Adjusted DMEPOS Payments to Reduce Medicare Spending by $19M

September 02, 2016 - Medicare spending would decrease by approximately $19 million a year once CMS fully implements new claims reimbursement rates for accessories associated with some durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), reported the Government Accountability Office (GAO).

The Medicare fee-for-service program spent nearly $311 million in 2014 to provide wheelchair accessories to beneficiaries and about half of the accessories were tied to CRT power group three wheelchairs, which Medicare will cover if the patient meets basic and addition coverage criteria and demonstrates limitations due to neurologic, myopathic, or congenital skeletal abnormalities.

In an effort to curb Medicare spending, CMS started to adjust Medicare fee schedule payments for DMEPOS items and accessories based on the competitive bidding prices for the items in January. The federal agency expanded the scope of the competitive bidding program to areas outside of the initially designated locations.

CMS phased in the new Medicare reimbursement rates with a hybrid payment schedule that included 50 percent of existing fee schedule rates and 50 percent of adjusted amounts. However, the Patent Access and Medicare Protection Act postponed the implementation of adjusted rates for wheelchair accessories when furnished with CRT power group three wheelchairs.

Under the act, GAO was required to report on utilization, healthcare costs, and payment rates associated with the DMEPOS accessories. Using 2016 fee schedule data and 2014 utilization and cost information, GAO analyzed how claims reimbursement rates based on the competitive bidding program would impact the 50 costliest accessories related to CRT power group three wheelchairs.

GAO found that the adjusted claims reimbursement rates ranged from three to 50 percent lower than the unadjusted fee schedule payment rates. Once the adjusted Medicare reimbursement rates for wheelchair accessories goes into effect, GAO projects that Medicare and beneficiaries will see considerable healthcare savings.

While GAO reported significant decreases in Medicare spending, many providers have expressed concerns that the adjusted Medicare reimbursement rates will put pressure on their healthcare revenue cycle.

As the adjusted payment rates went into effect in July, many providers have experienced significant decreases in claims revenue. For example, CMS reported in its announcement of the new rates that a healthcare supplier would have been reimbursed $1,086 for furnishing an oxygen contractor for six months to a Medicare beneficiary under the fee schedule. However, the adjusted reimbursement amount for the same service would be $472 in urban areas and $520 in rural areas.

Some healthcare organizations have petitioned CMS to reconsider reimbursement cuts for DMEPOS items and accessories in order to save providers from the lost revenue. In a statement, the American Association of Homecare explained that many providers may have to “make difficult business and operation decisions” as a result of the lowered payments.

“Home medical equipment providers in rural areas are now faced with Medicare reimbursement rates that, in many cases, are about half of what they were receiving in 2015,” said Tom Ryan, President and CEO of the American Association for Homecare. “I know that HME [home medical equipment] providers will do everything they can to continue to serve the patients who depend on them – but there’s no doubt that many companies may have to reduce their offerings, cut back on services, or leave the Medicare program entirely to survive.”

Several House representatives have also introduced and passed legislation to ensure beneficiary access to high-quality DMEPOS items and accessories by preventing substantial decreases in provider payments. Tom Price (R-GA), MD, who introduced the bill, stated that the competitive bidding program does not produce bids that are “financially unsustainable” and cannot hold bidders accountable.

As a result, the national rollout of the adjusted prices negatively impacted some providers, especially rural suppliers. For many, the new provider payments barely covered the cost of delivering certain DMEPOS items, stated Price.

The Patient Access to Durable Medical Equipment Act was designed to extend the fee schedule rates for DMEPOS items and accessories in non-competitive bidding areas to give Congress more time to study the effects of adjusted rates on rural providers.

“Georgia's seniors ought to have access to quality health care,” said Price. “Every single day, many rely on durable medical equipment such as wheelchairs, oxygen tanks, and canes to maintain their health and wellbeing. This bipartisan effort seeks to allow providers of this equipment the ability to continue to supply lifesaving medical supplies to patients regardless of where they live.”

Despite being passed in the House of Representatives, the bill did not clear the Senate before summer adjournment and the July launch of the adjusted rates nationwide took effect. When the Senate returns in September, the bill will be considered by the Committee on Finance.

Dig Deeper:

• Preparing the Healthcare Revenue Cycle for Value-Based Care

• New DMEPOS Prices Reduce Medicare Spending, Ensure Care Access