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Competitive Bidding for Durable Medical Equipment: Round 2

Posted Nov 16 2012 12:00am

Previously I wrote about Medicare’s efforts to introduce competitive bidding for durable medical equipment (DME) . Today I provide additional details on the program, an update of the initial competitive bidding implementation (Round 1) and a look ahead at the competitive bidding process in fiscal year (FY) 2013 (Round 2).

In FY 2011 and 2012 (i.e., Round 1), the DME program covered nine metropolitan areas.

In fall 2010, the Centers for Medicare and Medicaid Services (CMS) awarded 1,217 contracts awarded to 356 individual suppliers. Ninety-two percent of suppliers who submitted a bid and were offered a contract accepted the contract terms. Each Round 1 area had multiple winners for each product category due to CMS policy to ensure a choice of suppliers for all beneficiaries living in the area. CMS reports that: “The competitive bidding program has reduced prices significantly for beneficiaries living in these nine areas. The average percentage savings in comparison to the fee schedule was 35 percent.” Overall savings was actually 42 percent as beneficiary utilization of DME also decreased. Total Medicare savings was $202.1 million.

Quality of care, however, has not decreased. “The rate of use of hospital services, emergency room visits, physician visits, and skilled nursing facility care [in competitive bidding areas] has remained consistent with the patterns and trends seen throughout the rest of the country.” For equipment where utilization decreased, CMS called 100 individuals randomly to determine if they had sufficient supplies to meet their medical needs. “The calls revealed that in virtually every case, the beneficiary reported having more than enough supplies on hand, often multiple months’ worth, and therefore did not need to obtain additional supplies when the program began. This would suggest that beneficiaries received excessive replacement supplies before they became medically necessary.”

In 2013, Round 2 will begin and will expand to 91 (listed below). In 2016, the program will be fully phased in throughout the country.

How much money will CMS save? The CMS Office of the Actuary (OACT) estimates that “the program will save the Medicare Part B Trust Fund $25.7 billion and beneficiaries $17.1 billion between 2013 and 2022.” That’s no small change.

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