It Affects ALL HME Providers

Transcription

1 Competitive Bid Pricing Comes to Rural America and Beyond It Affects ALL HME Providers Presented by Jeffrey S. Baird, Esq., Kim Brummett, Mark Higley and Miriam Lieber

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3 Roll-Out Specifics Agenda History of Competitive Bid Expansion proposed and final rule Operational Perspective Assignment, Pricing, ABNs Legal Matters Retail pricing, participating providers, contractual obligations versus rural provider impact

4 Roll Out Specifics On October 31st, 2014, the Centers for Medicare & Medicaid Services (CMS) released a final rule (CMS-1614-F) which affects all durable medical equipment suppliers in the United States. The Rule establishes a new reimbursement methodology that makes national price adjustments to payments for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) items currently paid under Medicare fee schedules. This affects all HCPCS codes currently included in the Round 1 and Round 2 geographic competitive bidding areas.

5 Reimbursement for these items will be reduced to an amount based on the current competitive bid single payment amounts. Under the Final Rule, CMS stated it attempted to accounts for regional variations in costs, establishing Regional Single Payment Amounts ( RSPAs ) calculated for each of eight regions. CMS calculates the RSPA for each region using the unweighted average of the SPAs for a DMEPOS item from all CBAs that are fully or partially located in that region, regardless of population. CMS also states that the unweighted average avoids giving undue weight to SPAs in more heavily populated areas. CMS then uses the average of each RSPA, weighted by the number of states in that region, to calculate a national average RSPA.

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7 For the competitive bid DME items, the final rule phases in, over 6 months, a new reimbursement rate for noncompetitive bidding areas (CBAs). On January 1, 2016, the reimbursement rate for these claims (with dates of service from January 1, 2016 through June 30, 2016) will be based on 50 percent of the un-adjusted (current) fee schedule amount and 50 percent of the adjusted (reduced) fee schedule amount which will be based on the regional competitive bidding rates. Starting on July 1, 2016, reimbursement rate will be 100% of the adjusted fee schedule amount which will be based on regional competitive bidding rates.

8 Important Note! Industry stakeholders, including AAHomecare, are attempting to delay and/or mitigate the implementation on January 1, 2016 of this Rule. We argue that the application of payment rates, set by a competition, to non-cbas is flawed and will disrupt Medicare beneficiaries access to the DME items they need. In CBAs, suppliers accept contracts for DME items at a lower rate because there will be a reduced number of suppliers that can operate in that bid area.

9 Suppliers try to make up for the drastic payment cuts through increased volume of beneficiaries served. As a result of CMS final rule, suppliers - such as those in attendance today- in non-competitive bid areas will receive the same drastic payment cuts set in CBAs, without exclusive contracts or increase in volume of business. The industry also has data that indicates providing DME items in rural areas have a higher cost than in urban areas.

10 CMS estimates that by applying bid rates throughout the entire United States it would save over $7 billion over FY 2016 through This obviously affects the (approximately) 60% of U.S. ZIP codes in the non bid areas!! The next map indicates actual CBA footprints ; the remainder of the areas (in yellow) are affected by this Rule!

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12 Let s look at this more closely Once more CMS will adjust fee schedule amounts for states in different regions of the country based on previous competitive bidding round pricing in these regions. The regional prices would be limited by a national ceiling (110% of the average of regional prices) and floor (90% of the average of regional prices). There were originally three possible Regions in the proposed rule (see next).

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14 CMS determines a regional price for each state equal to the average of the single payment amount for an item or service from the CBAs that are fully or partially located in the same region where the state is located. CMS determines a national average price equal to the average of the regional prices. Adjust fee schedules annually using CPI-U Revise the SPA each time there is a new round of bidding. BUT to be clear, the current RSPAs have already been determined using Round 2 (e.g., Atlanta) and Round 1 recompete (e.g., Miami) single payment amounts. And, CMS Joel Kaiser has suggested that if the Round 2 recompete SPAs are determined prior to the roll out, these prices will be used.

