Medicare Beneficiaries Need CMS to Finalize Proposed Rule on DMEPOS

Millions of Americans who require home oxygen, care providers and suppliers are breathing a sigh of relief.

A newly proposed rule by the Centers for Medicare and Medicaid Services calls for updates to Medicare’s competitive bidding program and payment process for Durable Medical Equipment, Prosthetics, Orthotics and Supplies, including home oxygen and sleep therapies and related equipment. Though well-intentioned, the existing competitive bidding program must be reformed to protect beneficiary access to respiratory care. These reforms will also have an important, positive impact on areas of the country that are outside of densely populated urban areas because CMS is now using competitively bid rates in the rest of the country, too.

A new report published by the Pacific Research Institute that analyzes Medicare’s competitive bidding program for DMEPOS also calls for reforms to improve the program’s payment methodology. The report’s conclusions reinforce CMS’ proposal stating that changes to the program are more likely to result in identifying the market rate, creating a level playing field for providers, and ultimately protecting patients’ access to home oxygen supplies and equipment.

In theory, competitive bidding should lead to an efficient market, in which the cost of goods and services stabilizes at a point where supply meets demand (i.e. the clearing price). The program’s complex methodology was originally structured in such a way that the rates for home respiratory therapy were set at artificially low levels. This led many home respiratory therapy providers to exit the markets they served for years, putting some of the nation’s 15.7 million patients with chronic obstructive pulmonary disease  — the third leading cause of death in the United States — at risk of being unable to access the oxygen they need to live.

Fortunately, CMS’ newly proposed pricing methodology simplifies the bidding process using “lead products,” which promote transparency, and using a clearing price (described in the proposed rule as the maximum winning bid). The proposal also eliminates the problem under the old system that required roughly half the bidders to accept rates that were lower than what they bid. Additionally, CMS signals that, in subsequent sub-regulatory guidance, it will separate larger categories, such as home respiratory therapy, into smaller product categories to avoid distortion of the rates and eliminate an opportunity for unscrupulous suppliers to game the system.

Crucially for the sector, CMS provides a stop-gap measure to allow for the new methodology to be finalized and sufficient time for it to be rolled out before the next round of bidding. Given the major changes to the methodology, it will be important for providers to understand the changes before submitting the next round of bids.

Addressing flaws in the current competitive bidding methodology is also important for those parts of the country that are not subject to competitive bidding because CMS plans to apply these rates to other areas.

We are pleased that CMS proposes to extend the blended rate in rural areas, but we remain concerned that CMS is merely applying the densely populated urban competitive bidding rates to areas that are not competitive bidding areas nor classified as rural.  Because there are fewer patients in these middle areas that require home respiratory therapy services, it costs more to provide services to them than the densely populated urban areas. Thus, CMS should address the fact that the competitive bidding rates used in these areas need to be adjusted to make sure that access issues do not occur.

We applaud CMS for taking this important step, urge the agency to finalize and implement modifications to the competitive bidding program and extend the blended rates to the rural areas. We also ask that CMS work with industry to better understand the impact of using the competitive bidding rates in areas of the country where there are fewer patients. These changes are the right step toward supporting and incentivizing home respiratory therapy that keeps patients at home and out of the hospital and long-term care settings.


Dan Starck is chairman of the Council for Quality Respiratory Care.

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