The abc's of Competitive Bidding Preparation by suchenfz

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									Preparing to Bid:

 the Realities of
   Exclusively for
   VGM Members
 As you are most aware, on May 1, 2006,
  CMS published its proposed rule to phase
  in the competitive acquisition program for
  DMEPOS under Medicare Part B.

 To the concern of the industry, the
  proposed regulation did not provide
  definitive answers to the most pressing
  questions about the program, the cities and
  the products included in the initial rollout.
 However, on April 2, 2007, CMS 1270 F (the
  “Final Rule”) was released. Number of pages:
 The Competitive Bidding Area (CBA) & Mail
  Order CBA boundaries (by ZIP code) and the
  Product Categories applicable to the Rule were
  posted on the Competitive Bidding
  Implementation Contractor (CBIC) website one
  day later
 The Final Rule was published April 10, 2007 in
  the Federal Register.
  Competitive Bidding Resources
   Available on
 On the front page of the web site,
  look for the “National Competitive
  Bidding Website” on the left side. Click
  on it, and you will be directed to an access
  page which includes information,
  applications, forms, instructions, and so on.
 Initial Registration for Competitive
          Bidding Now Open
 To help ensure the privacy of all bids, all
  suppliers must complete initial registration
  in the internet application to get a USER
  ID and password. Initially closed on June
  30, the application window has been
  reopened until August 27.
 All suppliers will submit their bids using
  the online Competitive Bid Submission
  System (CBSS).
     Bidding opened on May 15

 The initial registration process requires the
  authorized official, (see Section 15 of the
  CMS 855S) to complete the information
  required in the internet application.
 The authorized official's information must
  match the information on file at the
  National Supplier Clearinghouse.
       To obtain USER ID…
 The User ID and Password will be mailed to the
  authorized official if his/her submitted
  information matches exactly the data on file for
  last name, date of birth, Social Security number
  and supplier number.
 The USER ID and password will be delivered in
  2 separate mailings to the authorized official.
 An authorized official only needs ONE USER ID
  and password in order to submit bids for any
  company for which he/she was listed as the
  authorized official on the CMS 855S.
              To Register…
 Or, go to and click on the
  “Competitive Bidding Info” link on the main
 Suppliers must have the USER ID and password
  before they can enter a bid into the competitive
  bidding internet application. However, the USER
  ID and password cannot be used until the bidding
  window opens, which is expected very shortly!
 Access a user guide for the Individuals
  Authorized Access to CMS Computer
  Services (IACS) application before
  attempting initial registration. This guide
  can be found on the Competitive Bidding
  Implementation Contractor's website at
 Or, call the CBIC helpdesk on 1-877-577-
 May 15, 2007 - Bid period opens
 August 27, 2007 - Registration Deadline (Last
  day to register to get user IDs and Passwords )
 September 25, 2007 60-day bid window closes
 October 31, 2007 - Last day for first round
  bidders to obtain accreditation.
 December 2007 - CMS concludes bid evaluation
  and begins contracting process.
 Early 2008 - CMS announces winning suppliers
  for first round.
 1/1/08-4/1/08 - CMS conducts intensive
  beneficiary and referral agent education
 July 1, 2007 - New program begins
Background & Summary
      The “Authorization”…
 Section 4319 of the Balanced Budget Act
  of 1997 (BBA) authorized up to five
  demonstration projects for Medicare Part B
  items, excluding physician services. CMS
  implemented demonstration projects on
  competitive acquisition of DMEPOS at
  two sites: Polk County, Florida and the San
  Antonio, Texas, Metropolitan Statistical
  Area (MSA). The demonstrations took
  place from 1999 to 2002.
                CMS report:
 “The demonstration projects revealed that
  substantial savings could be realized through the
  implementation of competitive acquisition,
  without compromising the quality of the products
  being supplied. Based on these demonstrations,
  CMS estimates potential savings of 20% on
  DMEPOS if competitive acquisition for these
  products is successfully implemented throughout
  the country. Statistical data indicated that
  beneficiary access and quality were essentially
        Implementation Dates
 May 2007 - Bidding begins and lasts for 60 days.
     Has been extended to last 134 Days

  Through Late 2007 - CMS and its contractors
  review bids.

  February 2008 - Announcement of winning bids.

  July 1, 2008 - Implementation in the 1st 10
             Which MSAs ?
 CMS began with a list of the fifty largest
  MSAs based on total 2005 population.
  From these fifty, CMS then selected 25
  that had the largest total allowed Medicare
  charges for DMEPOS in calendar year
  2005. The 25 MSAs were to be ranked
  according to two criteria: allowed
  DMEPOS charges per beneficiary, and the
  number of DMEPOS suppliers per
  beneficiary receiving DMEPOS items.
2007 MSAs (with some surprises!)
   Charlotte-Gastonia-Concord, N.C.-S.C.
   Cincinnati-Middletown, Ohio-Ky.-Ind.
   Cleveland-Elyria-Mentor, Ohio
   Dallas-Fort Worth-Arlington, Texas
   Kansas City, Kan-Mo.
   Miami-Fort Lauderdale-Miami Beach, Fla.
   Riverside-San Bernadino-Ontario, Calif.
   Orlando-Kissimmee, Fla.
   Pittsburgh, Pa.
   San Juan-Caguas-Guaynabo, Puerto Rico
 Cleveland AND Cincinnati AND
 No Houston
 No Atlanta
 Orlando vs. Tampa
 San Juan
   “Which areas affect me?”
The CBAs are defined by ZIP codes.
Many rural ZIPs, that would be included in
the official U.S. Census Bureau MSA,
were deemed non-competitive and hence
not included within the CBA. Providers
may find the actual ZIP codes affected on
the CBIC site or following the links on Maps of the CBA are also
Example of CBA: Cincinnati-
  Middletown, OH-KY-IN
ZIP Code Detail Available
“Mail Order” CBA varies…
    check the web site!
 The competitive bidding program will be
  phased in over several years: The 10
  CBAs announced, with 70 more CBA’s in
  2009, and at least 10 others in 2010.
 Payment under the first round of the
  competitive bidding program will go into
  effect in July 2008.
    Product Categories for First 10 CBAs
   Oxygen equipment and supplies
   Respiratory assist devices and CPAPs
   Standard power mobility devices
   Complex power rehab
   Diabetic supplies (Mail Order Only)
   Enteral nutrition
   Hospital beds and accessories
   Walkers
   Negative pressure wound therapy devices
   Support surfaces, Group 2 and 3 mattresses and overlays
    (Only to be bid in Miami and San Juan)
            Supplier Eligibility
 All bidders must be accredited (or be in the process of
  becoming accredited) by a CMS approved accreditation
 Abide by final quality standards, including financial,
  business, and customer service standards, in addition to
  product-specific standards.
 CMS will estimate supplier capacity to meet the projected
  demand. CMS will require suppliers to say how many
  units they are willing and capable of supplying at the bid
  price in the competitive bidding area and will require
  evidence of financial resources to support potential
  market expansion
            Supplier Capacity
 If a supplier estimates that it can furnish more
  than 20 percent of the expected beneficiary
  demand for the product category in the CBA,
  CMS will lower that supplier’s capacity estimate
  to 20 percent.
 This capacity adjustment is necessary to ensure
  that at least 5 suppliers have composite bids at or
  below the pivotal bid for the product category.
 Enables CMS to award contracts to at least those
  5 suppliers, per product category. “Sufficient
  contract suppliers in the CBA to provide
  beneficiaries with variety and choice.”
            Supplier Capacity

 However, CMS will award at least two contracts,
  if there are less than five suppliers meeting these
  requirements and the suppliers satisfying these
  requirements have sufficient capacity to satisfy
  beneficiary demand for the product category
 Note: The provisions do not apply to regional or
  nationwide mail order CBAs.
           The Bid Process
 Competitive bidding items will be included
  in product categories and identified by
  HCPCS codes. Suppliers may choose to
  bid on one, some, or all of the product
  categories, but if they bid on a category,
  they must bid on each and every item
  included in the category.
 Bidders who bid at or below the “Pivotal
  bid” are winning bidders, assuming they
  meet accreditation and other requirements.
               “Pivotal Bid”
 This is the point where beneficiary demand is
  met by supplier capacity. Part of determining the
  pivotal bid would be to evaluate the composite
  bid to compare all the suppliers’ bids submitted
  for an entire product category in an area which
  will allow CMS to determine which suppliers can
  offer the lowest expected costs to Medicare for
  all items in a product category.
 IN THE PROPOSED RULE…Suppliers whose
  bids were at, or below, the pivotal bid would be
  the winning bidders and those above the pivotal
  bid would leave out other suppliers with very
  close, but slightly higher bids
However…New Small Supplier “Target”
 CMS changed the definition of a “small
  supplier” to be a supplier that generates
  gross revenue of $3.5 million or less
  (compared to the proposed rule’s $6
  million in revenues.)
 CMS set a target number of 30% for small
  supplier participation. Small suppliers
  must meet all bidding requirements.
 CMS will review whether the number of
  small suppliers whose bids are at or below
  the pivotal bid is less than the 30% CMS
  target number.
 If the number of small suppliers is lower,
  CMS will offer small suppliers whose bids
  were most close to, but above, the pivotal
  (cutoff) bid, the option of accepting a
  contract to furnish the product category at
  the contract amount.
 Bidding by product categories requires
  bidders to submit bids on multiple items
  (by HCPC code) within the product
  category. CMS will aggregate these
  individual bids into a composite bid in
  order to compare bidders with each other.
  The “composite bid” would be equal to the
  weighted sum of the bids for the items in
  the product category.
 After calculating the composite bid for each
  bidder, CMS would determine the capacity or
  market demand it would have to meet to service
  beneficiaries in an area.
 This analysis would determine the number of
  winning bidders CMS must select for a given
  area. CMS would pick the pivotal bid by
  counting up from the lowest bid until it has
  counted as many suppliers as it needs to meet the
  capacity for the area.
 CMS will use the median of the bids submitted
  by the winners
 Respiratory Assist Devices and CPAP
    Category Bidding Example (*)
     Assume CBA Capacity = 100
     HCPC        E0601   E0470   E0471   A7030
    Weight        0.4     0.3     0.2     0.1

  Supplier #
       1          $90    $185    $202     $52
       2          $82    $180    $170     $42
       3          $85    $175    $190     $50
       4          $87    $192    $185     $41
       5          $80    $170    $200     $40
(*) Simplified
with only 4
HCPC codes
         Apply HCPC Weights

