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Transcript for audio podcast: Durable Medical Equipment Competitive Bidding Round 1 Rebid Program

From the Office of Inspector General of Department of Health and Human Services

http://oig.hhs.gov

[Jaime Saucedo] I'm Jaime Saucedo, Audit Manager in Chicago, Illinois, speaking with Brian Anderson, a senior auditor also in our Chicago office. Brian, your team recently completed a review of Durable Medical Equipment Competitive Bidding Round 1 Rebid Program. Can you give us some background?

[Brian Anderson] I'd be glad to, Jaime. Let's start with how Medicare reimbursed providers prior to Competitive Bidding for Durable Medical Equipment, which we also call D-M-E. Any supplier enrolled in Medicare could provide DME items to Medicare beneficiaries based on a physician's order. The supplier submitted a claim to Medicare, and Medicare paid based on a predetermined fee schedule for the items.

[Jaime Saucedo] So, how does the DME Competitive Bidding Program change this process?

[Brian Anderson] It changes who can provide DME items to Medicare beneficiaries and it changes the amounts that Medicare pays for certain DME items. CMS is phasing in the competitive bidding program. Round 1 began in January of 2011 in 9 geographic areas called competitive bidding areas. Round 2 expanded the program to an additional 100 competitive bidding areas in July of 2013. Our review focused on Round 1.

[Jaime Saucedo] Can you walk us through these changes and how this new Competitive Bidding process works?

[Brian Anderson] Sure. In Round 1, DME suppliers in the 9 competitive bidding areas who wanted to sell equipment to Medicare patients had to do two things. One, they had to submit bids for prices at which they would sell selected medical equipment products for Medicare patients. And two, they had to provide to CMS certain documents supporting their bids. CMS evaluated the bids, and awarded contracts to enough suppliers to meet medical equipment needs of Medicare patients in the 9 geographic areas.

[Jaime Saucedo] So how did the program change the amount that Medicare pays for the competitively bid DME items?

[Brian Anderson] Under the Competitive Bidding Program, Medicare paid suppliers in each competitive bidding area a single payment amount based on the median - or middle price - of all winning bids in that area. These single payment amounts have been significantly lower than Medicare's traditional fee schedule amounts.

[Jaime Saucedo] So for this audit, OIG looked into how CMS selected DME suppliers, and how CMS computed the single payment amounts?

[Brian Anderson] Yes. We wanted to make sure CMS followed program procedures and Federal requirements.

[Jaime Saucedo] So what did your review find?

[Brian Anderson] We found that CMS generally selected DME suppliers and correctly computed DME single payment amounts according to Federal requirements. However, for 11 of the 266 winning supplier bids, CMS did not consistently follow its procedures and applicable Federal requirements.

[Jaime Saucedo] What does that mean?

[Brian Anderson] We estimated that CMS paid suppliers around $33,000 dollars less than it should have, during the first 6 months of the program.

[Jaime Saucedo] That doesn't seem like a lot of money relative to the size of the program. Why are these findings important?

[Brian Anderson] In terms of dollars, the findings are small. Let's look at our recommendations to better explain why this is important. We recommended that CMS follow its established procedures to make sure all supplier bids are included when calculating the single payment amounts - before offering contracts to approved bidders. This program really affects the supplier community by limiting who can provide medical equipment to Medicare patients and how much they'll be paid for each item. CMS should also make sure to consistently evaluate and select suppliers. After all, a supplier's business can depend on it.

[Jaime Saucedo] Can you tell me about additional work you are doing on the Competitive Bidding area?

[Brian Anderson] Our team is currently reviewing suppliers' compliance with licensure requirements in selected States for the second round of Competitive Bidding. This work responds to allegations that CMS potentially awarded contracts to unqualified suppliers in some states.

[Jaime Saucedo] Thank you, Brian, for sharing such important work your team is doing in DME Competitive Bidding.

[Brian Anderson] You are very welcome.

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