15 As noted, the new adjusted pricing for DMEPOS CBP items will begin on January 1, This will be a phase-in process over 6 months, allowables will be reduced by 50% on 1/1/16 and 100% on 7/1/16. CMS has recently released a preliminary list of what they consider rural zip codes. The payment amount will be 110 percent of the average of the SPAs of all the areas where bid programs are in effect (the ten percent add-on ). A rural area was defined as a postal zip code that has more than 50 percent of its geographic area outside of a metropolitan area (MSA) or a zip code that has a low population density area that was excluded from a competitive bidding area. Let s look at one area (Georgia) as an example:

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17 CMS has released the actual rural zip codes that will get a 10% adjustment to new bidding-derived fees According to the USPS, there are nearly 43,000 zip codes in the US. For purposes of the bidding program, they break down as follows: Round 1 zip codes 3,714 (approx. 8.6% of total US zip codes) Round 2 zip codes 13,902 (32.3%) Regional zip codes 9,099 (20.9%) subject to new biddingderived rates ( RSPAs ) generated on a regional basis Rural zip codes 16,285 (37.8%) subject to the above mentioned bidding-derived rates, plus a 10% positive adjustment to these rates.

18 Put another way, about 64% of areas outside of a CBA will be considered rural. You can access ALL the rural ZIPS (by state in numerical order) here: Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule.html.

19 Back to my map areas in a shaded red metropolitan area but not included in any CBA are paid at the RSPA. Using an example of servicing a Medicare FFS patient with a permanent ZIP code in a Georgia (Southeast Region) not considered rural And using the averages of the E1390 oxygen single payment amounts in the of all CBAs in this region, the supplier reimbursement would be $ on January 1, 2016, and then $94.89 on July 1, 2016.

20 The yellow rural areas (see link/excel file for exact ZIPs), however, will be reimbursed at the adjusted fee schedule amounts based on 110 percent of the national average RSPA. Thus, the RSPA in rural areas for E1390 is $

21 While not released We have the current SPAs in all markets from the current programs. As CMS has provided us the methodology to determine the regional payment amounts (RSPAs), and has confirmed that the BEA regional array will be utilized, AAHomecare has estimated the RSPAs for high utilization items for all of the regions. (*) This assumes the R2RC prices are not determined in a timely manner; if they are, then the following estimates may not be accurate

22 Can we see (now) the likely RSPAs? Yes! The AAH Regulatory Council has created a document which includes the high utilization codes. AAH members may go to:

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24 Lastly, how about a state that has NO CBAs?? CMS originally dubbed these states as rural or frontier, and proposed that the SPA would also be 110% of the national average. However, in the Final Rule, this designation was removed, and only ZIP codes considered rural (albeit the majority in these states) received the 100% add-on. Example: Billings, Montana Zips are at the RSPA.

25 HISTORY OF EXPANSION CB PRICING 2010 AFFORDABLE CARE ACT By 2016, Medicare must implement competitive bidding or competitive bidding pricing for included items to noncompetitive bidding areas ADVANCED NOTICE OF PROPOSED RULE MAKING CMS issues notice of intent to issue a proposed rule AAHomecare commented to CMS on March 28, PROPOSED RULE ISSUED Comments due September 2, 2014 Detailed analysis of CMS s proposal of pricing rollout. AAHomecare provided detailed comments on proposal

26 HISTORY OF EXPANSION CB PRICING 2014 FINAL RULE RELEASE OCTOBER 31 ST 6/4/14 - AAHomecare meets with Laurence Wilson and Joel Kaiser about concerns 10/7/14 AAHomecare meets with Laurence Wilson and Joel Kaiser 11/6/14 AAHomecare meets with Sean Cavanaugh To Date Multiple meetings with industry stakeholders and communication with CMS clarifications of the rule

