Responding to the Centers for Medicare and Medicaid Services' (CMS’s) call for comments on the recent notice of proposed rule making (NPRM) for competitive bidding, the newly-formed Sleep Manufacturers Alliance called CPAP “not an appropriate category for competitive bidding.” The Alliance also strongly recommended that any final rule be published as an “interim final rule” to allow time for appropriate public comment.

The competitive bidding program, required by the Medicare Modernization Act of 2003 (MMA), would replace the current Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule payment amounts for selected items in select areas. Suppliers in a competitive bidding area would submit bids for selected items, and CMS would use these bids to establish Medicare payment amounts for these items. Competition under the program would be phased in beginning in 2007 in 10 of the largest metropolitan statistical areas (MSAs), in 80 of the largest MSAs in 2009, and in other areas after 2009.

Opponents of the competitive bidding program are concerned that the program could restrict patient choice. A loss of quality service, which could impact patients using equipment for the diagnosis and treatment of sleep disordered breathing, could also result from the implementation of the program, they say. 

The Alliance, consisting of nine device manufacturers that produce and sell equipment to treat and diagnose sleep disordered breathing, has also expressed its concern. In addition to its call for an interim rule before a final rule, the Alliance recommended seven specific items for CMS to consider:

1)    Quality standards for suppliers of durable medical equipment (DME);
2)    Implementation contractors;
3)    Payment basis;
4)    Criteria for item selection;
5)    Opportunity for networks;
6)    Education and outreach; and
7)    Gap filling.

The text below represents a partial transcript of the Alliance’s letter to CMS and a full description of all 7 points.

1) Quality Standards for Suppliers of DME: The primary goal of quality standards must focus on ensuring that Medicare beneficiaries receive the device(s) and supplies that are appropriate for the management of their illness. The proposed rule indicates that on the basis of a recommendation from PAOC [Program Advisory Oversight Committee], CMS will publish quality standards through program instructions. On the one hand, we find it problematic that CMS would choose to implement a statutorily mandated requirement through a simple instruction rather than the more formal mechanism of rulemaking through the Federal Register which would afford interested parties ample opportunity to comment. However, as these standards will apply to our customers who participate in the competitive bidding program, it is of paramount importance that CMS permit ample opportunity for public comment, whether it be through the Federal Register rulemaking process or the less formal program memorandum process.

Specifically, the proposed regulation states, “These standards will measure the effect of suppliers’ services on beneficiaries. The supplier quality standards will include product-specific requirements that will focus on a consumer-directed model of service delivery for suppliers to improve beneficiary access to information about DMEPOS.” The term “product specific requirements” clearly would affect our products, and therefore the development of standards not subject to input from manufacturers of devices that are likely to be bid competitively is problematic.

Recommendation: We recommend that CMS create a transparent policy process with ample opportunity for public comments for final promulgation of “product specific requirements.”

2) Implementation Contractor: As device manufacturers, we maintain ongoing relationships and communications with the DMERCs [Durable Medical Equipment Regional Carriers] and the SADMERC [Statistical Analysis Durable Medical Equipment Regional Carrier]. While we are not opposed to CMS’ designation of competitive bidding implementation contractors (CBICs), we are unclear as to how the CBICs and DMERCs will interact in terms of development of policy, implementation of each other’s policies, and overall coordination by CMS central office. On the one hand, the CBIC(s) will prepare the requests for bids, perform bid evaluations, select qualified suppliers and set single payment amounts for all competitive bidding areas, and the CMS approach here seems logical. But the addition of “assist(ing) CMS and the DMERCs in monitoring program effectiveness, access and quality,” with the mix of responsibilities, could be confusing and repetitive due to overlap of responsibilities, and costly to taxpayers.

The proposed rule is unclear in delineating specific responsibilities of existing and new contractor responsibilities, and therefore, without extensive clarification, it is unlikely that manufacturers as well as suppliers, providers, and beneficiaries will know where to turn to address the myriad issues that will arise related to competitive bidding.

Recommendation: We urge CMS to provide specific contractor responsibilities so that manufacturers, providers, physicians, and beneficiaries know where to address concerns regarding access, quality of care, etc.

3) Payment Basis—Mail order programs under competitive bidding:  Our review of the proposed rule indicates that CMS will seek bids from mail order suppliers on all items of DME, regardless of the fact those items might not be included in a nationwide or regional competitive bidding program. We strongly urge CMS to approach this aspect of competitive bidding very carefully to ensure that patient care, access to suppliers, etc, is not adversely impacted. In candor, we believe that because there is a wide range of items under the DME benefit, it would be wise to seek specific input from the public and interested parties, including physicians, to determine what items can appropriately be distributed through mail order. 

Using the CMS example, items such as blood glucose test strips may be appropriate for mail order processing, but certainly CMS does not want to encourage shipping of oxygen cylinders or ventilators to Medicare beneficiaries. In the arena of respiratory related devices, one must not presume that, unlike a cane or walker, instruction on proper use is as simple as reading an instruction manual. In the case of CPAP, fitting of a proper mask is paramount to successful compliance with/adherence to a prescribed plan of care. To presume that the same mask is clinically appropriate ad infinitum and the patient’s condition does not warrant a different kind of mask at some time during the ongoing course of treatment is extremely problematic.

It is also unclear as to the application of mail order in the context of initial order versus reordering of supplies. Clearly situations will arise where reordering via mail order may be appropriate, but this, too, must be carefully monitored to ensure that the beneficiary’s needs have not changed. Ongoing involvement of health care providers is imperative to ensure that any mail order process does not adversely affect patient care.

