 25,688. We request clarification as to whether this statement is referring to the Medicare inherent reasonableness methodology of altering fee schedule amounts, or to some other process?

If you have any questions regarding the above comments or our more general comments on competitive bidding reflected in the attached Addendum, please feel free to contact our Washington counsel, Peter W. Thomas, at (202) 466-6550.

Sincerely,Mark DeHarde President National Association for the Advancement of Orthotics and ProstheticsWalter L. Racette, CPO PresidentAmerican Orthotic & Prosthetic AssociationPaul E. Prusakowski, CPO, FAAOP President American Academy of Orthotists and ProsthetistsJeffrey J. Yakovich, CO President American Board for Certification in Orthotics and Prosthetics



Additional Comments of the O&P Alliance to the Proposed Rule Regarding Competitive Acquisition of DMEPOS; CMS-1270-P

The following comments are offered by the O&P Alliance on CMS’s Proposed Rule for Competitive Acquisition of Durable Medical Equipment, Orthotics, Prosthetics, and Supplies. These comments relate to the general concerns of the O&P community with respect to Medicare competitive bidding of DMEPOS and not with the more specific concerned of the orthotic and prosthetic field outlined in our primary comments.

I. Opportunity for Participation by Small Suppliers/Opportunity for Networks

Section 1847(b)(6)(D) of the Act states that “[i]n developing procedures relating to bids and the awarding of contracts under this section, the Secretary shall take appropriate steps to ensure that small suppliers of items and services have an opportunity to be considered for participation in the program under this section.” We believe that the proposed competitive bidding system strongly favors large providers with the ability to cover large service areas, provide all of the products in various categories, and use economies of scale to underbid smaller suppliers. The final regulations must include further measures to ensure that small suppliers have the opportunity to meaningfully participate in serving the needs of Medicare beneficiaries in competitive bidding areas. The O&P Alliance recommends that CMS require a minimum percentage of small suppliers in each competitive bidding area (“CBA”). For example, CMS could establish a rule that required in each CBA at least fifty percent of the suppliers who receive a contract to be small suppliers (the definition of small supplier may be based on either FTEs or annual revenue). CMS may employ a number of means to ensure that CBAs include minimum percentages of small suppliers, such as: (1) creating CBAs that are reasonably sized in order to allow small suppliers to participate (since small suppliers often will be unable to furnish services to a large CBA); (2) allowing small suppliers to bid for “carve out” areas of CBAs; or (3) awarding contracts to the small suppliers with the lowest bids that exceed the pivotal bid (until the minimum percentage threshold is met). We believe that requiring CMS to contract with a minimum percentage of small suppliers is necessary to effectuate Congress’s unequivocal mandate that small suppliers are included within the competitive bidding program. Furthermore, we do not believe that the proposal for suppliers to form supplier networks serves as a meaningful method to ensure participation by small suppliers. We question whether any such network is permissible under federal antitrust laws. While antitrust laws permit provider networks, such networks are based on the so-called “messenger model” and do not permit suppliers to reach a mutual consensus on pricing. In contrast, CMS’s proposed model requires suppliers who are marketplace competitors to agree on proposed prices for all items within a competitive bidding product category. If CMS believes that its proposed network model is permissible under federal antitrust laws, we request that the agency publish any internal legal analyses supporting this position. Furthermore, if CMS believes that its supplier network option is permissible under the antitrust principle of “implied repeal” (in which there is an irreconcilable conflict between a federal regulatory scheme and antitrust laws), then we request that CMS clarify this in the final regulation. See, e.g., National Gerimedical Hospital and Gerontology Center v. Blue Cross of Kansas, 452 U.S. 278, 101 S. Ct. 2415 (1981). Otherwise, we believe that the proposed network model does not pose a viable solution for ensuring that small suppliers can participate in the competitive bidding program because of the risk that such a network violates federal antitrust law.

II. Beneficiary Access to Non-contract Suppliers

The proposed rule generally does not permit beneficiaries to access non-contract suppliers within a CBA (as grandfathering is not available to O&P). While we recognize that CMS has adopted this policy to ensure program cost savings, we believe it is imperative for CMS to permit beneficiaries to obtain services from a non-contract supplier. This is necessary for quality assurance purposes and to ensure that beneficiaries continue to have access to unique or particularly high-quality services from longstanding Medicare suppliers. As discussed below, this can be done in a fashion that ensures that Medicare receives its full program savings and which provides incentives for suppliers to seek contract-supplier status.