27 COMPARISON OF PROPOSAL TO FINAL TO AAH RECOMMENDATIONS Proposed Rule Our Comments Final Rule Create a fee schedule using the average regional SPA (RSPA) amount for an item subject to national payment ceilings and floors. CMS purge bids in a CBA by removing bids from unlicensed suppliers, recalculate the pivotal bids, and determine regional pricing by using the revised pivotal bids from CBAs in a state. CMS must provide add-on payments to the base rates in areas outside CBAs. CMS did not make any changes, and fee schedules will be based on the average RSPA for an item. The fee schedule jurisdictions would be determined using boundaries identified by the Bureau of Economic Analysis (BEA). Use regional data specific to each state. The designations used by the BEA allow for broad groupings of states with very different economic environments that could create unfair disparities in the payment rates. Appropriate data point is the clearance price for an item in a product category in a CBA or group of CBAs. CMS did not make any changes, and created eight regions developed from the BEA. Set the price for items with limited or no SPA history at 110% of the average of the SPAs for the areas where CBPs were implemented. Proposed methodology should not be implemented because CMS' data is limited. The SPAs for these items should not be the basis of a nationally rolled out fee schedule. CMS did not make any changes, and will be using the national ceiling or 110 percent of the weighted average of the RSPAs as a payment floor as stated in the proposed rule. Adjusted Payment Amounts for Accessories used with Different Types of Base Equipment-- For items with more than one SPA in a CBA, calculate one allowable by weighting the SPAs in each product category for that CBA by national allowed services to create a single SPA. Use the clearance price for products in a product category in a CBA or groups of CBAs instead of the current SPAs. The clearance price, or pivotal bid, is where pricing and expected demand for an item in a CBA intersect. The clearance price is not subject to the distortions inherent under the design of the current bidding program which identifies the SPA as the median of all the bids up to the pivotal bid. CMS did not make any changes. Adjust the SPAs for bids for items without features so that they are not higher than the items that have additi CMS proposal to alter the outcomes of unbalanced bidding only manipulates the bidding process, moving the program further away from a commercially CMS will limit this to two specific scenarios Group 1 power wheelchairs or Group 2 reasonable bidding process. The solution to unbalanced portable power wheelchairs cannot exceed the adjusted fee schedule amounts for bidding is for CMS to correct the design flaws in the Group 2, non-portable power wheelchairs and for enteral pumps without alarm program. cannot exceed the adjusted fee schedule amounts for enteral pumps with alarm.

28 PROVIDING RELIEF IN NON-CB AREAS As the national trade association representing the HME community, it is imperative that HME stakeholders support AAHomecare as the voice of the industry. Over the last four months, the association has been working behind the scenes to bring the collective weight of the industry behind a specific proposal for relief from the 2016 expansion of bid rates. The following legislative provisions are the result of hundreds of conversations, face-to-face meetings, spirited debate and prudent compromise with providers of all shapes and sizes, allied trade associations and leaders in Congress.

29 PROVIDING RELIEF IN NON-CB AREAS DMEPOS Rule Relief Proposed Legislative Specifications: Establish a 30 percent adjustment to address increased costs suppliers incur in non-competitive bidding areas to be applied to average regional single payment amount as determined by the methodology set forth in 42 C.F.R (g) (79 Fed. Reg (November 6, 2014), as well as an update mechanism. Provide for a four-year phase-in of the national price adjustments to the DMEPOS fee schedule set forth in 42 C.F.R (g) (79 Fed. Reg (November 6, 2014)) when implementing them. Establish in statute the bid limit ceiling for competitive bid contracts that begin on or after January 1, 2017 at the unadjusted fee schedule payment rates as of Jan 1, These provisions will serve as our starting point as we move forward in our negotiations with leaders in Congress to have this language either included in future legislation or as a stand-alone piece.

30 Business Strategies - Pricing CBA versus Non-CBA Rural versus contracted provider Varied pricing levels Regional Single Payment Amount Rural providers Single Payment Amount Contracted providers One company could be necessarily be subjected to various Medicare pricing configurations One HME company could necessarily have multiple contracts with Medicare plus rural and urban locations

31 Business Strategies Operations Contracted providers Must accept assignment Noncontracted providers (rural included) Participating provider (PAR) versus nonpar status Nonassigned claims Cash paying customer opportunities» Customer accessibility CMS states it will monitor and measure ABN Rules don t change

32 Business Strategies Weigh Options Weigh and measure your options Assignment Subcontracting Noncompetitively bid items Simulate pricing reductions Determine strategy/policy for your company Implement operational efficiencies Quick fixes Longer term process changes Automation initiatives essential Diversified payer and product mix for insulation

33 Education and Training Once your plan is defined Educate referral sources and staff alike Sales approach modifications Inventory and purchasing changes Form C requirements Order intake for Medicare patients who need competitively bid items Documentation variances Billing and reimbursement differences Modifiers

34 Operational Matters Keep track of contracted versus noncontracted locations separately Rural versus urban locations Zip code differentiation Pricing and assignment variations What about noncompetitively bid items? Both referral sources and staff need easy to understand cheat sheet (automated)

