Competitive Bidding Update

Competitive Bidding Legislation

What it Means for CPAP Suppliers and How Sunset Can Help

Round 2 reimbursement amounts from Medicare were recently announced. This new competitive bidding legislation means there will be a lot of change in our industry in the next couple of years, especially for smaller stores who may not have the scale to remain competitive due to these new Medicare cuts.  Many HME registered for this process as of March of 2012 and are probably anxiously awaiting their fate.

This new legislation does not affect reimbursement amounts for private insurance; it only affects Medicare reimbursements at this time.   There are pros and cons to accepting a round 2 contract. As Elizabeth Deprey of HME News blogged earlier this week, some HMEs were relieved to be out of a Medicare contract. The high administrative costs of billing Medicare and time consuming government audits are draining and in the end, just not worth it for many smaller companies. The National Association of Independent Medical Equipment Suppliers (NAIMES) has put together an anonymous survey to gauge the end result of round 2 contracts.

The whole logic behind this legislation change is to protect consumer rights; ensuring companies are delivering the highest quality products to their patients at the lowest possible cost.  The bill is also a means for cutting the allocation of Medicare spending on these products by dramatically decreasing reimbursement rates. To give you a little more insight to specifics on how this might affect you, check out the new HCPCS Reimbursement by State. We also put together the chart below so you could better see an example of how HCPCS rates have changed across CPAP supplies specifically.

Product Reimbursement
2012*
Reimbursement
2013**
Difference Difference %
CPAP Tube 36.00 15.30 20.70 58%
Replacement Full Face Cushion 65.00 20.40 44.60 69%
Full Face CPAP Mask 170.55 99.00 71.55 42%
Nasal CPAP Mask 106.35 59.00 47.35 44%
Replacement Foam Filters 11.78 6.81 4.97 42%
Replacement Filters 4.88 2.38 2.50 51%
Headgear 32.00 20.40 11.60 36%
Chinstrap 14.50 11.01 3.49 24%

*reimbursement average 2012

**reimbursement Ohio 2013

As you can see, the average 45% decrease in reimbursement rates was no media exaggeration. Some products are affected more than others, for example, replacement cushions’ reimbursement rate decreased 69% while chinstrap reimbursement rates decreased by only 24%, with additional variances by state and region.

So what is Sunset doing to help our customers during these times of reimbursement cuts? We recently came out with a new deluxe line of CPAP masks that include a replaceable cushion and cost about 40-50% less than similar masks from leading manufacturers. We’ll continue to provide the lowest prices to our customers, whenever possible. We’re also looking to add more cash and retail items to our line in the next year so our customers can battle Medicare cuts with a boost to their cash sales.

In addition, we are backing a favorable alternative for home care providers, the Medicare DMEPOS Market Pricing Program.   This act will still reduce Medicare spending but would better accommodate smaller providers and preserve their ability to compete.  John Gallagher and the team with VGM government relations are making a stand for a new Market Pricing Program (MPP), if you’re interested in advocating this, check out VGM DC Link or AAHOMECARE.  Many people in the HME industry are going to be talking about this at MedTrade Spring 2013. So if you’re headed out there, keep an eye out for MPP news and updates. What do you think about the Medicare cuts and MPP? We would love to hear your feedback in the comment section below.