Washington Update GAMES Annual Convention August 4, 2008 Seth Johnson V.P. Government Affairs

1. Washington Update GAMES Annual Convention August 4, 2008 Seth Johnson V.P. Government Affairs 1

2. Agenda Medicare Legislation Outcome Competitive Bidding Update Accreditation Update Supplier Standards and Quality Standards Update Proposed Surety Bond “In the Home” Legislation Manual Wheelchair Coding Update Industry Forecast 2

3. Medicare Package - 2007 A Compromise package was developed in late 2007 to address the 10% physician payment reduction. Elimination of PWC first month purchase option & Oxygen reductions on table. A Scaled back Medicare package was ultimately passed in December. No reductions to PWCs or Oxygen Extremely good news, however only provided a six month fix to alleviate a 10.6% physician payment cut. Congress required to develop Medicare package in 2008 to stop the 10.6% physician cut effective on July 1, 2008. 3

4. Senate “Complex Rehab” Legislation (S 2931) introduced April 29, 2008 Exempted all Complex Rehab products from Competitive Bidding The Bill never advanced out of the Finance Committee Senate “doc fix” Legislation (S 3101) introduced June 6, 2008 Oxygen payment reductions included Elimination of the beneficiary first month purchase option for standard power wheelchairs was included Exemption for Complex Rehab Accelerate the rental payments for standard power wheelchairs by providing 15% of total for months 1-3 and 6% of total for months 4 -13 Did not include language to delay implementation of Competitive Bidding program A procedural vote (cloture) failed to advance the bill to the floor for consideration Senate Medicare Proposals 4

5. Senate “Competitive Bidding” Legislation (S 3144) introduced June 17, 2008 Delayed implementation of Round 1 to 2009 and Round 2 to 2011 Exempted Complex Rehab from the Competitive Bidding Program Mandated changes, improvement and quality measures be implemented The “pay for” required a 9.5% fee schedule reduction for all competitively bid items nationwide The Bill never advanced out of the Finance Committee These 3 Bills (S 2931, S 3101 and S 3144) were the working documents the Senate Finance Committee used to develop their Medicare Package A comprehensive Senate Medicare bill was not introduced Senate Medicare Proposals 5

6. House “Complex Rehab” Legislation (HR 2231) introduced May 9, 2008 Exempted all Complex Rehab products from Competitive Bidding The Bill was referred to the Health Subcommittee and never advanced out of the Ways and Means Committee House “doc fix” Legislation (HR 6221) introduced June 9, 2008 Elimination of the beneficiary first month purchase option for standard power wheelchairs was included Exemption for Complex Rehab Accelerate the rental payments for standard power wheelchairs by providing 15% of total for months 1-3 and 6% of total for months 4 -13 Did not include language to delay implementation of Competitive Bidding program The Bill was referred to the Energy and Commerce and Ways and Means Committees and did not advanced to the House Floor. House Medicare Proposals 6

7. House “Competitive Bidding” Legislation (HR 6252) introduced June 12, 2008 The Senate Bill, S 3144 was the companion Bill to HR 6252 The Bill was referred to the Energy and Commerce and Ways and Means Committees and did not advanced to the House Floor. These 3 Bills (S 2231, S 6221 and S 6252) were the working documents the House used to develop their Medicare Package, HR 6331 House Medicare Proposals 7

8. Medicare Improvements for Patients and Providers Act of 2008 (HR 6331) Delays Round 1 implementation of the competitive bidding program until 2009 and requires a number of changes, improvements and quality measures be instituted prior to Round 1 or Round 2 going forward. Permanently carves out Complex Rehab Power Wheelchairs (Group 3 or higher) and accessories from the Competitive Bidding Program. Does not eliminate the power wheelchair first month purchase option or include any additional cuts to oxygen. 9.5% fee schedule reduction effective 1/1/2009 for all competitively bid items to “pay for” CB delay. Introduced on 6/20/08, approved on 6/24/08 by a vote of 355 – 59 and sent to the Senate for consideration the same day. House Medicare Proposal 8

9. Beneficiaries prescribed a power wheelchair suffer from long-term, debilitating conditions that are not short-term in nature (95% purchased). Many power wheelchairs are custom-configured and individualized. Mandating rental of power wheelchairs will severely curtail access due to the significant up-front costs that providers need to recover soon after delivery. Power wheelchair providers have seen significantly increased set up, delivery, and documentation costs, at the same time reimbursement was cut 27% on average when the new codes were implemented. Industry review of claims data shows that over 90% of beneficiaries who were provided a power wheelchair used it 13 months or more. Medicare will pay 5 percent more for power wheelchairs under this provision. Talking Points - Power Wheelchair Rental Provision 9

