I read CMS's proposed rule change multiple times in order to understand what is being proposed. I know many will not want to spend the time dissecting this proposal — if implemented it will effect us all whether you use Welfare or not. Companies that only produce a few ostomy products will not be able to participate in the bidding — effectively preventing them from getting any welfare payments.The bill favors the big manufacturers (Coloplast, ConvaTec, Hollister) that sell all of the ostomy items in the ostomy product category. If implemented, I will in all likelihood lose Medicare coverage for the Nu-Hope belts I prefer.
The following is notes that I have included about the proposal. My aim is to convey as accurately as I can the information in the proposal.
Proposal Notes:
Ostomy, tracheostomy, and urological supplies are explicitly being clarified as "medical equipment items" mandated for inclusion under the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) and are considered a "category of items" separate from durable medical equipment. This means that diverse individual ostomy products (like pouches, barriers, adhesives, etc.) would be grouped together within an overarching "ostomy supplies" product category for bidding purposes.
Individual ostomy supplies such as pouches, barriers, and adhesives will not be bid on separately. Instead, they will be included within a broader "ostomy supplies" product category, and the bid will encompass all items within that group
This means a contract supplier for the "ostomy supplies" product category would be obligated to provide all types of ostomy supplies (pouches, barriers, adhesives, etc.) covered within that category.
Therefore, if a supplier is awarded a contract for the "ostomy supplies" product category, they would be contractually obligated to provide the full range of items encompassed by that category, not just a select few. A supplier specializing in only one or two products would not be able to meet this comprehensive requirement, effectively eliminating them from being a contract supplier for that product category within the CBP.
Once composite bids are calculated for all entities, they are arrayed in order from lowest to highest.
The Centers for Medicare & Medicaid Services (CMS) starts awarding contracts to suppliers with the lowest composite bids and continues through the array until the cumulative capacity of the selected bidders is projected to meet or exceed the beneficiary demand for the items in that product category.
The composite bid of this last supplier added to the array to meet demand is known as the "pivotal bid".
All bidding entities whose composite bids are equal to or below this pivotal bid are selected as winning contract suppliers. The bids of these winning contract suppliers are then used to establish the Single Payment Amounts (SPAs) for all items in that product category. This approach balances competitive pricing with the need to ensure access.
It is highly likely that a supplier who only provides one or two specific ostomy products would be eliminated or unable to successfully participate DMEPOS CBP once ostomy supplies are phased in.
The proposal uses the composite bid approach. A composite bid is like offering a single package price for a whole group of related items, instead of giving a separate price for each individual item.
Think of "ostomy supplies" as a big box of different things like pouches, barriers, and adhesives. These are all related and are grouped together in something called a "product category" for the bidding program.
Within that box of ostomy supplies, there's one item that's considered the "lead item." This is usually the item with the highest total Medicare charges across the country.
Instead of giving a separate price for every type of pouch, barrier, or adhesive, a supplier submits just one bid amount for that "lead item".
This single bid for the lead item then becomes the supplier's "composite bid" for all the items in the entire ostomy supplies product category.
It is intended to make the bidding process much simpler for suppliers, as they don't have to list prices for hundreds of individual items.
This system aims to prevent suppliers from only offering low prices on popular items and high prices on less popular ones. When a supplier wins a contract for the "ostomy supplies" product category, they are required to provide all the items within that category (like pouches, barriers, and adhesives) to any beneficiary who needs them. They can't just pick and choose the most profitable ones.
So, for ostomy supplies, a supplier wouldn't bid on pouches and adhesives separately. They would submit one "composite bid" based on the designated "lead item" within the ostomy supplies category, and that bid would cover all the items in that group.
The CMS must determine the Single Payment Amounts for all items within the ostomy supplies category.
The Single Payment Amount (SPA) for the lead item is calculated as the 75th percentile of the bid amounts submitted by the winning suppliers for that lead item.
If the 75th percentile falls between two bid amounts (in cases of an odd number of winning suppliers), the SPA is calculated as 75% of the way between those two amounts, rounded to the nearest cent.
Calculating the 75th Percentile:
First, all the winning bids for that lead item are arranged from the smallest price to the largest price.
The 75th percentile is the point in that ordered list where 75% of the winning bids are at or below that price.
Sometimes, the 75th percentile will land exactly on one of the bid amounts in the list. If that happens, that specific bid amount becomes the Single Payment Amount (SPA) for the lead item.
Other times, especially if there's an odd number of winning bids, the 75th percentile might fall between two different bid amounts in the list. In this situation, Medicare figures out the price by going 75% of the way between those two bids, rounding the final number to the nearest cent.
