Medicare Competitive Bidding for DMEPOS: Stakeholder Perspectives

1. Medicare Competitive Bidding for DMEPOS: Stakeholder Perspectives presented byBradley Merrill Thompson Epstein Becker & Green P.C. August 28, 2006

2. Overview • Competitive Bidding Program • Key Features • CMS Objectives • Specific Provisions • Parameters of the Program • Determining Payment • Other Provisions • Pharmacies • Role • Becoming a Contract Supplier

3. Key Features • Timing • Proposed Rule • Implementation • Medicare Competitive Bidding Demonstrations • Five categories of DMEPOS • Blood glucose monitors and supplies not part of demos

4. CMS Objectives CMS’s stated objectives include: • Implementing competitive bidding for certain DMEPOS • Assuring beneficiary access to quality DMEPOS • Reducing Medicare payment for DMEPOS • Reducing beneficiary out-of-pocket expenses for DMEPOS • Creating a payment structure more reflective of a competitive market

5. Select Provisions • Parameters of the Program • Competitive Bidding Areas • Criteria for Item Selection • Determining Payment • Pivotal Bid • Single Payment Amount • Rebate Provision • Other Provisions • National Mail-Order Program • Accreditation and Quality Standards

6. Competitive Bidding Areas • Access to care patterns for Medicare beneficiaries are unique • Role of community-based suppliers including pharmacies is important • Potential for large geographic gaps within Competitive Bidding Areas • Adoption of convenient access standards is potential solution

7. Factors to Consider in Item Selection Implications for Blood Glucose Monitoring Systems and Supplies Criteria for Item Selection Compatibility of items Specific test strips are used with specific monitors Importance of diversity of products Variety in functionality of monitors is necessary to meet varying patient needs Number of existing suppliers Current number of suppliers is large -- indicating high degree competition exists

8. Determining Payment • Suppliers bid on as-yet-undetermined product categories • Bids must include a price for each item within a particular product category • A supplier’s bid evaluated based on composite bid, which will aggregate bids for individual items into a single bid for the whole product category

9. Pivotal Bid • Pivotal bid will be set at the point where CMS estimates it will have a sufficient number of suppliers to meet projected demand • Concerns • No measure for quality or other services provided • Ensuring appropriate number of suppliers

10. Determining Single Payment Amount • Concerns with methodology • Payment is by item • However, “winning” bids are determined based on aggregate bid • Half of the “winning” bidders will be required to supply items at a price lower than what they bid

11. Rebate Provision • Applicability • “Winning” bidders with item bids below the Single Payment Amount • Example • Mechanics • If supplier chooses to provide rebate • Must provide to all beneficiaries • May not advertise rebate

12. National Mail-Order Program • Supplies • Should be one option • Replacement supplies • Should not be mandatory

13. Accreditation and Quality Standards Requirement: All Medicare DMEPOS suppliers must meet quality standards and obtain accreditation from an approved accreditation organization

14. Role of Pharmacies Serve Medicare beneficiaries with diabetesby providing: • Information • Education • Monitoring • Product Choice • Convenient Access

15. Becoming a Contract Supplier A participating bidder may not be awarded a contract, unless the bidder meets the following: • Accreditation • Medicare standards • Financial standards

16. Accreditation • Requirement • Must meet quality standards currently being developed • Accrediting bodies • Yet-to-be selected by CMS • Proposals • Grace period • Grandfathering

17. Medicare Standards • Meet current eligibility rules • Medicare DMEPOS supplier standards • Be enrolled and in good standing • No current Medicare sanctions • Make certifications related to sanctions • Two proposals • Be licensed • State and local • Agree to terms in supplier contract

18. Financial Standards Application will likely require certain financial information including: • Financial reports • Reviewed reports – small suppliers • Audited reports • Credit rating and score • Bank references

19. Development of Bids Draft forms identify information potential suppliers will need to provide: • Revenue and customer data • Service area • Supply capabilities • Expansion plans

20. After the Bid – Contract Suppliers • General requirements • Supply all items in a product category • Provide service to items and replacements • Supplier contract terms • Likely to include provisions such as: • Subcontracting rules • Non-discrimination against beneficiaries in a Competitive Bidding area • Other required information

21. Importance of the Role of Pharmacies Consequences of disruption include: • Less frequent or effective monitoring • Decreased compliance • Increased confusion • Disconnect with Part D benefit

22. Comments and questions?