10. The following consumer & physician organizations support a preservation of the purchase option in order to ensure access to power wheelchairs: ALS Association American Association for People with Disabilities (AAPD) American Academy of Physical Medicine and Rehabilitation (AAPMR) Easter Seals Society Multiple Sclerosis Society National Council on Independent Living National Spinal Cord Injury Association Paralyzed Veterans of America United Spinal Association Consumer and Physician Support for the Industry Position 10

11. Medicare Improvements for Patients and Providers Act of 2008 (HR 6331) Considered in the Senate on June 26, 2008. The measure did not pass a procedural vote required to bring it to the floor for a vote; however, the manner in which it was defeated allowed it to be brought up at a later date. Re-considered on July 9, 2008, approved by a veto proof vote 69 – 30 and sent to the President. The President could have done 1 of 3 things: - Sign the Bill into Law - Veto the Bill and send it back to the House - Let the Bill sit for 10 days and do nothing, at which time it will automatically become Law Senate Consideration of Medicare Bill 11

12. The President Vetoed the Bill on July 15, 2008 House overrode the veto by a margin of 383 – 41 on July 15. Senate overrode the veto by a margin of 70 – 26 on July 15. The measure becomes PL 110 – 275 Medicare Improvements for Patients and Providers Act of 2008 (HR 6331) 12

13. Oxygen Update PL 110-275 • Repeals the transfer of ownership of oxygen equipment that was enacted in the Deficit Reduction Act of 2005. • After the 36th month, during which continuous payment is made for oxygen equipment, the supplier will continue to maintain ownership of the equipment. • Payments for oxygen contents will be made after the 36th month. • Rental payments for oxygen equipment are still subject to the 36 month cap. • Maintenance and service payments after the 36th month are still under development by CMS. 13

14. Competitive Bidding Implemented on July 1, 2008 – Repealed July 15, 2008 Competitive Bid Areas (CBAs) Charlotte- Gastonia- Concord; NC-SC Cincinnati- Middletown; OH-KY-IN Cleveland-Elyria- Mentor; OH Dallas- Fort Worth- Arlington; TX Kansas City; M Miami- Fort Lauderdale- Miami Beach; FL Riverside- San Bernardino- Ontario; CA Orlando- Kissimmee; FL Pittsburgh; PA San Juan; PR removed from Round 1 reimplementation Competitive Bid Product Categories Oxygen/equipment CPAP/RAD Standard Power Wheelchairs Complex Rehab Power Wheelchairs (Group 3 and higher removed from Competitive Bidding) Mail Order Diabetic Supplies Enteral Nutrition Hospital Beds Walkers Negative Pressure Wound Therapy (removed from Round 1) Support Surfaces (Miami & Removed from San Juan in Round 1) 14

15. Round One Bid contracts extended March 21 - 10 days to respond Announcement of Winning Bidders May 19 Implementation on July 1, 2008 Repealed July 15, 2008 retroactive back to July 1 Scheduled to be re-implemented in 2009 Round Two Announcement of next 70 CBAs – January 8, 2008 Details including affected Zip Codes and HCPCS codes have not been announced Will not begin until 2011 after a thorough GAO study of the impact of Round 1 Competitive Bidding Timeline 15

16. Competitive Bidding Update PL 110-275 • Bidding Process Changes and Improvements • Requires CMS to notify bidders of paperwork discrepancies and give them an opportunity to correct the discrepancy within a reasonable time frame. • Allows CMS to subdivide MSAs with 8 million or more in population. • Exempts MSAs with a population of 250,000 or less for at least 5 years. • Requires CMS to consider how prices set through competitive bidding compare to costs before adjusting prices in non-bid areas. • Requires the OIG to verify calculations used to determine the pivotal bid amount and winning bid amounts. • Requires the GAO to study beneficiary access, beneficiary satisfaction, cost savings, the impact of the program on small suppliers, the impact on HCPCS utilization and the cost to administer the program as compared to the savings before proceeding with Round 2. 16

17. Competitive Bidding Update PL 110-275 • Establishment of Quality Measures • Requires all suppliers to be accredited for the products they provide/bid by October 1, 2009 and meet all applicable quality standards. • Ensures that all suppliers, whether billing Medicare directly or subcontracting with a supplier that will be billing Medicare, to be accredited. • Requires contracting suppliers to disclose all subcontracting relationships. 17