HCPC     E0601         E0470         E0471         A7030

Weight    0.4           0.3           0.2           0.1

  1      $90     $36   $185    $56   $202    $40   $52     $5.2

  2      $82     $33   $180    $54   $170    $34   $42     $4.2

  3      $85     $34   $175    $53   $190    $38   $50     $5.0

  4      $87     $35   $192    $58   $185    $37   $41     $4.1

  5      $80     $32   $170    $51   $200    $40   $40     $4.0
      Sum Weighted HCPC Bids To
      Obtain Composite Category Bid

HCPC     E0601         E0470         E0471         A7030

Weight    0.4           0.3           0.2           0.1

  1      $90     $36   $185    $56   $202    $40   $52     $5.2   $137
  2      $82     $33   $180    $54   $170    $34   $42     $4.2   $125
  3      $85     $34   $175    $53   $190    $38   $50     $5.0   $130
  4      $87     $35   $192    $58   $185    $37   $41     $4.1   $134
  5      $80     $32   $170    $51   $200    $40   $40     $4.0   $127
      Determine Capacity of each Supplier (Units) –
                Capacity of CBA is 100

HCPC     E0601         E0470         E0471         A7030

Weight    0.4           0.3           0.2          0.1                   CAP
  1      $90     $36   $185    $56   $202    $40   $52     $5.2   $137   15
  2      $82     $33   $180    $54   $170    $34   $42     $4.2   $125   10
  3      $85     $34   $175    $53   $190    $38   $50     $5.0   $130   40
  4      $87     $35   $192    $58   $185    $37   $41     $4.1   $134   60
  5      $80     $32   $170    $51   $200    $40   $40     $4.0   $127   50
      Select Lowest Composite Bid - Add Additional
            Suppliers- Until Capacity Reached

HCPC     E0601         E0470         E0471         A7030

Weight    0.4           0.3           0.2          0.2                  CAP
  1      $90     $36   $185    $56   $202    $40   $52     $10   $137   15
  2      $82     $33   $180    $54   $170    $34   $42     $8    $125   10
  3      $85     $34   $175    $53   $190    $38   $50     $10   $130   40
  4      $87     $35   $192    $58   $185    $37   $41     $8    $134   60
  5      $80     $32   $170    $51   $200    $40   $40     $8    $127   50
 3 Suppliers Reach 100% Capacity.
 At this point, the Pivotal Bid is met.
  (All Bids over $130 are excluded)
HCPC     E0601         E0470         E0471         A7030

Weight    0.4           0.3           0.2          0.2                  CAP
  1      $90     $36   $185    $56   $202    $40   $52     $10   $137   15
 2       $82     $33   $180    $54   $170    $34   $42     $8    $125   10
 3       $85     $34   $175    $53   $190    $38   $50     $10   $130   40
  4      $87     $35   $192    $58   $185    $37   $41     $8    $134   60
 5       $80     $32   $170    $51   $200    $40   $40     $8    $127   50
         These 3 Suppliers Receive the
         Median Of Each HCPC Code

HCPC     E0601         E0470         E0471         A7030

Weight    0.4           0.3           0.2          0.2                  CAP
  1      $90     $36   $185    $56   $202    $40   $52     $10   $137   15
 2       $82     $33   $180    $54   $170    $34   $42     $8    $125   10
 3       $85     $34   $175    $53   $190    $38   $50     $10   $130   40
  4      $87     $35   $192    $58   $185    $37   $41     $8    $134   60
 5       $80     $32   $170    $51   $200    $40   $40     $8    $127   50
 The five bids received for CPAP ranged from $80 to
  $90. However, with the pivotal bid and median
  taken into account, the winning bidders all receive
 This example, for simplicity purposes, only used five
  suppliers, of which three were eligible for contract
  award. The “30% small supplier” target would
  require one of these three to be a small supplier. If
  this was not the case, then the next small supplier
  who bid closest (but above) the pivotal bid would be
  eligible for a contract.
 Also…this example did NOT take into account the
  “20%” maximum capacity. In any case, final CMS
  weights per HCPC code and supplier analysis of each
  bid amount per code is, hence, very important!
       Payment Determination
 CMS will use the median of the bids submitted
  by the winners.
 Using the median of the winning bids to establish
  the payment amount could drive down
  reimbursement because the median of the
  winning bids will be lower than the pivotal bid.
 (CMS considered as an alternative the pricing
  methodology used in the demonstrations. Using
  this methodology, after the pivotal bid is
  determined, a supplier’s bid for each item in the
  product category would be adjusted so that each
  winning bid would equal the pivotal bid.)
 Bids will grouped into product categories
  consisting of items that are used together to
  treat a medical condition, though separate
  bids for each item are required, for
  example, hospital beds and necessary
 CMS: “Medicare patients will be able to
  receive all of their related products from
  one supplier by using this method.”
 Bids must include all costs related to furnishing
  an item, including all services directly related to
  the furnishing of the item.
 Medicare believes that this approach is more
  favorable for small suppliers because they can
  choose to specialize in only one product
 Suppliers who submit bids incur the cost of
  bidding. During the demonstration projects,
  suppliers spent between 40 and 100 hours
  preparing and submitting bids. The midpoint is
  70 hours and therefore the amount of time CMS
  is projecting the average supplier will spend on
  the bidding process
 Oxygen and Oxygen Equipment
 CMS will calculate single payment
  amounts based on separate bids for
  furnishing on a monthly basis of each
  category of oxygen and oxygen equipment
  services (e.g., stationary oxygen
  equipment, portable oxygen equipment
  only, stationary and portable oxygen
  contents only, and portable oxygen
  concentrators/transfilling concentrators).
  Inexpensive or Other Routinely
      Purchased DME Items
 Generally remains the same
 Provider bids will be submitted only for
  the furnishing of new items in this
   Items Requiring Frequent and
       Substantial Servicing
 Bids will be submitted for the monthly
  rental of these items
 Exception: continuous passive motion
  exercise devices, for which bids would be
  submitted on a daily rental basis.
 Payments made on a rental basis.
         Capped Rental Items
 CMS will request bids for “purchase” amounts be
  submitted for the furnishing of new items in this
 For items furnished on a rental basis, the single
  payment amount for rental of the item for months
  1 through 3 would be based on 10 percent of the
  single payment amount for purchase of the item,
  and for months 4 through 13 would be based on
  7.5 percent of the single payment amount (after
  which title transfers to the beneficiary)
  Capped Rental Items, cont’d
 CMS will make separate payment for
  reasonable and necessary maintenance and
  servicing of capped rental items only for
  beneficiary-owned DME. Payment for
  maintenance and servicing of rented DME
  would be included in the single payment
  amount for rental of the item.
          Power Wheelchairs
 The lump sum purchase option for power
  wheelchairs will be retained under the
  competitive bidding program.
 A single payment amount for purchase of a new
  item would be calculated for each item to
  determine the lump sum purchase of a new power
 If a beneficiary elects to purchase a used power
  wheelchair, the single payment amount for the
  lump sum purchase would be 75 percent of the
  payment for a new wheelchair.
       Beneficiary/Travel Rules
 Beneficiaries who live in a CBA will be permitted to
  obtain DMEPOS only from contracted suppliers.
  Beneficiaries whose permanent residence is outside a
  CBA but visit a CBA also will be required to utilize
  contracted suppliers.

 If the area that the beneficiary is visiting is not a CBA, or
  if the area is a competitive bidding area but the item
  needed by the beneficiary is not included in the
  competitive bidding program for that area, they must
  obtain the item from a supplier that has a valid Medicare
  supplier number.
 In either case, payment to the supplier will be paid based
  on the bid amount for the item in the competitive bidding
  area where the beneficiary maintains a permanent
 Monthly rental oxygen: Arrangements entered into
  before the start of a competitive bidding program can be
  continued. The supplier must agree to accept the
  competitive bidding price. Losing suppliers cannot take
  on new patients for these items.
 Inexpensive/routinely purchased items furnished on a
  rental basis, items requiring frequent and substantial
  servicing, and capped rental items: Grandfathered
  supplier may continue furnishing these items in
  accordance with existing rental agreements.
 Allows beneficiaries to continue to rent items from their
  existing supplier, even if that supplier has lost its contract
  status under a subsequent competitive bidding program.
 CMS’ intent is to drive all business for
  competitively bid products to the contract
  supplier. Beneficiaries who visit the competitive
  bidding area and need products included in the
  bidding program would be required to obtain
  them from a contract supplier.
 Conversely, beneficiaries who live in a
  competitive bidding area and need competitively
  bid equipment when they visit other areas can
  obtain the equipment from any Medicare
  supplier. However, Medicare will only pay the
  competitive bidding contract amount for the item.
 The proposed rule required winning
  bidders to accept every beneficiary in the
  CBA no matter how many months rental
  they have remaining on their equipment.
  CMS refers to this as a beneficiary
  protection in the event the beneficiary has
  a supplier who loses the bid and does not
  agree to the grandfathering terms.
 However, the final rule somewhat
  mitigated supplier concern relative to the
  monthly rental issue…
 For oxygen, CMS allows suppliers that
  must begin furnishing oxygen equipment
  after the rental period has already begun to
  a beneficiary who is no longer renting the
  item from his or her previous supplier
  (because the previous supplier elected not
  to become a grandfathered supplier or the
  beneficiary elected to change suppliers)
  will receive at least 10 rental payments for
  furnishing the equipment.
 For capped rentals, CMS allows suppliers
  furnishing items to a beneficiary who is no longer
  renting the item from their previous supplier
  (because the previous supplier elected not to
  become a grandfathered supplier or the
  beneficiary elected to change suppliers) to
  receive 13 monthly rental payments for the item,
  regardless of how many monthly rental payments
  Medicare previously made to the prior supplier
  (assuming the item remains medically necessary).
 At the end of this new 13 month rental period,
  the contract supplier will still transfer title to the
  capped rental item to the beneficiary.
         Important Exception…
 This rule does not apply when a beneficiary who
  is renting a capped rental item from a contract
  supplier elects to obtain the same item from
  another contract supplier, because the
  grandfathering provisions only apply to those
  situations in which a beneficiary had been
  previously receiving the item from a non-contract
 A new contract supplier would be paid rental
  only for the duration of the rental period.
   Grandfathering Other Items
 CMS: “We do not believe we have
  authority to allow grandfathering for other
  DMEPOS, such as glucose testing supplies
  and enteral nutrition, equipment, and
    The Competitive Bidding
Implementation Contractor (CBIC)

