What is Competitive Bidding?

The DMEPOS (Durable Medical Equipment Prosthetics Orthotics and Supplies) Competitive Bidding Program was mandated by Congress through the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The statute requires that Medicare replace the current fee schedule payment methodology for selected Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) items with a competitive bid process. The intent is to improve the effectiveness of the Medicare methodology for setting DMEPOS payment amounts, which will reduce beneficiary out-of-pocket expenses and save the Medicare program money while ensuring beneficiary access to quality items and services.

Under the program, a competition among suppliers who operate in a particular Competitive Bidding Area (CBA) is conducted. Suppliers are required to submit a bid for selected products. Not all products or items are subject to competitive bidding. Bids are submitted electronically through a web-based application process and required documents are mailed. Bids are evaluated based on the supplier’s eligibility, its financial stability and the bid price. Contracts are awarded to the Medicare suppliers who offer the best price and meet applicable quality and financial standards. Contract suppliers must agree to accept assignment on all claims for bid items and will be paid the bid price amount. The amount is derived from the median of all winning bids for an item.

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), enacted on July 15, 2008, made limited changes to the competitive bidding program for Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS), including a requirement that the Secretary conduct a second competition to select suppliers for Round 1 in 2009. The Centers for Medicare & Medicaid Services (CMS) issued an interim final rule with comment period (IFC) on January 16, 2009. The rule incorporates into existing regulations specific statutory requirements contained in MIPPA related to the competitive bidding program.

The Administration delayed the effective date for the IFC to allow CMS officials the opportunity for further review of the issues of law and policy raised by the rule. Based upon its review and on the need to ensure that CMS is able to meet the statutory deadlines contained in MIPPA, the Administration has concluded that the effective date should not be further delayed. The rule will became effective April 18, 2009. However, there will be no immediate effect on the Medicare DMEPOS benefit and Medicare beneficiaries may continue to use their current DMEPOS suppliers at this time.

During the comment period, CMS received many suggestions by a range of stakeholders to make further improvements to the competitive bidding program, such as ensuring that CMS’s processes for collecting and evaluating bids are fair and transparent. In the upcoming weeks, CMS will be issuing further guidance on the timeline for and bidding requirements related to the Round 1 re-bid. In finalizing these guidelines, CMS will continue to seek input from all affected stakeholders to ensure program implementation consistent with the legislative requirements.