The federal government has reduced expenditures in a move that negatively impacts DME products

Payment for most DME under Part B of the Medicare program (supplementary medical insurance) is made through Medicare carriers. Given existing budget deficits, the Federal Government has been forced to reduce expenditures, including on programs such as Medicare and Medicaid.  In order to control cost and set appropriate payment rates, Medicare implemented the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program.

Historically, Medicare had paid for DMEPOS items using a fee schedule based on historic supplier charges updated to account for inflation.  However, studies from the Department of Health and Human Services and other have shown that the cost for certain DMEPOS items are excessive; putting a financial burden on taxpayers and Medicare beneficiaries to benefit the bottom line of DME players.  Under the bidding program, DME suppliers compete to become Medicare non-exclusive suppliers by submitting bids to furnish certain items in competitive bidding areas. This put significant pressure on pricing, as the newer, lower payment amounts will replace previous fee schedule. The new, lower payment amounts resulting from the competition will replace the fee schedule amounts for the bid items in these areas.  The payment amounts from the supplier competition for the Round One Rebid of the program are projected to result in average savings of 32 percent as compared to the current fee schedule prices.  These new payment amounts are scheduled to go into effect on January 1, 2011 in nine areas of the country.

The second edition of the DeciBio DME market report scheduled to be published mid-February will include a thorough analysis of the impact of competitive bidding on the DME market.

Authors: Stephane Budel, Partner at DeciBio, LLC

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