 Awarded to Palmetto GBA
 Functions include prepare Request For
  Bids (RFPs), accept bid proposals, evaluate
  bids, select qualified suppliers, set final fee
  schedules, and educate all providers and
  beneficiaries on program/processes.
     “Education and Outreach”
 CMS will instruct the DME MACs and Palmetto
  GBA (the CBIC) to provide early education and
  resources to all suppliers, referral agents,
  beneficiaries and other providers who service a
  competitive bidding area.
 These resources will include customer service
  support and ombudsmen networks. The claims
  processing system will also be used as a vehicle
  for information relating to this program.
     Inherent Reasonableness
 NCB will generate a rich HME database
  even if it doesn't result in substantial cost
 CMS will have detailed information on
  what bidders in the first 10 MSAs are
  willing to charge and, by implication, how
  low they can go and still stay in business.
  CMS could use the data to impose an
  inherent-reasonableness standard on the
  entire industry.
   “Opportunity to Create Networks”
 Small suppliers (<$3.5 million in revenue) may
  join/form networks if they do not service the
  entire Geographical area of the CBA.
 Networks must comply with all applicable laws,
  including the federal antitrust laws.
 The small suppliers forming the network must
  have market shares that do not exceed 20 percent
  of the expected beneficiary demand for the
  product category.
 No more than 20 small suppliers may participate
  in a network.
 Each network must form a single legal entity that
  acts as the bidder (e.g.,. a joint venture, limited
  partnership, or contractor/subcontractor
  relationship which would act as the applicant and
  submit the bid.)
 A small supplier may join more than one network
  but cannot submit an individual bid to furnish the
  same product category in the same CBA as any
  network in which it is a member.
 A small supplier may not be a member of more
  than one network if those networks submit bids
  for the same product category in the same CBA.
 Each member of the network must meet all
  accreditation and quality standards.
 In a change from the proposed rule, the “legal
  entity” is no longer responsible for billing
  Medicare, receiving payment and distributing
  reimbursements on behalf of the network
 Network members will continue to maintain
  current billing functions.
 However, the Network “legal entity” will submit
  the bidding application on behalf of all of the
  members, and will receive a Network “bidding
  number” from CMS.
 More Network detail to follow in the next
  Other Final Rule Changes or Clarifications
 Proposed CPI increases over three year period removed:
  “No Payment Adjustment to Account for Inflation”
 Starting in 2009 CMS has the authority to adjust payment
  amounts in non-bid areas based upon bid amounts in bid
 CMS will not require that repairs of beneficiary-owned
  competitively bid items be performed by contract
  suppliers. This policy will also apply to maintenance
  services required by the DRA.
 After considering generally negative comments, CMS
  removed the “rebate program.
 Change of ownership update: A contract supplier must
  notify CMS if it is negotiating a change in ownership 60
  days before the anticipated date of the change.
    Physicians/Practitioners, SNFs &
       Hospital-based Suppliers
 The Final Rule permits physicians and certain
  nonphysician practitioners to furnish certain
  competitively bid items to their own patients
  without submitting a bid and being selected as a
  contract supplier.
 HOWEVER…. SNFs & NFs must bid (and
  compete to serve their own patients!)
 CMS: We believe it is appropriate to include
  them in the same bidding process as other
  suppliers because the statute requires us to
  conduct bidding for items in which we expect
 Hospital-based suppliers also must bid
Accreditation and
Quality Standards
 Four New Supplier Standards!
 The following items were added as
  Medicare suppliers standards in the Federal
  Register notice dated August 18, 2006.
 However, CMS has not set a deadline for
  DMEPOS suppliers to become accredited
  in order to retain/obtain a billing number.
  Therefore, at the time CMS review,
  suppliers needed to comply with only 21
  standards to enroll in the Medicare
            The Standards…
 (22) All suppliers of DMEPOS and other items
  and services must be accredited by a CMS-
  approved accreditation organization in order to
  receive and retain a supplier billing number. The
  accreditation must indicate the specific products
  and services for which the supplier is accredited
  in order for the supplier to receive payment for
  those specific products and services
 (23) All DMEPOS suppliers must notify their
  accreditation organization when a new DMEPOS
  location is opened. The accreditation
  organization may accredit the new supplier
  location for 3 months after it is operational
  without requiring a new site visit.
 (24) All DMEPOS supplier locations, whether
  owned or subcontracted, must meet the
  DMEPOS quality standards and be separately
  accredited in order to bill Medicare. An
  accredited supplier may be denied enrollment or
  their enrollment may be revoked, if CMS
  determines that they are not in compliance with
  the DMEPOS quality standards.
 (25) All DMEPOS suppliers must disclose upon
  enrollment all products and services, including
  the addition of new product lines for which they
  are seeking accreditation. If a new product line is
  added after enrollment, the DMEPOS supplier
  will be responsible for notifying the accrediting
  body of the new product so that the DMEPOS
  supplier can be re-surveyed and accredited for
  these new products.
    Accreditation Requirement
 All supplier standards are still in effect. CMS
  directly and through its contractor, the National
  Supplier Clearinghouse (NSC), will still enforce
  and interpret all standards.
Recognized National Accreditation
   Organizations for DMEPOS
 Joint Commission on Accreditation of Healthcare
 Community Health Accreditation Program
 Healthcare Quality Association on Accreditation
 National Board of Accreditation for Orthotic
  Suppliers/Board of Certification in Pedorthics (merged)
 Accreditation Commission for Healthcare Inc.
 Board for Orthotist/Prosthetist Certification
 National Association of Boards of Pharmacy
 Commission on Accreditation of Rehabilitation Facilities
 American Board for Certification in Orthotics and
  Prosthetics Inc.
 The Compliance Team Inc.
   Frequently Asked Questions
 Is DMEPOS accreditation mandatory?
  Yes, for Medicare. The MMA of 2003
  mandates a final rule requiring
  accreditation and competitive bidding for
  entities providing DMEPOS, diabetes, and
  Part B supplies and services.
 Must I obtain accreditation to acquire or
  retain my Medicare Part B supplier billing
  number? Yes.
 What happens if my HME does not obtain
  accreditation? Your facility will not be able to
  competitively bid for DMEPOS products and will
  not be eligible for reimbursement by Medicare
  for DMEPOS supplies and services.
 Will accrediting organizations prioritize facilities
  in the initials MSAs? Yes.
 When is the last date that my company is
  required to be accredited? CMS IS TO
  that all DMEPOS suppliers, including non-
  bidding suppliers, must obtain accreditation! The
  date could be as early as in 2008
 Do I need to buy a manual in order to
  become accredited? A manual, per se, is
  not required by the regulations. However,
  accrediting organizations will require all
  supporting documentation requested with
  the application to be submitted. Manuals
  may be appropriate for facilities to ensure
  the HME is in compliance with the CMS
  Quality Standards.
      Quality Standards and
♦ Contract suppliers must meet quality
  standards specified by the Secretary under
  section /1834(a)(20) of the Act
♦ Quality standards applied by recognized
  independent accreditation organizations
  designated by the Secretary
♦ Bidding suppliers must be accredited by a
  CMS approved accreditation organization
♦ Quality Standards will apply to ALL
  suppliers, not just those in bid areas
 If you provide any of the identified products
  or services to Medicare beneficiaries in any
  of the first 10 CBAs you must bid to obtain
  consideration for winning contract status. In
  order to bid, you will need to be accredited.
  If you provide products and services to
  Medicare beneficiaries in such areas as who
  are NOT in the first defined service areas,
  you may be subject to competitive bidding in
  2008 and beyond.
 All others may be required to be accredited
  (whether or not there is competitive bidding
  in your service area) as early as 2008
        Rural Service Areas
 Providers may never be required to participate
  in a competitive bidding program.
 However, a rate adjustment (reduction) is
  likely, as CMS has the authority to eventually
  reimburse providers the rates paid in the most
  adjacent CBA
 Bottom line: Must be accredited by some date
  (no specific date announced), but most likely
          Quality Standards
 In August of 2006 CMS released the
  final supplier quality standards--which
  HME providers must meet not only to
  participate in the bid but also to do any
  Part B business
 More than 5,600 stakeholders
  commented, with the most common
  complaint that they were "too
  prescriptive. Agency officials agreed.
 CMS performed “significant revisions
  to reduce burden on small suppliers and
  ensure quality services for Medicare
 The final standards reflect more general
  good business practices and product
  specific services.
 CMS suggests that many suppliers
  already comply.
              Key Revisions
 Removed “unnecessary specificity” and “redundant
  information” to reduce document from 104 pages to
  14 pages.

 Reduced “overly-prescriptive requirements”.
  Example: Eliminated requirement to be open for 40
  hours/wk. & replaced with requirement to maintain
  posted business hours.