18. Competitive Bidding Update PL 110-275 • Complex Rehab and Accessories • Exempts Complex Rehabilitative Power Wheelchairs (Group 3 and higher) and related accessories from the competitive bidding program. • Exempts options, accessories , seating and positioning components from the 9.5% fee schedule reduction when they are not provided with a power wheelchair. • It remains unclear as to whether Complex Rehab Power wheelchairs and accessories are subject to the 9.5% payment reduction scheduled to be implemented on January 1, 2009. 18

19. The Next 70 Metropolitan Statistical Areas (MSAs) Northeast Allentown-Bethlehem-Easton, PA- NJ Bridgeport-Stamford-Norwalk, CT Hartford-West Hartford-East Hartford, CT New Haven-Milford, CT New York-New Jersey-Long Island, NY-NJ-PA Scranton-Wilkes-Barre, PA Syracuse, NY Competitive Bidding- Round Two • Midwest • Akron, OH Chicago-Naperville-Joliet, IL-IN-WI Columbus, OH Dayton, OH Detroit-Warren-Livonia, MI Flint, MI Grand Rapids-Wyoming, MI Huntington-Ashland, WV-KY-OH Indianapolis-Carmel, IN Milwaukee-Waukesha-West Allis, WI Minneapolis-St. Paul-Bloomington, MN-WI Omaha-Council Bluffs, NE-IA Toledo, OH Youngstown-Warren-Boardman, OH-PA • West • Albuquerque, NM Bakersfield, CA Colorado Springs, CO Denver-Aurora, CO Fresno, CA Las Vegas-Paradise, NV Los Angeles-Long Beach-Santa Ana, CA Sacramento--Arden-Arcade--Roseville, CA Salt Lake City, UT San Diego-Carlsbad-San Marcos, CA San Francisco-Oakland-Fremont, CA San Jose-Sunnyvale-Santa Clara, CA Visalia-Porterville, CA 19

20. The Next 70 Metropolitan Statistical Areas (MSAs) Asheville, NC Atlanta-Sandy Springs-Marietta, GA Augusta-Richmond County, GA-SC Austin-Round Rock, TX Baton Rouge, LA Beaumont-Port Arthur, TX Birmingham-Hoover, AL Cape Coral-Fort Myers, FL Charleston-North Charleston, SC Chattanooga, TN-GA Columbia, SC Deltona-Daytona Beach-Ormond Beach, FL El Paso, TX Greensboro-High Point, NC Greenville-Mauldin-Easley, SC Houston-Sugar Land-Baytown, TX Jackson, MS Jacksonville, FL Competitive Bidding- Round Two South • Knoxville, TN Lakeland, FL McAllen-Edinburg-Mission, TX Memphis, TN-MS-AR Nashville-Davidson-Murfreesboro-Franklin, TN New Orleans-Metairie-Kenner, LA Ocala, FL Oklahoma City, OK Palm Bay-Melbourne-Titusville, FL Raleigh-Cary, NC Richmond, VA San Antonio, TX Tampa-St. Petersburg-Clearwater, FL Tulsa, OK Virginia Beach-Norfolk-Newport News, VA-NC 20

21. Advocacy Efforts to Address the Competitive Bidding Process Problems • Congressional Letters of Support • Republican Senators Voinovich (OH), Specter (PA), Allard (CO), Burr (NC), Chambliss (GA), Cornyn (TX), Graham (SC), and Isakson (GA) sent letters to Secretary Leavitt to express collective concerns with CB.  • Letters from Senators Specter and Casey (PA) request an extension in the CB contract consideration window and delay in implementation of Round 1. • Democratic House freshmen Altmire (PA), Carney (PA), Klein (FL) and Sires (NJ) sent a letter to the house leadership requesting that the Chairmen hold hearings to review the problems with round 1 and delay implementation 6 months to adequately address the issues. • House Ways and Means Committee Hearing on CB – May 6 • Dear Colleague letters (6/2/08) in the House supporting at least a 12 month delay in implementation of CB signed by 132 Representatives • Dear Colleague letter (6/10/08) in the Senate supporting an unspecified delay in implementation of CB signed by 40 Senators 21

22. Pride Consumer Advocacy Efforts • Pride Consumer Advocate Madonna Long leads our efforts to mobilize end users and advocate positions that affect them the most. • Madonna works closely with organizations such as AAPD, ADAPT, NCIL and many other disability organizations at the national, state and local level. 22