For example, if the 75th percentile falls between a bid of $6.50 and a bid of $7.00, Medicare would calculate the SPA as $6.88. This is because $0.50 (the difference between $7.00 and $6.50) multiplied by 75% is $0.375. Adding that to the lower bid of $6.50 gives you $6.875, which rounds up to $6.88
This lead item SPA is the single, official payment amount for that specific lead item for all contract suppliers in that particular competitive bidding area (CBA) and product category combination (referred to as a "competition").
Determining Price For Non-lead Items:
For non-lead items within the same product category (like different types of pouches or adhesives, if the barrier is the lead item), their SPAs are determined by multiplying the lead item's SPA by a relative ratio.
This ratio is based on the historic differences in the 2015 fee schedule amounts for the non-lead item compared to the lead item in the specific state or area where the item is furnished. This helps ensure that the pricing for non-lead items reflects local historical price relationships. For nationwide or regional CBAs, the average 2015 fee schedule amounts are used.
Example with Ostomy Barrier as Lead Item:
Assume the ostomy barrier is the lead item in the "ostomy supplies" product category.
1. Multiple suppliers bid on the ostomy supplies product category, with their bid amount tied to the ostomy barrier (the lead item). Supplier A might bid $50 for the barrier, Supplier B $55, and Supplier C $60.
2. After selecting winning bidders, Medicare calculates the SPA for the ostomy barrier. If the 75th percentile of winning bids comes out to, say, $57.00, then this becomes the SPA for all ostomy barriers from all winning contract suppliers in that competition.
3. SPAs for Pouches and Adhesives (Non-Lead Items) Determined:
◦ Medicare then looks back at 2015 fee schedule data for that specific area.
◦ If, in 2015, an ostomy pouch typically cost 80% of an ostomy barrier, and a specific adhesive cost 30% of an ostomy barrier, then:
▪ The SPA for that ostomy pouch would be $57.00 (barrier SPA) * 0.80 = $45.60.
▪ The SPA for that adhesive would be $57.00 (barrier SPA) * 0.30 = $17.10.
While each winning bidder may have their own internal cost structure for providing individual ostomy pouches, barriers, and adhesives, the Medicare payment amounts (SPAs) for these individual items are fixed and uniform for all contract suppliers within that specific competition.
Contract suppliers are legally obligated to furnish all items under their contract at these established SPAs and are prohibited from "balance billing" beneficiaries for any difference between the SPA and their actual costs.
Even if different vendors offer different brands, sizes, or minor feature variations of, say, an "ostomy pouch," the SPA is set for the type of item within the product category (e.g., an ostomy pouch), not for every single unique style or brand.
All winning suppliers in a competitive bidding area must agree to furnish all items within their contract (the entire product category) at or below these established SPAs. This means that for a "standard ostomy pouch," regardless of the vendor's specific style or brand, the Medicare payment and beneficiary cost-sharing will be based on that single, calculated SPA for "ostomy pouches."
Medicare's stated goal is to set a fair and competitive price for the function or category of the medical supply, ensuring that beneficiaries can get the supplies they need without being overcharged, even if vendors have different options available.
Based on how the Medicare DMEPOS CBP determines payment amounts, all Medicare-covered "pouches" of a specific type from all winning contract suppliers in a given competition will effectively "cost" the same in terms of the Medicare Single Payment Amount (SPA). They are indeed treated as commodities for payment purposes.
Pouches of a "specific type" introduces a possible nuance. Based on the proposed changes for the DMEPOS CBP, it's correct to say that there will be more than one Single Payment Amount (SPA) for "pouches" if "type" refers to different distinct items within a product category (e.g., different ostomy pouch designs, sizes, or functionalities that have different Healthcare Common Procedure Coding System (HCPCS) codes). However, for any specific "type" of pouch (meaning a single HCPCS-coded item) within a given competition, all winning bidders will receive the same SPA, effectively treating that specific item as a commodity for payment purposes.
If "pouches of a specific type" refers to distinct items identified by different HCPCS codes (e.g., a one-piece ostomy pouch vs. a two-piece ostomy pouch), then yes, there will be different SPAs for these different "types" because each is a separate non-lead item with its own historical fee schedule ratio.
Under the proposed revision, the SPA for a specific, identical type of pouch (same HCPCS code) could differ from one Competitive Bidding Area (CBA) to another. This is because the ratio used to calculate its SPA would now be based on the local 2015 fee schedule amounts rather than a national average, which aims to prevent situations where a non-lead item's SPA might be higher than the fee schedule amount that would otherwise be paid in a specific area.
In summary, while any given type of pouch (identified by a single code) is a commodity within its specific competition (all winning suppliers get the same SPA for it), different coded "types" of pouches will have distinct SPAs, and these SPAs may also vary geographically based on historical local fee schedules if the proposed changes are finalized.