 Clarified requirements for performance management;
  allows suppliers flexibility in determining indicators

 Reduced the number of product specific standards
  from 15 to 3 via consolidation of product specific
  standards into general product service standards
 An Executive Summary with excellent
  compliance tips is available on
 Actual copies of the final standards are
  available on the CMS website and on
  numerous industry websites
Final Supplier Quality Standards
First Section: Business Services
  ♦ Administration
  ♦ Financial Management
  ♦ Human Resource Management
  ♦ Consumer Services
  ♦ Performance Management
  ♦ Product Safety
  ♦ Information Management
Final Supplier Quality Standards

Second Section: General Product Specific
  Service Standards
 Preparation
  – Intake
  – Beneficiary Record
 Delivery and Set-Up
 Training/Instruction to Beneficiary and
 Follow-up
Final Supplier Quality Standards
Appendix A- C
A: Respiratory Equipment, Supplies & Services
   ♦ Oxygen concentrators, reservoirs, high pressure
       cylinders, oxygen accessories and supplies, oxygen
       conserving devices
   ♦   Home invasive mechanical ventilators
   ♦   CPAP Devices
   ♦   Respiratory Assist Devices
   ♦   IPPPB Devices
   ♦   Nebulizers
Final Supplier Quality Standards
Appendix A- C
B: Manual Wheelchairs, Power Mobility
  Devices, Complex Rehab and Assistive
Key Issues in Complex Rehab and Assistive Technology:
   ♦ Check items listed
   ♦ Employ at least one qualified RTS per location
   ♦ Provide appropriate equipment for trial
   ♦ Provide private, clean and safe rooms appropriate for fitting and
   ♦ Maintain a repair shop located in the facility
Final Supplier Quality Standards
 Appendix A- C
 C: Custom Fabricated, Custom Fitted,
   Custom-made Orthotics, Prosthetic
   Devices, Somatic, Ocular and Facial
   Prosthetics and Therapeutic Shoes
   and Inserts
  Not off-the-shelf items
Policy and Procedure Manual

♦Must meet the needs and
requirements of the accreditation
provider you select
♦Not worth trying to create on
your own at this point
 Review Patient Paperwork…

♦Consent for Treatment/Services
♦Third Party Review
♦HIPAA Information
♦Disaster/Emergency Preparedness
♦How to Reach the Office (Hours)
      Educational Materials &
       Competency Program:
♦Many of the requirements of the standards
speak directly to the educational materials you
provide to your patients
♦Competency Program - Review the
requirements of your accreditor and be sure you
meet them
♦Generally only technical staff are required to
have competency evaluated
♦Can be written (testing) but must be observed
for technical staff
  Performance Management
1. Beneficiary satisfaction surveys
2. Patient complaint log
3. After hours (on call) log to prove
   timeliness of response to questions,
   problems and concerns
4. Log that documents frequency of billing
   and/or coding errors
5. Log documenting adverse events (as
   defined by your P & P manual)
Most accrediting organizations
require at least three months of
surveys collected and summarized
with plans for improvement or
you will have to provide written
follow-up and possible a re-visit
         10 Accreditation Tasks
        You MUST Do Right Now
1.   Download and become VERY comfortable with the final quality
     standards---read them carefully
       Found on the CMS website at: (http://www.)
2.   Review and talk to your payers to make an informed decision as
     you choose your accreditation provider right away
3.   Send for your accreditor’s standards ASAP
4.   Review and update your P&P (or BUY one!)
5.   Identify your team(s)--- review the standards by team and identify
     what you need to do
          10 Accreditation Tasks
         You MUST Do Right Now
6.  Educate the staff NOW- practice discussions/interviews
7.  Create/review your PI program NOW– begin to collect patient
    satisfaction data and implement the required logs ASAP---
    Gather at least 3 mos of data before notifying accreditor that you
    are ready
8. Review all patient education materials to see what you will need
    to update/change so that they match the final standards
9. Review physical plant, warehouse, vehicles
10. Perform a Mock Survey- make corrections

     Notify your provider that you’re ready!- Surveys
     are unannounced!!! Need a window of time!!
    VGM Accreditation Tools
 Policy and Procedure Manual
  – HQAA and ACHC versions
  – Has ALL necessary forms, audit tools, logs
    needed for compliance with standards
 Belson Hanwright Educational DVD’s
  – VGM is the exclusive distributor
 “Blue Sheets” for Patient Education
  – Comply with Quality Standards
 On-line Educational Programs for staff
  to assist with Competency Program
   Medicare DMEPOS
Competitive Bidding Program
 Initial Registration for Competitive
          Bidding Now Open
 All suppliers will submit their bids using
  an internet application.
 To help ensure the privacy of all bids, all
  suppliers must complete initial registration
  in the internet application to get a USER
  ID and password. Suppliers need to
  complete this initial registration process
        Bidding has opened!!!!

 The initial registration process requires the
  authorized official, (see Section 15 of the
  CMS 855S) to complete the information
  required in the internet application.
 The authorized official's information must
  match the information on file at the
  National Supplier Clearinghouse.
       To obtain USER ID…
 The USER ID and password will be mailed to the
  authorized official if his/her submitted
  information matches exactly the data on file for
  last name, date of birth, Social Security number
  and supplier number.
 The USER ID and password will be delivered in
  2 separate mailings to the authorized official.
 An authorized official only needs ONE USER ID
  and password in order to submit bids for any
  company for which he/she was listed as the
  authorized official on the CMS 855S.
              To Register…
 Or, go to and click on the
  “Competitive Bidding Info” link on the main
 Suppliers must have the USER ID and password
  before they can enter a bid into the competitive
  bidding internet application. However, the USER
  ID and password cannot be used until the bidding
  window opens, which is expected very shortly!
 Access a user guide for the Individuals
  Authorized Access to CMS Computer
  Services (IACS) application before
  attempting initial registration. This guide
  can be found on the Competitive Bidding
  Implementation Contractor's website at
 Or, call the CBIC helpdesk on 1-877-577-
    The Competitive Bidding
 Application Process: Four Forms
 CMS-10169A – Form A: Application
 CMS-10169B – Form B: Bidding Sheet per
  category bidding on
 CMS-10169C – Form C: Medicare DMEPOS
  Competitive Bidding Program Contract Supplier
  Quarterly Report
 CMS-10169D – Form D: Competitive Bidding
  Program Beneficiary Survey
 (To access forms and instructions, you may go to Competitive Bidding Info link)
Eligibility and Submission Requirements
All suppliers must be in good standing and have an active
National Supplier Clearinghouse number (NSC#), meet any
local or State licensure requirements, if any, for the item
being bid, and be accredited by a Centers for Medicare &
Medicaid Services (CMS) approved accreditation
organization (or have pending accreditation) to be eligible to
Each bidder must complete its bid online using the
information collected on the Office of Management and
Budget (OMB) approved forms (Form10169A –Application;
Form 10169B – Bidding Sheet). Bid forms are due by 9:00
p.m. prevailing Eastern time on July 13, 2007. (Hardcopy
bid submission is available to those suppliers without access
to a computerized system by calling the Competitive
Bidding Implementation Contractor (CBIC) at (877) 577-
 Process for Submission of Required Documents
All hardcopy documents required as attachments to the
electronic bid submission must be sent to the CBIC as one
complete package. Each document must be identified by the
supplier’s bidder number to ensure that this information is
placed with the correct application. We strongly recommend
that the package be sent to the CBIC using a method that can
be tracked (e.g., certified mail). Irrespective of whether the
bid is submitted electronically or by mail, the supplier must
sign the certification statement identified on the application
and submit that with the hardcopy financial documents. All
documents must be postmarked by 9:00 p.m., July 13, 2007,
and mailed to one of the following addresses:
CBIC                            CBIC
PO Box 907                      Bldg. 200, Suite 400
Augusta, GA 30999               2743 Perimeter Pkwy.
                                Augusta, GA 30909
Additional information that will be
    required (begin now!)….
 Supplier Financial Statements
 Suppliers Credit Report and Score
 Signed legal contracts between all network
  members, if applicable
 Signed letter of intent to enter into an
  agreement if supplier plans to expand
  capacity through use of subcontractors
Additional information required
 Settlement Agreement and Corporate
  Integrity agreement, if applicable
 Copy of Accreditation Organization’s
  Certificate of Accreditation, if applicable.
         Financial Requirements
 Suppliers that submit individual tax returns that
  include business taxes must submit the following
  documents for the last 3 years:
   –   Submit Schedule C from their 1040
   –   Balance sheet
   –   Statement of Cash Flow
   –   Income Statement
   –   Current credit report completed within 90 days prior
       to the date the bid is submitted (must be from
       Experian, Equifax or TransUnion)
     Financial Requirements
 Suppliers that submit corporate tax
  returns must submit the following
  documents for the last 3 years:
  – Schedule L from the tax return (balance sheet)
  – Statement of changes in financial position
    (cash flow)
  – Statement of operations (income statement)
  – Bank references.
      Financial Requirements
 All documents that are not prepared as part
  of a tax return must be “certified” as
  accurate by the supplier. (Audited
  documents are not required.)
 All documents must be prepared on a
  accrual or cash basis of accounting
 Publicly traded companies will submit a
  copy of their 10-K Filing reports
      Financial Requirements
 New suppliers must submit projected
  financial statements for any year they they
  do not have past financial information
  because they were not in business as a
  DMEPOS supplier and/or did not service
  the area.
         Form A: Application
 Separate Form A, as well as financials, submitted
  every time a supplier submits a bid as a different
  bidder or entity (e.g. as a network).
 If a supplier has multiple locations within the
  CBA, the supplier must complete all required
  information on Form A for each location.
 Warning! If a document has to be resubmitted
  the entire package must be resubmitted
          Form A: Application
 Supplier type (select only one)
  – Individual supplier with single location
  – Supplier with common ownership and
    multiple locations
  – Primary Network Supplier (*)
  - Specialty Supplier (A supplier that is eligible
    for limited participation in the CBA program,
    such as mail order only)
  (*) The final RFB will likely edit this description, e.g., “Network Legal
     Entity” as the “Primary Supplier” nomenclature may be removed.
     Form A: Application cont
 Select product category to which you are submitting a
  bid. Product categories and HCPC codes have been
  released (see example next page)
 Suppliers legal business name (as reported to the IRS for
  tax purposes), address, phone number, e-mail address and
  fax number
 How long has supplier been supplying DMEPOS items
  in the CBA in years and months
 Suppliers primary physical address
 Tax ID number
     Form A: Application cont
 NSC and NPI number
 Service type (retail locations, mail orders, home
  delivery) DBA name
 Supply all physical locations where supplier does
  business (has common ownership)
 PO boxes are not acceptable. Must have zip code
  and telephone number with area code
     Form A: Application cont
 Accreditation information
   – Name(s) of Medicare-approved accreditation
     organization you are approved by, or anticipate to be
     approved by
   – Accreditation issue date(s) and expiration date(s)
   – Product specific areas you are accreditated in (ex:
     oxygen, general dme)
   – Applies to all locations in the case of multiple location
     HME companies
   Form A: Application cont

