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CMS Mail-Order Competitive Bid Supplier Enforcement Changes: Will It Be Enough?

mail order competitive bid pharmacy dmeBy: Michael Silverman

Ever since the Centers for Medicare & Medicaid Services (“CMS”) announced its DMEPOS Competitive Bidding Program there has been outcry from both providers and consumers. Particularly with respect to Competitive Bidding for the National Mail-Order Diabetic Testing Supplies Program (“National Mail-Order Program” or “Program”), which took effect on July 1, 2013, there has been a concern about the Program’s sustainability and potential for negative implications to beneficiaries. This is largely due to the low reimbursement rates, as set by the bid winning providers, and the possible spillover effect to the Medicare Part B beneficiaries’ access to quality supplies and services. While CMS had safeguards in place when the Program was implemented, many of the regulations have gone largely unenforced. Change is on the horizon as CMS strives to better police its own Program, but is it too little, too late?

In 2011, prior to the implementation of the National Mail-Order Program, CMS tested Competitive Bidding for diabetic testing supplies in nine geographical regions. In these test markets, the payment rates for a vial of test strips were reduced from $34 to $14. CMS’ goal with Competitive Bidding is to reduce costs to the Medicare Trust Fund and beneficiaries, as well as to curb fraud, waste and abuse in the industry. Wanting to ensure that the intentions of the Program were being fulfilled without repercussions, CMS conducted a study on the nine geographical test regions. In its 2012 report CMS stated that there were no negative consequences to the beneficiaries as a result of the Competitive Bidding Program.

Prior to the National Mail-Order Program’s 2013 roll out, any DMEPOS supplier enrolled with Medicare could, with the exception of patients residing in nine regional 2011 test markets, mail diabetic testing supplies to a Medicare Part B beneficiary residing anywhere in the country. When the National Mail-Order Program took effect, the number of suppliers able to mail and bill Medicare Part B for these diabetic supplies dwindled from thousands to approximately two dozen bid winning providers. CMS had difficulties finding enough contract suppliers to support the National Mail-Order Program, as the reimbursement rate for diabetic test strips dropped to $10.41 from the $34 providers were accustomed to. The bid winning suppliers contracted with CMS for three years, and the National Mail-Order Program was re-bid in 2016. On July 1, 2016 the reimbursement rate of test strips dropped again, this time to $8.32; CMS was only able to contract with approximately twelve providers at that rate. Today, roughly 20 months into the second round of the Program, after several of the 2016 bid-winning suppliers have gone out of business, there are only nine suppliers left for beneficiaries to choose from.

Knowing there would be a reduction in the number of suppliers and reimbursement rates, CMS attempted to safeguard beneficiary access to quality supplies and services by requiring its National Mail-Order Program contract suppliers to adhere to certain rules. Most notable with regard to safeguarding beneficiaries are the Anti-Switching, Non-Discrimination, and 50% Rules.

Anti-Switching Rule: prohibits National Mail-Order Program contract suppliers from influencing or incentivizing beneficiaries to switch their current glucose monitor and testing supply brands to another brand. 42 CFR §414.422(e)(3)

Non-Discrimination Rule: requires that all brands/manufacturers of the supplies furnished to Medicare beneficiaries under the Competitive Bid Contract must be the same items that the contract supplier makes available to its other customers. 42 CFR §414.422(c)

50% Rule: suppliers must carry manufacturers that account for at least 50% of the market share.

But do these rules have any teeth? According to the Anti-Switching Rule contract suppliers are supposed to provide the test strips that work with the beneficiary’s current blood glucose monitor, but per the 50% Rule contract suppliers are not required to carry all brands of test strips. Given that a single manufacturer’s test strips account for over 42% of the market, the supplier can be compliant with the 50% Rule by only carrying two manufacturer’s test strips. If the nine contract suppliers left in the Program carry essentially the same 2-3 strip manufacturers to be compliant with the 50% Rule, every other patient presenting to a contract supplier will ask the question “[w]ell what manufacturers do you carry?” This opens the door for the contract supplier to suggest that the beneficiary try one of the models it provides. As such, these regulations do not seem have much effect in ensuring that beneficiaries have access to the supplies they are accustomed to. The 50% Rule seems to even undermine the purpose of the Anti-Switching Rule. To the extent that these regulations could be even somewhat effective in safeguarding beneficiaries, they have gone largely unenforced.

A bipartisan group of congressional representatives is trying to change that with the introduction of 2017 legislation entitled “The Protecting Access to Diabetes Supplies Act.” H.R. 3271, in part, would strengthen the enforcement of CMS’ Anti-Switching and 50% Rules. CMS seems to be catching on, and now seems more willing to act as the enforcer of its own Program’s regulations. The Fiscal Year 2019 Budget for the Department of Health and Human Services has provisions to reform the Competitive Bidding Program and includes language from H.R. 3271 to strengthen the enforcement of the Anti-Switching and 50% Rules. Will added enforcement of these existing regulations be enough to save the Competitive Bidding Program or is too little being done to address the underlying issues?

In April 2016 the American Diabetes Association (“ADA”) released its findings in a study conducted that largely covered the same timeframe of the 2012 CMS report. The ADA was looking determine the effect, if any, that CMS’ Competitive Bidding Program had on the overall health of Medicare Part B beneficiaries that rely on the program for access to their covered diabetic testing supplies. Looking to verify CMS’ 2012 findings, the ADA’s analysis compared patients in the nine regional test markets to patients in areas where there was no reduction in reimbursement nor supplier restriction. The results were troubling, especially in light of the CMS report that found no negative impacts. Hospital admissions and mortality rates for those in the test markets were significantly higher (nearly double) than those beneficiaries that did not reside in those Competitive Bid test regions.

CMS’ looking to enforce its existing regulations is a step in the right direction, but it seemingly does not address the foundational causes and resulting effects as reported by the ADA and other studies. The fact remains that beneficiaries need access to accurate diabetic testing supplies, and that some blood glucose meters and testing supplies are more precise than others. Since 2011 when Competitive Bidding for diabetic testing supplies was first implemented, reimbursement rates for diabetic test strips have been reduced by over 70%. Herein lies the underlying problem under the Program – contract suppliers are paid that same amount by Medicare for diabetic testing supplies regardless of what manufacturer they supply to a beneficiary. Such low reimbursement rates incentivize contract suppliers to minimize the costs of their operations, and this is often accomplished by carrying the least expensive generic supplies and providing subpar customer services.

The Competitive Bidding Program’s intention to reduce costs appears to be having the opposite effect. Restricted access to quality supplies + poor customer service = increased hospital visits, corresponding increases in overall costs to the Medicare Trust Fund and to mortality rates that could otherwise possibly be prevented. Looking past the suppliers that are no longer in business, it is the beneficiaries that were supposed to be protected by the Program that are the ones being failed by it. Future rounds of the entire Competitive Bidding Program have since been temporarily delayed to allow the new administration further opportunity to review it.