We recommend that CMS permit beneficiary’s to access non-contract suppliers if:
  1. the beneficiary pays 20% of the competitive bidding amount for the item;

  2. the beneficiary also pays the difference between the competitive bidding amount and the lesser of the Medicare fee schedule or the supplier’s usual charge;

  3. the supplier provides, and the beneficiary signs, a notice indicating the lower payment rate available at a contract supplier.

This methodology ensures that the Medicare program obtains its program savings (since the program would only pay 80% of the competitive bidding amount, as it would had the beneficiary received services from a contract supplier). It provides a strong incentive to the beneficiary to use contract suppliers (since the beneficiary will have clear notice that the coinsurance payment rate will be lower at such suppliers). It preserves beneficiary choice, without unduly penalizing beneficiaries for using non-contract suppliers. Finally, it provides an incentive to suppliers to submit bids (because, due to increased coinsurance amounts, it can be expected that beneficiaries would mostly utilize contract suppliers). The following example illustrates how Medicare and the beneficiary would pay for non-contract services in a CBA. Supplier A is a non-contract supplier who charges $120 for an item. The Medicare fee schedule amount is $100, and the competitive bidding payment for the item is $80. If the beneficiary chooses to go to Supplier A, Medicare will pay the supplier 80% of the competitive bidding amount, or $64. The beneficiary will be responsible for 20% of the competitive bidding amount ($16), plus the difference between the competitive bidding payment amount and the lesser of the fee schedule payment or supplier charge ($20). Supplier A also must provide a notice to the beneficiary that the beneficiary’s coinsurance at a contract supplier would be $16 rather than $36.

Accordingly, in this example Medicare pays the same amount as if the beneficiary went to a contract supplier ($64), the noncontract supplier receives its usual payment amount ($64 from Medicare, and $36 from the beneficiary), and the beneficiary retains a choice of suppliers. There remains a strong incentive for the beneficiary to use a contract supplier (since the beneficiary would have paid $16 rather than $36). An added benefit of this methodology for Medicare is that it provides an additional incentive for suppliers to offer lower bids (since a contract supplier can only expect to gain significant additional market share if the difference between the competitive bidding amount and the fee schedule amount provides sufficient incentive to beneficiaries). The O&P Alliance views this as the ultimate quality assurance mechanism, as beneficiaries would be able to “vote with their feet” and access the provider of choice if the contract supplier or suppliers were not meeting their needs.

III. Geographic Access to Suppliers

The proposed rule does not include any provision to ensure adequate geographic distribution of suppliers within a CBA in order to maintain access for beneficiaries. For example, CBAs potentially may be as large as an entire MSA (possibly even including some adjacent counties), and under the proposed selection process, all contract suppliers may be located in one portion of the CBA. This will make it difficult for beneficiaries to obtain medically necessary services (especially in large urban areas where beneficiaries may have limited means of transportation).

The O&P Alliance recommends that CMS ensure adequate geographic access to contract suppliers by creating relatively small CBAs (with multiple CBAs in each chosen MSA). Doing so ensures that beneficiaries will not be forced to travel across large cities in order to obtain Medicare services.

IV. Use of Median Bid

CMS has proposed to pay contract suppliers the median of the winning bids. This means that, for any given HCPCS code subject to competitive bidding, half of the contract suppliers in a CBA will be paid less than their bid amount. We believe that this policy significantly discourages suppliers from participating in the competitive bidding program. It is our view that quality suppliers may be unlikely to become contract suppliers if they will be reimbursed at less than their proposed bid amount. Furthermore, this system may lead to a high level of supplier attrition in the competitive bidding program. Suppliers who drop out of the program will not be easily replaced since the potential replacements are suppliers who will be paid the same amount but who submitted even higher bids. We recognize that CMS believes that the median bid methodology is necessary to ensure program savings. However, we believe that this methodology is a fundamental flaw in the competitive bidding program. We believe that the program will be placed in jeopardy due to lack of supplier participation under this model, or will lead to a substantial deterioration in quality due to this attempt to maximize program savings. We recommend that CMS use the highest selected bid. While CMS states in the preamble to the proposed rule that it disfavors this approach, we request that the agency reconsider. The use of the highest bid provides an equitable result (because it ensures that no supplier is required to accept less than the supplier’s bid amount). It will ensure sufficient supplier participation in the program (because suppliers are more likely to bid and remain in the program if they are paid at least their bid amount). Finally, it is a valid representation of the market payment rate (the process will still weed out disproportionately high prices because composite bids above the pivotal bid will not be selected).