 Type of Business (Corporation, Sole
  proprietorship, Franchise, etc.)
 State and Date of Incorporation)
 Main contact person information
 Financial documents
     Form A: Application cont
 Bidding supplier must disclose any information
  on current or past (within last 5 years) sanctions
  or debarments in which they were involved
 Any applicable settlement agreements or
  corporate integrity agreements must be submitted
 Sanctions include, but are not limited to
  debarment from any federal program, sanctions
  from the OIG or from any State or Local level.
  This includes any actions taken against board of
  directors, corporate officers, high-level
  employees, affiliated companies, network
  members or subcontractors.
    Form A: Application cont
 List key personnel to include officers,
  partners, directors, managing employees or
  members of the board of directors
 A space is provided at the end if additional
  space is needed to respond to the questions
  on Form A
     Application for Networks
 (Networks and Subcontracting opportunities
  will be further discussed in the next series of
  slides. The following is a short summary…)
 If a network is bidding, the network legal entity
  (draft forms include “primary supplier”
  nomenclature) must complete and submit Form A
  for every member of the network for each
  member location
 The Network legal entity must submit the
  certified financial statement of each network
  member as well as all hard copy documents in
  one complete package
     Application for Networks
 The Final Rule clarifies that the “primary
  supplier” will no longer submit claims, bill
  Medicare and receive reimbursement on
  behalf of all the networks members.
 If a network member (any member in the
  network) has had a sanction or debarrment, it
  must be reported on the sanctions section (section
  N) of Form A for each network member
 Only one bid per item in each product
  category will be accepted from a network
 Network suppliers cannot bid separately
  from the network for the same product
  category within the same CBA
 Members cannot join more than one
  network for the same product category in
  the same CBA
      Form B: Bidding Sheet
 List product category at top of sheet
 List Suppliers legal business name and
  bidder number at the top of each page
 If this is a network bid indicate the legal
  entity name and bidder number
      Form B: Bidding Sheet
 Indicate total revenue collected for product
  category (not just Medicare) for past calendar
 If multiple locations that share common
  ownership, list total for all locations
 Networks provide total for all member suppliers
 Indicate the percentage of total received from
 Estimates are acceptable.
       Form B: Bidding Sheet
 Indicate total number of customers served for the
  product category in the CBA for the past calendar
 Multiple location suppliers (with common
  ownership/Tax ID) will include total for all
 Networks provide total for all member suppliers
 Indicate the percentage of total received from
 Estimates are acceptable
      Form B: Bidding Sheet
 List counties in the CBA that you are
  servicing customers for the product
 If supplier does not service entire county
  then list zip codes in the county that you do
  not service
 Indicate the percentage of total geographic
  area in the counties the supplier services
  Medicare Beneficiaries
      Form B: Bidding Sheet
 List by HCPC code the number of units
  provided (total) during the last year and the
  number supplied to Medicare beneficiaries
 Indicate, in percentage, the increase in
  volume the supplier or network could
  provide for the product category. The
  amount given is an aggregate amount for
  all codes in the product category
       Form B: Bidding Sheet
 If supplier plans to expand you must explain your
  business expansion plan on the form to include
  current and expansion plan levels, such as staff,
  financing, facilities, inventory control and
  distribution methods
 If you plan to expand through subcontractors you
  must identify them as well as attach signed letters
  of intent with each subcontractor. The letters
  have certain items they must contain which were
  explained earlier
      Form B: Bidding Sheet
 Supplier must list each category of which they
  are submitting a bid and list the CBA the bid is
  being submitted in
 On the actual bidding sheet the supplier or
  network must fill out items C, F and G
 C- Bidders enter Manufacturer, Model Name and
  Number of items they will provide to suppliers
  (suppliers may change models in later periods of
  the bidding cycle)
     Form B: Bidding Sheet
 F-Bidder put in total estimated Medicare
  capacity which is units by HCPC code that
  bidder currently supplies plus any
  additional capacity the bidder would be
  capable of providing per HCPC code
 G-Bid price for each item in the product
       Form B: Bidding Sheet
 Bids include cost of furnishing item throughout
  the CBA.
 CMS also assumes it includes providing the item
  and any services directly associated with the item
  (such as proper beneficiary/caregiver training and
  follow up, manufacturer shipping charges,
  maintaining rented equipment in proper order,
  education, delivery, set-up and retrieval)
            Bid Weighting Tip

 CMS has published bid weighting data on the
  CBIC website
  /(pages)/Suppliers. If you go to this site and
  select “Competitive Bidding Areas (CBAs) and
  Bidding Information Chart” you can then select
  the specific CBA that interests you. From there,
  you can obtain information specific to that CBA
  including geographical area, HCPCS codes and
  the “bid weights” for each code.
 VGM is finding that many providers are
  misinterpreting the weighting information that
  CMS is providing. The weights included are
  actually a formula that identifies what the
  utilization of each HCPCS code is relative to the
  total utilization of all codes in the category. It
  may actually be better to consider this as a
  “multiplier” because it does not factor in the
  actual allowable associated with each code and
  the impact the allowable has on the composite
  bid. Consider the following hypothetical
 If you apply this to the product categories that are
  included in the first round of Competitive
  Bidding you will realize that only a handful of
  the listed HCPCS codes make up the large
  majority of the bid weight for each category.
 Using power wheelchair category 2 as an
  example, two codes (K0822 and K0823) make up
  approximately 73.5% of the total bid weight
  (depending on the CBA) and only seven codes
  contribute 2% or more to the total bid
  weight. The total for the remaining 100 codes is
  just over 14% of the overall weight of the bid,
  with most of these codes individually
  representing only a very small fraction of the
  total bid weight.
  Bidding Sheet HCPC Update!
 HCPCS code E0194 (air fluidized bed)--the only
  Group 3 code written into the category--has been
 Essentially this product category now becomes a
  Group 2 support surface category.
 Code A4255 (platforms for home blood glucose
  monitor, 50 per box), an outdated code that is no
  longer used, has been removed from the mail-
  order diabetic supplies product category.
     Bid Application FAQs…
 The bid application requires that you list
  the manufacturer, make and model
  number(s) of the products you intend to
  provide if you are selected as a winning
  bidder. Are you locked into only providing
  those items for the duration of the contract
  or, if not, what is the process for updating
  your contract to include new models or
 Suppliers are not locked into furnishing only
  these products during the contract period.
  Suppliers must report what products they are
  furnishing on a quarterly basis (See Form C).
  Suppliers cannot report that they are offering
  certain items if they are not providing those
  specific items to Medicare beneficiaries. In
  addition, suppliers cannot discriminate against
  Medicare beneficiaries. The items a contract
  supplier furnishes to Medicare beneficiaries
  under its contract must be the same items
  furnished to other customers.
 If you bid on a product category, you must
  submit a bid for every HCPCS code in that
  product category. However, does that also
  mean you’re contractually obligated to
  provide every HCPCS code if selected as a
  contracted supplier? For example, many
  oxygen suppliers today don’t do liquid
  oxygen so if I bid, I must include pricing
  for the liquid oxygen HCPCS codes. If
  selected, it’s my understanding that the
  contracted supplier now has these options
  with respect to providing liquid….
 Get into the liquid oxygen business; or,
 Subcontract the liquid oxygen business; or,
 Tell the beneficiary that you don’t do liquid but
  that you’ll refer them to a contracted supplier
  who does do liquid oxygen.
 Convince the beneficiary (and/or physician) that
  liquid isn’t really necessary and that you’ll
  supply them with a concentrator or other
 The most curiosity comes about option C and
  whether it’s acceptable to just refer them to a
  different contracted supplier.
 Yes, suppliers are responsible for
  furnishing all of the items listed in the
  product category to any beneficiary with a
  permanent residence in the CBA. Suppliers
  must furnish the modality of oxygen that is
  prescribed by the physician.
“Weight Utilization” May Be Confusing!!!