35 Responding to Expanded Competitive Bid Pricing Cash/Retail Sales DME supplier is statutorily prohibited from charging Medicare substantially in excess of the supplier s usual charges, unless there is good cause Regulations do not give clear guidance on what constitutes substantially in excess or usual charges The most recently proposed rule (never finalized) contemplates usual charges to be either the average or median of the supplier s charges to payers other than Medicare (and some others)

36 Responding to Expanded Competitive Pricing Cash/Retail Sales Under the proposed rule, a DME supplier s usual charge should not be less than 83% of the Medicare fee schedule amount (i.e., up to a 17% discount from the Medicare fee schedule). Under the proposed rule, there would be an exception for cause, which would allow a supplier s usual charges to be less than 83% of the Medicare fee schedule if the supplier can prove unusual circumstances requiring additional time, effort or expense, or increased costs of serving Medicare beneficiaries.

37 Responding to Expanded Competitive Bid Pricing Cash/Retail Sales The proposed rule would include charges of affiliate companies into the calculation of a supplier s usual charges An affiliated company is any entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under control with the DME supplier

38 Responding to Expanded Competitive Bid Pricing Arrangements With Hospitals Section 3022 of The Affordable Care Act creates Accountable Care Organizations ( ACOs ) An ACO is a group of providers and suppliers that contract directly with Medicare and will work together to coordinate care for the patients they serve A DME supplier can be an ACO participant : the supplier is entitled to the shared saving earned by the ACO and is obligated to help pay for the shared losses incurred by the ACO

39 Responding to Expanded Competitive Bid Pricing Arrangements With Hospitals Under the Hospital Readmissions Reduction Program, if a Medicare beneficiary is readmitted after discharge within a certain period of time, for a particular disease, then the hospital can be subjected to future payment reductions from Medicare The hospital can contract with the DME supplier to monitor/work with discharged patients so that they are not readmitted soon after discharge

40 Responding to Expanded Competitive Bid Pricing Arrangements With Hospitals A joint venture occurs when two or more people/entities own something together Under a typical joint venture, the hospital and DME supplier can set up a separate legal entity that is a DME supplier (e.g., St. Mary s Hospital Medical Equipment, Inc. or SMHME ) SMHME cannot be a sham in which the DME supplier is paying remuneration to the hospital in exchange for referrals

41 Responding to Expanded Competitive Bid Pricing Arrangements With Hospitals Ideally, the joint venture will comply with the Small Investment Interest safe harbor. If this safe harbor cannot be met, then the joint venture will need to comply with the OIG s 1989 Special Fraud Alert ( Joint Ventures ) and the OIG s April 2003 Special Advisory Bulletin ( Contractual Joint Ventures )

42 Responding to Expanded Competitive Bid Pricing Arrangements With Hospitals Among other requirements Both parties must invest risk capital The hospital s percentage ownership interest is determined by the amount of risk capital invested The hospital will have obligation to refer to the joint venture Profit distributions to the hospital will be based on its percentage ownership interest, not on the number of referrals from the hospital to the joint venture The DME supplier cannot operate SMHME on a turnkey basis. While some of SMHME s responsibilities can be contracted out to the DME supplier, at the end of the day, SMHME must have operational responsibilities and financial risk.

43 Responding to Expanded Competitive Bid Pricing Arrangements With Hospitals Loan Closet/ Stock and Bill Arrangement/Consignment Arrangements Consignment arrangement with hospital ER in which the DME supplier stocks the closet with braces, splints and cervical collars and such items are given to the patient when he is discharged from the ER

44 Responding to Expanded Competitive Bid Pricing Sale of DME Supplier What a purchaser looks for in acquiring a supplier Product mix Provider and supplier number issues Payer mix Medicaid issues Employee and independent contractor issues Referral source issues Documentation issues Numbers, licenses and sanction issues Litigation, audits and reviews Legal Financial Understanding day-to-day operations

45 Responding to Expanded Competitive Bid Pricing Sale of DME Supplier Stock vs. asset sale Steps to bring acquisition to fruition Mutual Non-Disclosure Agreement Disclosure by seller of financials Letter of Intent Conduct of due diligence by Buyer Closing

46 2016-Competitive Bid Pricing Comes to Rural America and Beyond-It Affects All HME Providers Medtrade Fall October 27, L9419.ppt