23. Accreditation Deadline for Round 2 CB Rescinded: Providers who wanted to participate in Round 2 were to have been accredited, or in the accreditation process by July 21, 2008, and be accredited by January 14, 2009. All providers MUST be accredited by September 30, 2009 to maintain their Medicare supplier number. Note: Accredited providers that have not had a site visit after November 1, 2006 MUST have not met the accreditation requirements and must have a site visit to meet the supplier standards and quality standards. Accreditation Update 23

24. CPAP Proposed Rule • Proposed rule reads “We are proposing to add new definitions to paragraph (a) to define “sleep test” and “CPAP device” and to add a new paragraph (f), which would not allow the supplier to receive Medicare payment for a CPAP device if the supplier, or its affiliate, is directly or indirectly the provider of the sleep test used to diagnose a beneficiary with OSA” (Obstructive Sleep Apnea) • The proposed policy is open for comment through August 29, 2008. 24

25. Proposed Quality Standards • Durable Medical Equipment, Prosthetic, Orthotics, and Supplies (DMEPOS) Quality Standards • Draft changes published in February, 2008 • Comment period ended March 18, 2008 • Significant proposed changes include- • The supplier must document in the beneficiary’s record the make and model number of any non-custom equipment and/or item(s) provided. • If the supplier cannot or will not provide the equipment or service that is prescribed for a beneficiary, the supplier shall notify the prescribing physician practitioner or other healthcare team member promptly, but in no case no more than five calendar days. • Verify, authenticate and document the following prior to distributing, dispensing, or delivering products to an end-user: • 1. The products and not adulterated, counterfeit, suspected of being counterfeit and have not been obtained by fraud or deceit • 2. The products are not misbranded and are appropriately labeled for their intended distribution channels; and • 3. The products were obtained from a distributor or wholesaler approved and authorized by the manufacturer or the products. • - Ensure that the beneficiary and/or caregiver(s) can use all equipment and items • provided safely and effectively in the settings ofanticipated use 25

26. Supplier Standards Update • Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Supplier Enrollment Safeguards • 22) 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 a site visit. • 24) All DMEPOS supplier locations, whether owned or subcontracted, must meet the DMEPOS quality standards and must be separately accredited in order to bill Medicare. • 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. 26

27. Proposed Surety Bond Requirement CMS issued a Proposed Rule on August 1, 2007 to require all DME Suppliers obtain/retain a Surety Bond. • Bond amount is $65,000 per location - Estimated cost to providers $2,000 per year. • Possible exemptions for physicians, pharmacies and large publicly owned suppliers. • Higher bond amounts being considered for higher risk suppliers (for example, an additional $65,000 for each HIPAA violation). • Comment period on Proposed Rule closed October 1 • Final Rule expected Summer/Fall 2008

28. “IN THE HOME” Restriction Medicare Independent Living Bill (HR 1809) – 41 cosponsors Introduced by Rep. James Langevin (D-RI) on March 29, 2007. Bill is currently in the Finance Committee (S 2103) – 10 cosponsors Introduced by Sen. Jeff Bingaman (D-NM) on September 26, 2007. Bill is currently in the Ways and Means Committee and the Energy and Commerce Committees To eliminate the “in the home” restriction for Medicare coverage of Mobility Devices for individuals with expected long-term needs. 28

29. Manual Wheelchair Coding, Coverage & PaymentUpdate New manual wheelchair codes being developed by the SADMERC in consultation with NCART / industry. Goal is to better reflect new advances in technology Possibilities include: 10 ‘builder’ codes for adult manual wheelchairs (then add options and accessories to fit individuals weight and needs) 40 codes in 10 different categories - depending on weight capacity 12 additional codes for pediatric manual chairs Following the release of new codes, a new local coverage policy will be released and fee schedules calculated. Feedback on coding for manual wheelchairs should be sent to Dr.Doran.Edwards@palmettogba.com Timing - TBD in late 2008 / early 2009 29

30. Forecast Competitive Bidding Round 1 is Retroactively Pulled Back. CMS begins work on the implementing the changes, improvements and quality measures required by law prior to re-implementation of Round 1 in 2009. Nationwide 9.5% Payment Reduction for all competitively bid items goes into effect 1/1/2009. Pride is Working to Eliminate or Reduce That Cut! Remainder of 2008 Positive No Further Legislative Changes Expected Until Late 2009 30

31. Thank You For Your Business and Strong Advocacy Efforts!Any Questions? 31