 Bids are weighted by utilization and not
  expenses ($ reimbursed by Medicare).
 Low cost high utilization items have high
  weights whereas high cost low volume
  items have low weights.
 For example…in CPAP/RAD
  weighted (out of 1.00) -- 0.224623254, and
  the one unit fee schedule amount is $5.39
  AIRWAY PRESSURE) is weighted (out of
  1.00) --0.0601943846, and the one unit fee
  schedule amount is $1,052.60
 When the weights are applied within a
  product category, the effect is to possibly
  distort the composite bid amount in a way
  that is not immediately obvious!
    Form C: Quarterly Report
 Submitted no later than 10 days after the
  quarter ends
 Information must be sent regarding
  manufacturers, model names and numbers
  for items furnished to Medicare
  Form D: Beneficiary Survey
 Enables the beneficiary to rate you on
  several categories
  –   Arranging Equipment
  –   Training
  –   Delivery of Equipment
  –   Equipment Quality
  –   Customer Service
  –   Overall Complaint Handling
    Bid Submission Timelines
 Suppliers have 60 days (until July 13, 2007) to
  submit bids after the release of the RFB.
 Suppliers may submit bids 24 hours a day, 7 days
  a week.
 During the 60 day window, suppliers may amend
  their bids as many times as necessary.
 Once the 60 day window closes, however, no
  amendments will be allowed.
     Bid Submission Timelines
 Suppliers will be notified if they are missing hard
  copy documents during the last 10 days of the
  bidding window.
 The CBIC must review the supplier's financial
 The supplier sends a portion of the financial
  reference form to the bank for completion and
 The bank sends the completed form to the CBIC.
           CMS “Education”
 CMS has established the following web site
  where RFBs and other pertinent program
  information will be posted
 CMS plans to alert the supplier community by
  email of all postings on this web site.
 VGM maintains updated postings and
  information. Look for links on the front page on
  the web site.
“Opportunity to
Create Networks”
 “Opportunity to Create Networks”
 Small suppliers (<$3.5 million in revenue)
  may join/form networks if they do not
  service the entire Geographical area of the
 Networks must comply with all applicable
  laws, including the federal antitrust laws.
 The small suppliers forming the network
  must have market shares that do not exceed
  20 percent of the expected beneficiary
  demand for the product category.
 No more than 20 small suppliers may
  participate in a network.
 Each network must form a single legal entity that
  acts as the bidder (e.g.,. a joint venture, limited
  partnership, or contractor/subcontractor
  relationship which would act as the applicant and
  submit the bid.)
 A small supplier may join more than one network
  but cannot submit an individual bid to furnish the
  same product category in the same CBA as any
  network in which it is a member.
 A small supplier may not be a member of more
  than one network if those networks submit bids
  for the same product category in the same CBA.
 Each member of the network must meet all
  accreditation and quality standards.
 In a change from the proposed rule, the “legal
  entity” is no longer responsible for billing
  Medicare, receiving payment and distributing
  reimbursements on behalf of the network
 Network members will continue to maintain
  current billing functions.
 (However, the Network “legal entity” will submit
  the bidding application on behalf of all of the
  members, and will receive a Network “bidding
  number” from CMS)
 CMS agreed with comments
  suggesting that suppliers
  participating in a network must
  form a "discrete legal entity“
 “…with the purpose to prevent
  violations of the Federal anti-
  kickback statute, self-referral rules
  and regulations, and allegations of
  unfair business practices among
  the participating network
 CMS stated "we strongly agree that networks must not
  violate antitrust laws and that networks must take steps to
  ensure that they are not in violation of Federal antitrust
  laws. We emphasize that suppliers that pursue the
  network option must comply with all applicable Federal
  antitrust laws, and we will reject a network bid if we
  believe it has been prepared in violation of those laws.
  We will also refer any suspected cases of Federal antitrust
  violations to the Department of Justice for further
 ACCORDINGLY…HME Providers should utilize legal
  counsel for network development purposes and NOT
  discuss pricing, costs, etc. among prospective members
  until the legal entity has been formed and only then with
  the review of legal counsel.
               Form A
 The Network legal entity will complete
  Form A for each member of the network
 The Network must submit all financial
  documentation for each network member.
 When submitting bids, networks must
  submit copies of all contracts with and
  among their members.
          Network Capacity
 Networks will indicate the percentage
  increase in volume it is capable of
  providing for that product category.
 This increase should represent the
  aggregate amount applicable for all codes
  in the product category during a 12 month
  period. (It is not necessary for one supplier
  to meet 100% of the demand for an area.)
Additional information required
 Certification Statement Signed by the Authorized
 Supplier Financial Statements
 Suppliers Credit Report and Score
 Signed legal contracts between all network
  members, if applicable
 Signed letter of intent to enter into an agreement
  if supplier plans to expand capacity through use
  of subcontractors
           Use of Subcontractors:
               Letter of Intent
 Clear identification of parties
 Description of functions/services to be performed by the
 Language clearly indicating that the subcontractor has
  agreed to supply the items, functions and or services
 Anticipated length of agreement
 Signature of each authorized official or each party
 Language obligating subcontractor to abide by State and
  Federal privacy and Security requirements, including
  those provisions stated in the regulation for this program
    Additional Network Documents
 Copy of Accreditation Organizations’
  Certificate of Accreditation, if applicable
 Operating agreement; or, shareholders
  agreement and bylaws
 Standards of conduct
 Confidentiality agreement
 Miscellaneous meeting documents, letters,
  announcements, logs, etc.
1. Financial Requirements – same
   as for individual bid submission
  Network suppliers that submit individual
   tax returns that include business taxes must
   submit the following documents for the last
   3 years:
   – Submit Schedule C from their 1040
   – Balance sheet
   – Statement of Cash Flow
   – Income Statement
 Network suppliers that submit corporate
  tax returns must submit the following
  documents for the last 3 years:
  – Schedule L from the tax return (balance sheet)
  – Statement of changes in financial position
    (cash flow)
  – Statement of operations (income statement)
      Suspension and Termination
         of Network Contracts
 CMS may suspend or terminate a contract
  for any material breach
   Supplier Standards or Quality Standards
   Unannounced survey deficiencies
   Failure to provide branded items ordered by a
 “Does a network whose members’
  aggregate annual gross revenues exceed
  $3.5 million meet the definition for a small
  supplier? In other words, will a small
  supplier network qualify for the small
  supplier set aside if its aggregate annual
  gross revenue exceeds $3.5 million
 CMS: “No”
 While VGM strongly encourages
  individual provider the request
  of providers - and if suitable numbers
  indicate interest, VGM will offer network
  and subcontracting services in all 10
               VGM Services

 Legal Service Package
 Federal Antitrust Law & Network Subcontracting
 Bid Submission & Evaluation
 Accreditation Assistance
 Policies and Procedures Manual, and Quality
  Management/Performance Improvement Manual
  offered at substantial discount. (These manuals are
  specifically designed for compliance with the
  imposition of quality standards and accreditation
  requirements of the MMA)
     For more information…
 Please contact Kelly Wolf, at 800.642.6065
  or email
             Network FAQs
 Will the Network require a “Primary Supplier”
  that must maintain and utilize its own Medicare
  supplier number on behalf of all Network
  members? Not any longer! The NPRM
  suggested this would occur, but requested
  comments. Many industry stakeholders replied,
  and the “legal entity” is no longer responsible
  for billing Medicare, receiving payment and
  distributing reimbursements on behalf of the
  network suppliers.
 Will members risk losing current patients by
  participating in a Network? Analysts anticipate
  that the great majority of the Network claims will
  occur due to the continuing and identical referral
  source structure in place prior to the Network
  formation. In other words, Network members
  will bill and service existing patients. New
  patients will belong to referring provider .In
  cases where a referring entity contacts the
  Network/call center directly, a standard rotational
  referral processes (defined within the network
  agreement) would take place.
 May providers submit a bid with network
  and also individually? Yes and No.
  Providers cannot bid as individuals and via
  participation in a network within the same
  product category. Providers may bid
  individually in other categories.
 How long is the competitive bidding
  contract ? 3 years
 What happens if I withdraw from a network?
  Non-contract suppliers cannot assume new
  patients in the network product category/ies.
  You may be eligible to sub-contract with another
  contract provider or network. You can bid in the
  next bidding period
 Is Network participation limited? Yes, the
  regulations limit Network capacity to 20% of the
  estimated MSA capacity per product category, 20
  total supplier number members, and each
  member is limited to annual receipts of less than
  $3.5 million.
 What is our Network bid is not
  accepted in one or more categories?
 (Note! The following tips and strategies
 are applicable to individual supplier bidders
 as well…..)
To begin, your Medicare patient service
 in a losing product category will not
           immediately cease!
 As noted, there are grandfathering provisions for
  all items (except glucose testing supplies, enteral
  nutrition, equipment, and supplies).
 Oxygen provisions allow reimbursement for the
  remainder of the rental period (to 36 months) at
  the new contract rate
 Capped rental provisions maintain the current fee
  schedule amount.
           Beneficiary Choice
 Beneficiaries may opt to continue renting from
  the grandfathered supplier (who will furnish on
  same terms) but they may choose to switch to a
  contract supplier at any time. Inform your
  patients that you will continue to provide quality
 However, if you choose to “grandfather” you
  must do so for all of your current beneficiaries in
  the product category. You cannot “select” a
  certain patient population.
 Grandfathering is applicable if “win” this bidding
  period, but lose your contract status in the next
  bid period (2011).
     Subcontract Opportunity
 Many winning (if not most) bidders will
  need subcontractors! Contract suppliers
  must service the entire CBA.
 If you are not submitting a bid, or desire to
  mitigate loss of a product category, begin
  to review the subcontracting regulations.
 Begin discussions with suppliers now,
  prepare template legal contracts/Letters of
  Intent, etc.
   Provide Non-Bid Products and
     Services and/or Diversify!
 The ten product categories are now known.
  Suppliers may continue to provide to
  Medicare beneficiaries products not
  covered in the first round (ex: manual
 Seek alternative sources of revenue, such

 Many HMEs undervalue retail sales
 Retail/showroom consultants are
  widely available
 No delay in reimbursement!
 Cash sales to Medicare beneficiaries
       are allowed, but limited!
 You must submit claims on beneficiaries
  behalf when requested
 Many suppliers have forms beneficiaries
  sign indicating they did not authorize the
  claim to be submitted to Medicare. The
  beneficiary pays cash and eliminates the
  supplier’s obligation to submit.
 (However, even if the statement is signed, a beneficiary
  can later change his mind and require the claim be
  Supplier “Usual Price” Issue
 Restrictions exist on cash sales! Cannot
  bill Medicare “substantially more” than
  retail price.
 CMS suggests 20% is limit for all non-
  governmental sources.
 Suppliers cannot open a separate “retail
  shop” (under same tax ID) to circumvent
  the restriction
            Other Facilities
 Residents in many long term care facilities
  (not SNF) may receive Part B as if they
  were in their homes. If the facility is not
  paid a per diem rate, suppliers may either
  bill Medicare directly, or, in some cases,
  the facility will contract directly with the
  DME to provide equipment.
 Hospice. While no patient reimbursement
  is allowed, hospices may purchase
  equipment direct, or arrange for a per
  diem/per bed rental arrangement
 VA Hospitals & Facilities. These large
  purchasers routinely send out RFPs for DME.
  An overview of the VA bid process may be
  found at
 Claims submission information may be found
 State prison systems/ “medical detention
  centers”. Contact the Department of
  Corrections in your state at
 Resort Hotels & Casinos. Suppliers who live in
  larger marketplaces should consider visiting these
  facilities. Many have begun providing
  wheelchairs and scooters and other DME to their
 Airports. Many airports are served by the local
  HME for wheelchairs and other equipment.
     Other Options ?
Expand Commercial Insurance
Expand into geographic areas
 not covered by competitive
Sell the business to a successful
 “Can I decline a bid if I win?”
 Once the payment amount is determined,
  suppliers are NOT obligated to sign the
  contract if they perceive the amount as
 Suppliers that do accept the payment
  amount are contractually obligated for the
  entire period (estimated at 3 years).
 Demonstration Summary: Positive
      Results Achievable!
 There were increases in business reported
  by contract suppliers in both demonstration
 Participating providers ran more
  streamlined businesses…resulting in
  higher profit margins.
 Providers diversified into new areas that
  became very profitable.
 Providers improved efficiencies and
  performance in collecting AR and
  secondary collections.
 Many providers increased third party
  insurance contracts and business
 Creative marketing techniques were
  developed to grow business
 Better training of employees resulted
 Compliance improved.
 Providers were more “audit savvy”.
Lastly…A review CMS’ “Bidding Estimates
            & Assumptions”
 “We estimate that 28,960 suppliers will provide
  competitive bid items in the CBAs that we
  initially designate. If suppliers furnish products
  in more than one MSA, we counted them more
  than once because they are affected in more than
  one MSA.
 Not all products are subject to competitive
  bidding; therefore, we estimate that 68 percent
  of suppliers will furnish products subject to
  competitive bidding and will be affected by
  competitive bidding during the initial round of
  competitive bidding.”
 “This means in CY 2007, the remaining 32
  percent of suppliers in the 10 selected
  CBAs will not be affected by competitive
  bidding because they do not furnish
  products subject to competitive bidding.
  However, the actual percentage of affected
  suppliers may be smaller if we do not
  select all eligible product categories for
  competitive bidding.
 CMS on Affected Suppliers…
 “We assumed that 90 percent of suppliers
  that furnish items that we choose to include
  in the program would submit a bid. We
  assumed the remaining 10 percent of
  suppliers would not bid based on the low
  level of the Medicare revenue received for
  the items subject to competitive bidding or
  because they had not received the
  necessary accreditation.”
 There will be 15,973 suppliers who will
  submit a bid because they will want the
  opportunity to continue to provide these
  products to Medicare beneficiaries and to
  expand their business base. We also
  assume, based on the results of the
  demonstration, that at least 60 percent of
  bidding suppliers will be selected as
  winners in at least one product category.
 The bidding DMEPOS suppliers that are
  not awarded a contract because they did
  not submit a winning bid would represent
  about 22 percent of the total DMEPOS
  suppliers in these CBAs.
 We expect that losing bidders will be
  distributed roughly proportionately across
  the selected CBAs…
 We also note that if a supplier submitted a
  bid in multiple product categories, its
  probability of becoming a contract supplier
  would increase.
Bid Preparation &
 Operational Strategies
       As previously noted…
 You must be accredited or submitted an
  application to an approved organization
 You will be allowed one bid per product category
 If you are a member of a network, the network
  must bid the entire category
 You should estimate the costs of supplying the
  product throughout the entire CBA
 Estimate product costs using specific
  manufacturer and model. Include this
  information on your application (you may switch
  manufacturers at your discretion.)
        The “ABC” Method
 Activity Based Costing
 One method that many HME providers use
  to determine a bid that their particular
  company can continue to operate on at a
 (Note: This method is also used by many
  companies to determine selling price of
 What is Activity Based Costing
 A process by which the activities your company
  performs can be qualitatively defined as tasks
  performed over a period of time
 Once tasks are defined, then they can be
 Once categorized,each can have a cost associated
  with it
 Waste can then be easily identified and
    Steps for Performing ABC
 Analyze Activities
 Gather Costs
 Match Costs to Activities
 Establish Output Measures
 Analyze Costs
         Establish a Baseline
 Establish an “As-Is” baseline so you can
  determine improvement over time
 A baseline is documentation of policies,
  practices, methods, measures, costs and
  their interrelationships at a particular point
  in time
               Analyze Activities
 Determine the main activities and processes that
  your company performs. (Delivery, Billing, Warehouse,
  Accounting, Advertising/Marketing, Intake Procedures, Etc)

