DMEPOS Competitive Bidding: Tough Choices for Long-Term Care

Beginning on July 1, Medicare beneficiaries in 10 metropolitan areas (Charlotte, North Carolina; Cincinnati, Ohio; Cleveland, Ohio; Dallas-Fort Worth, Texas; Kansas City, Missouri; Miami-Fort Lauderdale, Florida; Orlando, Florida; Pittsburgh, Pennsylvania; Riverside, California; and San Juan, Puerto Rico) will have to confront the complexities of the new competitive bidding program for durable medical equipment prosthetics, orthotics, and supplies (DMEPOS) under Medicare Part B. In many instances, they will likely have to say good-bye to the people who have been supplying their oxygen and servicing their wheelchairs and search for one of the handful of suppliers who managed to submit bids lower than most of their competitors.

Congress mandated the competitive bidding program in 2003 as a way to save money and to inject market forces into the establishment of payment levels for medical equipment. In addition to the 10 metro areas in the first round, the Centers for Medicare & Medicaid Services (CMS) has announced a second round of competitive bidding for 2009 that will include 70 more areas, including Chicago, Los Angeles, and New York—the three largest metropolitan regions in the nation.

The changing DMEPOS landscape will be particularly jarring for long-term care (LTC) facilities and their patients who require enteral nutrients, equipment, and supplies. This is the product area where there would be the biggest impact on LTC facilities in the first phase of the competitive bidding program.

Despite vigorous objections raised by the National Association for the Support of Long Term Care (NASL) that competitive bidding was not compatible with LTC settings, CMS decided to include LTC in the very first phase of this new and largely untested program.

When we say untested, we mean untested. In 1999, the Health Care Financing Administration (now CMS) launched a competitive bidding demonstration project in Polk County, Florida, that included enteral products. The Medicare agency subsequently dropped enteral products from the study to focus on products for noninstitutionalized patients. Now, CMS has decided to take a leap of faith that including enteral products in the first round of competitive bidding would not disrupt care in LTC settings, and that winning contract suppliers would have the requisite knowledge and experience to supply products to this vulnerable patient population.

This decision could be problematic. The competitive bidding program is based on a home care model that generally involves a distribution process designed for beneficiaries who are mobile and not institutionalized. However, the clinical needs of LTC patients using enteral products, how these products are distributed in the LTC setting, and the particular quality standards applicable to nursing facilities often are quite distinct from the home care setting.

Residents in LTC facilities are usually older and more impaired than patients in home care. Often, they are admitted after an acute care stay or an unsuccessful home stay, and they require a different regimen of care. For example, more than 80% of all enteral patients residing in LTC facilities require an enteral pump for the safe delivery of nutrition, while less than half of all enteral patients residing at home have such a need. Moreover, LTC facility residents often have multiple clinical conditions, significant physical limitations, and the need for assistance with activities of daily living. In short, they often require a range of services beyond enteral nutrition.

LTC facilities have a special relationship with their residents, and they assume responsibility for coordinating the work of an array of clinicians, providers, and suppliers to meet their residents’ healthcare needs. Items furnished to LTC residents typically are provided by the facility itself or by highly specialized suppliers working in a close clinical relationship with the facility’s nursing personnel. The level of clinical management and services related to the furnishing of DMEPOS to patients in institutionalized settings can be substantially higher than that for noninstitutionalized patients. As a result, LTC facilities traditionally have established long-standing relationships with selected suppliers based on experience, trust, and respect for their level of professionalism.

Competitive bidding could force nursing facilities (NFs) to use unfamiliar suppliers and potentially interrupt ongoing relationships and well-functioning care plans that have worked to the benefit of their residents. Competitive bidding could further complicate the lives of LTC facility managers by creating new layers of purchasing requirements. It is quite likely that a facility could find itself purchasing supplies for its Part A residents from one of its long-standing suppliers, while purchasing other supplies for its Part B residents from a competitive bidding contract supplier. This could reduce the volume of its Part A purchases, decrease possible discounts, and undercut purchasing contracts that provide the benefits of real competitive bidding.

Skilled nursing facilities (SNFs) and NFs have three options in providing DMEPOS to their residents under the competitive bidding program: (1) they can bid to supply products solely to their residents as “specialty suppliers,” (2) they can bid as regular contract suppliers to furnish competitively bid items to all beneficiaries within their competitive bidding area (CBA), or (3) they must use contract suppliers to furnish competitively bid items to residents within their facilities. Each of these options is discussed in further detail below.

Unlike most other DMEPOS suppliers, SNFs and NFs have the option to bid for contracts as “specialty suppliers” that furnish competitively bid items only to their own residents. While this approach certainly made sense in light of the unique status of their residents, CMS required that even those facilities seeking in-house specialty supplier status be winning bidders that met the same accreditation requirements that apply to all suppliers. This added regulatory burden has certainly dampened the response from LTC facilities during the first round of bidding.

A second option would be for SNFs and NFs to become regular contract suppliers that furnish competitively bid items to beneficiaries throughout a CBA. While some LTC facilities have the capability to provide DMEPOS to a larger population, most do not, which is another reason why so few bid on contracts in the first round. Finally, if an LTC facility is not a contract supplier (either a specialty contract supplier or a regular contract supplier), it must find a contract supplier to furnish competitively bid items to its residents. This appears to be the default choice for many LTC facilities in first round of competitive bidding, although it runs counter to the desire of facilities wishing to control the provision of products and services within their walls.

The LTC industry will be watching closely to see how nursing facilities in the competitive bidding areas cope with competitive bidding and its aftermath. The program as it is currently structured has raised widespread concerns that the Medicare program may be subjecting beneficiaries to unnecessary and avoidable risks in terms of their access to quality healthcare. NASL will continue working with other industry organizations to convince Congress to scrap the program or make structural improvements to help ensure that the needs of Medicare beneficiaries are met in an appropriate manner. n

Alan Peterson is Director of Government Relations, National Association for the Support of Long Term Care (NASL).

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