Again, we urge extreme caution in selection of devices that can be handled through mail order and strongly request careful consultation with the respiratory medical community prior to any proposed rules related to mail order programs.

4) Criteria for item selection: We cannot help but seriously question the approach CMS has outlined for device selection for competitive bidding. Using CPAP as an example, Medicare data indicate that these devices account for 1.2% of all DME allowed charges, $204.7 million in 2003. Assuming for the sake of discussion that Medicare believes it can save 5% to 10% of that amount through competitive bidding if implemented nationally, this would be a national savings of $20 million. While we fully appreciate and support CMS’ fiduciary role to act on the taxpayer’s behalf in a responsible way, it is difficult to fathom that the costs associated with implementing the program would make the approach cost effective.

Specifically, CMS estimates that its aggregate savings in 2008 will be $110 million. Using CMS’ tables for the top 10 eligible DME policy group allowed charges, with the allowed charges of $7.4 billion, savings of $110 million signals to us a savings of 1.4% in 2008. To us, creation of a new bureaucracy including new Medicare contractors, and other obvious related financial as well as social costs, very well may not justify the return. We do appreciate CMS’ need to implement a Congressionally mandated competitive bidding program, but it seems infinitely more logical to focus on product categories that will ensure savings that truly justify the associated costs. It is also important to emphasize the correlation between effective disease management for sleep disordered breathing and corollary reductions in other associated health care costs.  Therefore, when one looks at the broad financial perspective, CPAP is not an appropriate category for competitive bidding!

5) Opportunity for Networks: We support the concept of permitting suppliers to form their own networks. However, the use of networks must be very carefully structured to ensure that Medicare beneficiaries have appropriate access to Medicare suppliers. In theory, under the current structure, a Medicare beneficiary in Miami has dozens of suppliers from which to choose, and the implementation of competitive bidding will unquestionably reduce that number. Because such networks already exist for group purchasing, it is only reasonable to permit willing suppliers to form legal entities that will function to pass such savings on to the Medicare program as well as Medicare beneficiaries.

Specifically, we do note, however, that there appears to be a problematic limit on the size of such networks, as CMS proposes to limit market share to 20%. In fact, this could be discriminatory in its very nature if in fact large national suppliers can exceed the 20% threshold in their capacity.  For example, if two national chains, as winning bidders, account for 75% of the threshold capacity identified by Medicare, what logic exists in limiting the network’s capacity to 20%?  Simply, why is one company permitted to function above the 20% threshold while a legal network of companies must be limited to 20% capacity? 

To us, it appears to be questionable legally as it discriminates against small suppliers and their ability to participate in the program. To reiterate, we support the option for suppliers to create networks, but we do not believe that limiting the market share of such networks to 20% is reasonable and, if implemented as proposed, would likely inhibit beneficiary access to a reasonable number of choices of suppliers.

6) Education and Outreach: We support the Agency’s commitment to ensure that Medicare beneficiaries are thoroughly educated regarding this matter. Recent CMS experience unequivocally signals the need for aggressive, thorough, timely and accurate education of beneficiaries who will be impacted by competitive bidding.

7) Gap Filling: CMS recognizes that the current system does not readily address pricing of new technologies in the DME arena. We can identify numerous specific examples in the broad respiratory category where dramatic advances in sleep technology, as well as oxygen delivery technology, have quickly surpassed CMS’s ability to code, let alone price these new technologies. We also recognize that, on occasion, there are either statutory or administrative limitations to pricing of new technologies, and it would be appropriate for CMS to recognize those limitations as well rather than espousing detailed analytical processes that would apparently usurp or replace other pricing structures already in place. Our comments, therefore, focus on the specific arena of pricing for competitive bidding as well as the broader issue of gap filling for all devices covered by the Medicare program.

CMS’s proposal for gap filling in the context of competitive bidding is especially problematic. If a new code is established during a competitive bidding cycle, CMS has stated that payment will be made at the rate for the current code until the end of that competitive bidding cycle. However, that rate may not be adequate/appropriate for a newer, more advanced technology. The CMS approach is likely to be a barrier to access to new technologies. 

Additionally, of great concern to us is the statement, “we can use the technology assessment process at any time to adjust prices on or after January 1, 2007 that were previously established using the gap filling methodology if it is determined that those pricing methods resulted in payment amounts that do not reflect the cost of furnishing the item.” We interpret this to mean that technological assessment alone, to the exclusion of both price comparison and medical benefit assessment, can be used to re-price items that have payment rates established through the traditional gap filling methodology currently in place. We support use of those two assessment tools in the establishment of pricing for new technologies as well as re-pricing of existing technologies. Excluding those assessment tools is unacceptable.

To address “gap filling” in the broader context of Medicare outside of competitive bidding, we recommend that CMS develop a process that ensures Medicare contractors will solicit and review information from manufacturers that address product development as well as information from providers regarding costs associated with support, service and delivery of the device(s). Therefore, we believe it is more appropriate for CMS to promulgate a separate, free-standing rule addressing gap filling that would apply to devices in general, not just devices that may be subject to competitive bidding.

Alliance members include:    
• Embla: www.embla.com
• Fisher & Paykel Healthcare: www.fphcare.com
• Invacare Corp: www.invacare.com
• Pro-Tech Services: www.pro-techservices.com
• Puritan Bennett: www.puritanbennett.com
• ResMed: www.resmed.com
• Respironics: www.respironics.com
• Sunrise Medical: www.sunrisemedical.com
• VIASYS Healthcare: www.viasyshealthcare.com

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