 Determine the activities and processes that make
  up each of the above defined categories (ex:
  Billing consists of the following activities: intake,
  billing, transmitting, pulling ern’s, posting,
  working aged accounts receivables, etc.)
 Have employees help with this step. Most likely
  you will immediately realize areas you can
  improve,combine or eliminate by talking to them
         Categorize Activities
 Determine if each activity is value or non-value
 Value added - The output of the activity is
  directly related to customer requirements, service
  or product. (Usually something the customer is
  willing to pay for)
 Non-Value added – The output services the
  organization such as administration (typically
  activities that create waste, results in a delay of
  some sort or adds to the cost of the product)
  Further Categorize Activities
 Determine if Activity is Primary or
  Secondary and Required or Not-needed
 Primary – Support the organizations
 Secondary – support primary activities
 Required – Must always be performed
 Not needed – those performed only when
  allowed by management
            Identify Waste
 Once the Activities are categorized, you
  will begin to see areas that are not adding
 Removing waste will allow you to
  streamline your organization, thereby
  becoming more efficient and profitable
               Gather Costs
 Determine all the costs you have per time period
  (example: per month, per year)
 Include salaries,benefits, furniture, inventory,
  rent, insurance, etc.
 If costs are not available, then you may need to
  estimate based on the information you have at
 Do not forget to take into account any future
  obligations that may be forthcoming(ie: lease
  payments, contracts signed, etc.)
    Match Costs To Activities
 This step will match the cost of each
 Determine total costs associated with each
  Activity such as Billing, Warehousing,
  Advertising, etc.
       Example of Activities That
          Make up Unit Cost
   Incoming orders (number per time period)
   Product in warehouse
   Intake
   Verify benefits
   Delivery
   Customer questions
   Billing
   Denials
   Secondary/Patient billing
   Posting
   Filing chart
   Fixed costs (payroll, insurance, lease, fuel, cost of goods sold,
    vehicle, etc)
    Establish Output Measures
 This step calculates the actual cost of each
 Activity unit cost is determined by dividing the
  total input costs (including assigned secondary
  activity costs) by the primary activity output
  volume (ex: total items delivered per unit time
  divided by the activity costs determined to be
  associated with delivery per unit time to
  determine delivery cost per unit)
  Example of Output Measures:
 10 oxygen concentrators delivered during month
  for new patients
 Activity Cost for initial month(delivery, lease,
  intake, billing,marketing etc.) Average costs of
  $405.00 per patient!! This is $4,050.00 for 10 pts.
 In other words, for the initial set up, you are
  losing money based on the current medicare
              Analyze Costs
 Look at the unit costs and see if you can identify
  any areas where performance can be improved
 You may be able to identify non-value adding
  activities that can be eliminated in this process
  thereby gaining greater efficiency while cutting
  costs (ie: Review Homefill systems for high
  utilization portable patients)
        Bidding Preparation
 Review/determine total annual revenue per
  product category
 Breakdown between Medicare and other
 Identify the product categories by area
 Identify, if applicable, subcontractors by
  name, location and expected function
  “If you win”…will you be ready?
 Estimate the percentage increase in sales,
  per product category, and begin to develop
  “expanded plan”, e.g.,.
                                 Current   Expanded
Staff (manpower)
Financing (funding levels)
Facilities (square footage, additions)
Inventory Control/Tracking Methods
Distribution (vehicles, mail order)
           Your “Form C”
 Must be submitted on quarterly basis and
  include Product/HCPC, quantity supplied
  to Medicare beneficiaries, manufacturer(s)
  and model number(s).
 Is your inventory management up to the
  task? This is a requisite for winning
   Do you know your figures?
 In order to bid, you must know:
  Medicare revenue by product category
     Gross and Net
     Other payers
  Medicare collections per product category
     Compare revenue to collections
     Other payers
         Revenue Analysis
 Determine your top grossing Medicare
 Sort your revenue from highest to lowest
  by product and payer
 Compare your costs and margins with each
 Explore options for expansion, if any
 Two certainties: Medicare must reduce its
  reimbursement (save money) and you must
  be able to maintain a profit
    From Revenue to Expense
 Once you know your current and historic
  revenue by product/payer…
 Look for methods to reduce your costs of
 Outcome: The more efficient your
  operations, the more attractive your bid
           Costs of Bidding
 Begin with an analysis of your current
  costs of doing business…consider and
  review delivery, insurance, rent, software,
  intake, documentation, billing, etc.
 Bid preparation costs includes evaluation
  time (deciding on product categories,
  network options, subcontracting,
  determining prices and costs on the many
  “obscure” codes within the categories)
 Medicare estimate: 68 hours X $31.25 per
  hour, or $2,125 per bidding entity.
 Include a profit – CMS expects it
 Your estimates should prove that you can
  stay in business at the bid amount (if you
 Start by honing in on
  operations…Maximize efficiencies! (Ex:
  Automation, Inventory Control, Purchasing,
  Skilled Personnel)
 Preparing for Price Reduction
 Evaluate each process in work flow:
     Look for excess time spent on tasks
     Look for duplication of effort
     Eliminate manual processes
     Ensure the right people are in the right positions – if
      necessary, interview!
     Example: Do you collect maximum A/R? Evaluate
      your A/R collection processes.
   Planning Ahead – If You Win
 Intake - must be able to take an order for a
  patient who may require several products,
  some of which you can provide.
     Software changes
     Intake personnel to educate
     Must take assignment on all winning items
     Must be able to supply all the items in the entire
       product category
 Referral Sources – must market changes to
     May appear confusing
     Need education
                 If You Win…
 Patients – may not fully understand implications
  of changes
   May have to obtain HME from a variety of companies
      Several different invoices from several different companies
      Grandfathered items versus new items
      Winning bidders may be able to provide some, but not all,
        products necessary.
 Inventory needs
   Change based upon change in demand
      Based upon capacity, e.g., number of suppliers within the CBA
   Products may vary more by payer (allowable reduction
     dictates this)
   Collecting Copay/Private Pay
 To ensure profitability, focus on collecting copays
  upfront (exception: Medicaid)
   Use debit, credit, Telecheck®
   If you win the bid, you will likely have many more
      patients – resulting in more copays/varied prices
 Before dispensing product, solidify financial
   Follow up phone call
 Old outstanding patient A/R is most difficult to collect
   Most require serious discounting and/or a payment plan
   Proactively collecting copays is essential in a competive
      bidding environment!
        Accounts Receivable
 Keep a close eye on mounting receivables
     By payer, age, descending balance and HCPCS.
     Within payer, segregate by competitive bid vs. non-
       CB by HCPCS.
 Watch out for growing private pay
  balances. Expend more effort on these
 Divide A/R tasks by skill level
     Segregate easy from hard accounts; competitive bid
        Medicare accounts versus others…
   Software and Automation for
        Optimal Efficiency
 Automate as many manual functions as
  Document imaging and scanning
  Efaxing, eCMNs
  Bar coding
  Automated compliance checks
  Daily sales tracking by product, payer, etc.
     Automated reporting
     CMN, authorizations, revenue, billing, cash, A/R,
     Track competitive bid revenue separately!
 Automated inventory system – should be
  working for you
   Need for data will be instrumental in preparing your bid!
 Intake department to find inventory in computer
  when creating delivery ticket
 Automation is the key to success in inventory
   Reliance on and trust in your software is critical
 Must be able to handle inventory needs of
  competitive bid contract – all products in a given
    Purchasing Considerations
 Critical to evaluate your purchasing patterns
  whether or not you win a bid.
  Fragmented purchasing hurts pricing and vendor
 Need to minimize overall inventory costs
  Delivery method from vendor and to beneficiary
  Vendor consolidation/management
     Opportunity to find a real business partner
     Must be able to meet demands of Medicare contracts
     Extensive and comprehensive change in purchasing
      patterns may result
     Documentation Changes!
 Quality Standards = Expect CBIC Audits
 What about grandfathered patients?
 Expect more documentation audits (costs? are
  you prepared?)
 How much more extra paperwork should you
  expect in an audit? Medical records? Weigh
  pros and cons of doing this in advance.
 Which works better for you…Faxing, mailing,
  hand-delivery…of your documentation?
 What about eCMNs?
     Key Management Figures – 5
     Reports to Monitor and Trend!
   Net revenue
   Days held
   Accounts receivable percentage
   Cash receipts
    Percent of net revenue, lag days
 Bad debt
    Compared to net revenue
    Note: To measure competitive bid revenue and
      profitability, filter reports by HCPCS inside payer
 Read and understand the Final Rule. Full and
  summary text is available at
 Consider bid requirements
   The requirements dictate operational controls, such as
 Take an “outside look in” at each department to
  evaluate how operations might change
 Make sure the right people are in the right
 Use management reports and figures and make
  appropriate changes and gauge success
 Legislative Update
Grassroots Lobbying
Before we begin…
        Cumulative Effect of Trended
      Medicare Oxygen Cuts, 2004-2009*
                Unadjusted for Growth in Beneficiary Enrollment