V. Use of Rebates

The O&P Alliance opposes CMS’s proposal to allow contract suppliers to offer rebates to Medicare beneficiaries. First, we believe that such rebates constitute illegal “kickbacks” under federal fraud and abuse laws. While the proposed rule states that the collection of coinsurance and the provision of rebates must be separate transactions, in practice we expect that collection of coinsurance and the use of rebates will be reduced to a single transaction. Furthermore, while the proposed rule prohibits advertising of rebates, word-of-mouth advertising is inevitable.

Accordingly, the rebate system will become nothing more than the routine waiver or reduction of coinsurance. The Office of Inspector General has made clear on numerous occasions that such a practice represents an impermissible kickback, potentially interfering with clinical judgment and leading to overutilization. See, e.g., 59 Fed. Reg. 31,157 (Dec. 19, 1994). The routine waiver or reduction of coinsurance is illegal in traditional fee-for-service Medicare, and we believe the same should be true for Part B competitive bidding. Second, the proposed rebate system will lead to a decrease in professionalism and quality of care. Suppliers of DMEPOS should be expected to provide high quality professional care. Patients should choose suppliers (and physicians should refer to suppliers) based on a supplier’s record of providing quality medical services. Medicare certainly would not expect a beneficiary to choose a physician based on whether a coinsurance rebate is available. The use of rebates leads to patients instead choosing suppliers based solely on the availability of discounts, rather than quality of care. This could lead to decreased patient outcomes. We do not see any merit to the proposed use of rebates. Accordingly, we request that CMS withdraw this proposal.

VI. Miscellaneous Provisions

In addition to the above mentioned provisions, the O&P Alliance makes the following recommendations:

  1. Authority to Adjust Payments in Other Areas (414.408) — CMS should not use the competitive bidding program to adjust payment rates outside of competitive bidding areas — such a payment adjustment does not take into account a variety of factors (e.g., differences in wage indexes, differences among suppliers, the inability of small suppliers to provide services based on bids of large, more streamlined suppliers).

  2. Furnishing Items to Beneficiaries Whose Permanent Residence is Outside a CBA (§ 414.408) — A beneficiary from outside of the CBA should not be required to use a contract supplier. This requirement will lead to beneficiary confusion when traveling. This provision should be eliminated or should only apply to beneficiaries who have resided in the CBA for three or more months.

  3. Requirement to Obtain Competitively Bid Items from a Contract Supplier (§ 414.408) — We do not believe it is appropriate to set the payment for suppliers outside of a beneficiary’s CBA at the competitive bidding amount for that CBA. The suppliers outside of the CBA will not have agreed to participate in the competitive bidding program, and may be unable to offer services at the competitive bidding amount (due to differences in wage indexes or an inability to match the price of a potentially much larger supplier). We recommend that Medicare pay the supplier its normal Medicare payment amount (e.g., lesser of fee schedule or charge). The beneficiary will have an incentive to obtain DMEPOS from the competitive bidding area because of lower coinsurance amounts.

  4. Conditions for Awarding Contracts (§ 414.414) — We recommend a grace period of at least six months for suppliers to obtain accreditation.

  5. Composite Bids (§ 414.414) — We recommend that the composite bid should be weighted by utilization rather than payment amount, since this will result in a more accurate composite bid (otherwise “big ticket” items that are rarely purchased can be underbid to artificially deflate the overall composite bid).

  6. Terms of Contracts (§ 414.422) — A contract supplier should not be required to furnish services to a Medicare beneficiary. The supplier may be operating beyond capacity and unable to reasonably service the beneficiary. The supplier may not believe that the requested orthosis is appropriate for the patient, despite the physician order. In fact, the regulation does not even require a physician order; it simply states that the supplier must respond to beneficiary “requests.” Since there will be more than one supplier per CBA, there is no need to prohibit suppliers from turning away beneficiaries.

  7. Information Collection from the Supplier (Misc.) — The O&P Alliance requests that CMS clarify what is meant by “information on product integrity,” “information on business integrity,” and “customer service protocol.” Orthotic clinics are more like physicians offices than retail environments and, therefore, “customer service” is not accurate terminology.

  8. Beneficiary Education (Misc.) — The proposed rule’s preamble states that “[w]e believe that it is important for beneficiaries to learn about the benefits of the Medicare DMEPOS Competitive Bidding Program, such as lower out-of-pocket expenses and increased quality of products ….” 71 Fed. Reg. 25,684. We disagree with this statement. It is unproven that competitive bidding will increase the quality of products. In fact, the O&P Alliance believes that a system based on the lowest bidder has the potential to impact quality in a very detrimental way. CMS should be vigilant in monitoring quality as the competitive bidding system is implemented and not assume before this system is underway that quality will be improved.

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