                        $ In Thousands

*Estimates for competitive bidding are based on CMS’ proposed rule, list of top MSAs, an initial start
date of Q4 2007, estimated portion for oxygen spending in each MSA and 10% estimated net savings in
each MSA per CMS’ Regulatory Impact Assessment. Deficit Reduction Act estimate uses CMS’ data that
36% of oxygen patients exceed 36 months on service and applies that to 2008’s Medicare oxygen
estimated billings. The CPI would have been 3.1% and is the only factor that grows larger each year.
   First 10 CBA’s target poor,

Dear VGM Group Member:
I am writing this letter to all VGM Group Members in the first 10
Metropolitan Statistical Areas that will be affected by Competitive
Bidding, and hope you will take the time to read this carefully, then go
to and participate in the media education project.
In analyzing the demographics in the 10 MSAs selected, we have
identified statistics that may be of interest to you, your local press and
your elected officials. Census data indicate that 31 percent of the
population in the first 10 MSAs is Latino. The nation as a whole is only
15 percent Latino. The percentage of individuals living below poverty
level in these targeted areas ranges from 13 percent (Charlotte, N.C.) to
32 percent (Cleveland). Across the 10 areas, the poverty level is 19
percent of the population. The entire nation has only 13 percent of its
population living below the poverty line.
 “The Medicare Durable Medical
  Equipment Access Act” was introduced in
  the House in July 2005 and in the Senate in
  September 2006.
 The Bills would not repeal competitive
  bidding. The goal of the Bills is to protect
  patient access and to ensure that small
  suppliers can participate in the bidding
 The Bills would allow qualified small suppliers,
  that submit a bid below the current allowable, to
  participate at the selected award price.
 Under the MMA, CMS can extend the
  reimbursement established under competitive
  bidding to non-competitive bid areas.
 However, before extending reimbursement to
  non-competitive bid areas, the Bills would
  require CMS to conduct a comparability analysis
  for those areas to ensure the rate is appropriate to
  cost and does not reduce access to care.
The Bills also include provisions that:

 Would restore judicial or administrative review
  of a number off CMS decisions related to
  competitive bidding.
 Would require the quality standards to be in place
  before competitive bidding is implemented..
 Would exempt small rural (populations under
  500,000) MSAs.
 Would exempt items and services unless a 10%
  savings could be demonstrated..
 Would subject the Program Advisory and
  Oversight Committee (PAOC) to the Federal
  Advisory Committee Act which requires public
  access to meetings and proceedings.
 May 2007: Tanner-Hobson Bill
    Picks Up Support but Needs
Critical Push from All Stakeholders
 The Tanner-Hobson bill, H.R. 1845, has picked up
  several cosponsors in Congress over the past week. But a
  much larger, critical mass of cosponsors will be essential
  if the industry expects to have an effective lobbying day
  on June 7, the concluding day of the AAHomecare
  Washington Legislative Conference. The Tanner-Hobson
  bill would correct many of the worst provisions of the
  competitive bidding program by preserving fair
  competition and access to care. Those Members of the
  House of Representatives who supported last year’s bill,
  H.R. 3559, are prime candidates for signing on to the new
Georgia Congressman Tom Price, M.D
Reintroduces O2 Legislation - H.R. 621:
    Home Oxygen Patient
      Protection Act
 "To amend part B of title XVIII of the
  Social Security Act to restore the Medicare
  treatment of ownership of oxygen
  equipment to that in effect before
  enactment of the Deficit Reduction Act of

 The Home Oxygen Patient Protection Act, H.R.
  621, has gained many new cosponsors in recent
  weeks, bringing the total to 78.
    H.R. 621 would repeal:
(1) the limitation of Medicare payment to the
    supplier for such equipment (including
    portable oxygen equipment) to 36 months
    of continuous use; and
(2) the requirement that the equipment
    supplier transfer title to the individual at
    the end of such period, with payments
    continuing at specified monthly rates.
   In the 109th Congress, the list of co-sponsors to H.R. 5513 grew to
 The Rehab and Assistive Technology
  Council (RATC) looked at rehab issues
  with the National Coalition for Assistive
  and Rehab Technology (NCART), which
  had its congressional fly-in last week (May
 At the fly-in also the organization's
  members made more than 130 visits to
  lawmakers to drum up support for a new
   The Medicare Access to Complex
Rehabilitation and Assistive Technology
        Act of 2007 (H.R. 2231)
 This legislation will carve rehab out of
  competitive bidding
 Reps. Tom Allen, D-Maine, and Ron
  Lewis, R-Ky., introduced the measure,
  which "would ensure that Medicare
  beneficiaries would continue to have
  access to appropriate complex rehab and
  assistive technology products."
 Definition: Complex rehab and assistive
  technology products as "medically necessary
  adaptive seating, positioning and mobility
  devices and speech-generating devices fitted,
  configured, adjusted or programmed to meet the
  specific and unique needs of an individual with a
  primary diagnosis resulting from injury or trauma
  or which is neuromuscular in nature,"
 Without the legislation such customized products
  and services may be unavailable to beneficiaries
  because their costs exceed the fee schedule
          VGM Forms 527 Action
          “LAST CHANCE FOR
           PATIENT CHOICE”
I have decided to fight . . . have you?
We appear to be at a "tipping point" in the world of
HME. We can go one way from here or we can go the
other. I won't try to be overly dramatic. No matter what
happens in the delivery or payment system, home
medical equipment will still be manufactured, sold and
used in this country. The issues are who is going to be
supplying it, what quality of equipment will it be and
what level of service will support the equipment and the
                The plan was and is built
             around these LCPC activities:
 It is conducting a public information campaign in
  selected congressional districts through a multi-media
  effort designed to educate the electorate about their
  legislators’ support of selective contracting for HME.
  LCPC wants Medicare beneficiaries to understand
  how their freedom to choose providers and equipment
  are adversely affected by selective contracting.

 LCPC will file a federal lawsuit seeking to strike the
  selective contracting sections within the MMA on
  constitutional and other grounds. The lawsuit will
  include Medicare beneficiary patients who are
  suggested by local providers in areas selected for the
  first bidding and who volunteer to assist in this cause.
 LCPC will partner with other organizations likely to
  be the next targets of selective contracting and those
  beneficiary groups likely to be adversely affected if the
  scheme is implemented.

 LCPC is conducting an increased informational
  campaign for members of Congress to explain why
  selective contracting is bad public policy because it will
  create a two-tier health-care system in the U.S
  Educate Members of Congress & Beneficiaries About
  1. Impact of MMA & NCB
  2. The 36 month DRA oxygen cap (& potential 13
  month reduction)

 An economist has released a new report
  indicating the Tanner-Hobson bill will
  not result in significant changes in the
  savings Medicare can expect from
  national competitive bidding. The
  study was commissioned by The VGM
 In a study, Dr. Kenneth Brown, Ph.D., an
  economist who has authored previous work
  involving the HME industry and
  competitive bidding, concludes, “the
  Tanner-Hobson bill, which would allow
  small businesses to participate in the
  market without submitting winning bids,
  will have little or no impact on the recent
  cost savings estimate for competitive
  bidding for DME.”
 Brown makes several points in
  formulating his conclusion. He notes
  that the provisions in the Tanner-
  Hobson bill would reduce the number of
  providers seeking to submit winning
  bids but that the number of remaining
  bidders would still be significant enough
  to result in the lower pricing sought by
  Congress and CMS.
 Brown cites the Bertrand’s Oligopoly
  theory as part of the basis for his
 In the Bertrand model, a bid process where
  losing bidders are eliminated from the
  market results in firms charging prices
  equal to their marginal costs, which
  represents the lowest bid they can accept.
 The process works to drive pricing to the
  marginal cost level regardless of the
  number of bidders, as long as there are at
  least two.
 Brown’s report also states that allowing
  any qualifying provider will provide a
  built-in incentive for providers to exceed
  minimum standards to maintain market
 He cites the limitation on choice by
  beneficiaries under the current competitive
  bidding model as eliminating choice and
  thereby reducing quality. He asserts that
  more choice means higher quality,
  convenience and support.
 In his report to VGM, Brown also
  evaluated the current projections for CMS
  savings under the DME-related provisions
  of Medicare Prescription Drug and
  modernization Act of 2003, the bill that
  created competitive bidding as well as
  other reimbursement cuts.
 Brown found that the Congressional
  Budget Office has re-scored competitive
  bidding to take into account the
  reimbursement reductions instituted in
  MMA including the FEHBP cuts and the
  freeze on annual inflationary increase.
 Brown notes that of the original $9.9
  billion in savings CBO envisioned with
  reductions in payments for DME, 70% of
  that total has already been achieved via the
  freeze and FEHBP cuts.
 Brown, after indicating that the only 30%
  of the prospective saving is still available
  to achieve, questions, “one must wonder if
  the costs of implementing this program
  (competitive bidding) and the costs to the
  industry, especially the small business,
  justify its implementation.”
  Lobby Congress in Washington,
            June 5-7
 In June, providers and manufacturers in the
  homecare industry will be in Washington, DC to
  support and defend the interests of the homecare
 The AAHomecare Washington Legislative
  Conference is a two-day program: part issue
  briefing and part Capitol Hill lobbying visits.
 You will be given all of the background
  information you need to express your concerns
  face-to-face with your senators and
  representatives during the June 7 lobbying day.
      Thank you!

     Good Luck!
Questions?? – Please contact
Mark Higley, John Gallagher or
         Kelly Wolf

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