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Lead Item Pricing and Clearing Price

Lead Item Pricing and Clearing Price. Presented by Cara Bachenheimer, Esq. Brown & Fortunato. Please Complete Your Evaluation

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Lead Item Pricing and Clearing Price

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  1. Lead Item Pricingand Clearing Price Presented by Cara Bachenheimer, Esq. Brown & Fortunato

  2. Please Complete Your Evaluation Everyone should have received an evaluation form upon entering the session. Please complete evaluation form and turn in to room monitor as you exit the session. Or, you can complete your evaluation in the mobile app. Locate the session in the app and tap on the clipboard icon to begin the survey. Please help us keep the Medtrade Education sessions the best in the industry by completing an evaluation for every session you attend! Your feedback is very valuable to us and will be used in planning future Medtrade events! Connect with us on Social Media Twitter: @MedtradeConnect Instagram: @MedtradeConnect Facebook: facebook.com/medtrade #Medtrade18

  3. Round 2021 – What Next? • July 19, 2018 – CMS Proposed Rule • November 14, 2018 – CMS Final Rule • January 1, 2019 • Bid program suspended for up to 2 years • March 7, 2019 • CMS’s first sub-regulatory announcement on Round 2021 • CMS to start sub-regulatory policy decisions • May 2019 – Bidder Registration • June 2019 – Bid Window Opens • January? 2021 • Start of Round 2021 contracts

  4. Round 2021 – March 7, 2019 • First CMS sub-regulatory announcement on 2021 bid • Initial target dates • Competitive Bid Areas (CBAs) • Product categories • Surety bonds • Financial documents • CBAs • CMS is combining the former Rounds 1 and 2 • 100 MSAs, 130 CBAs

  5. Round 2021 – March 7, 2019 Product Categories • Commode Chairs • Continuous Positive Airway Pressure (CPAP) Devices and Respiratory Assist Devices (RADs) • Enteral Nutrition • Hospital Beds • Nebulizers • Negative Pressure Wound Therapy (NPWT) Pumps • Non-Invasive Ventilators – E0466 (new)

  6. Round 2021 – March 7, 2019 Product Categories (Cont’d) • OTS Back Braces (new) • OTS Knee Braces (new) • Oxygen and Oxygen Equipment • Patient Lifts and Seat Lifts • Standard Manual Wheelchairs • Standard Power Mobility Devices • Support Surfaces (Groups 1 and 2) • Transcutaneous Electrical Nerve Stimulation (TENS) Devices • Walkers *No national mail order for diabetic supplies this round

  7. Round 2021 – March 7, 2019 • Target Dates • March 7, 2019 • CMS begins pre-bidding supplier awareness program • May 2019 • CMS announces specific dates for registration and bidding • CMS begins bidder education program • June 2019 • Bidder registration period to obtain user ID and passwords begins • Bid window opens • Contracts will be 3 years

  8. This Session Focus on Two Key Proposed NCB improvements • Maximum winning bid • Lead Item pricing

  9. Maximum Winning Bid • CMS changed the method to calculate the SPAs • Former method: Median price • New method: Maximum winning bid • Same as “clearing price” • Market Pricing Program bills included clearing price to determine SPA • Supported by auction economists • No one gets paid less than their bid

  10. Maximum Winning Bid • The SPA for the lead item in each product category and CBA based on the highest amount bid for the item by suppliers in the winning range • CMS: It simplifies the bidding process and better ensures long-term sustainability of bid program

  11. SPAs based on Median method versus Maximum Winning Bid

  12. Lead Item Pricing • Replaces the previous bid process where bidders submit a price for each HCPCS code in the product categories • Bidders bid on the lead item, the single HCPCS code in a grouping of similar items, the product category • Lead item has highest total national allowed charges (paid) during the base period • The 2015 unadjusted fee schedules determine the relative pricing ratios • CMS revised the definition of “composite bid” to be “the bid submitted by the supplier for the lead item in the product category” • The bid on the lead item = the new composite bid

  13. Lead Item Pricing • 2015 fee schedules will be the bid ceiling for the lead item for product categories previously included in CB • 2019 fee schedules will be the bid ceiling for lead item for product categories previously NOT included in CB (Non-invasive Ventilators, OTS back braces and knee braces) • Lead item drives the expected beneficiary demand in a CBA • Lead item drives total supplier capacity in the product category • The lead item SPA is used to establish the SPAs for the lead item and all other items in the product category • Non-lead items’ SPAs based on the relative difference in the fee schedule amounts for the lead and non-lead items in the 2015 fee schedule

  14. Lead Item Pricing – Example

  15. Pros of Lead Item Pricing • Eliminates current “price inversions” • Caused by bid methodology which rewards bidders who are most aggressive on items with highest allowed services • Results in lower SPAs for items with more features, etc., than other items or per CMS “when a more complicated item is cheaper than a simple version” • Occurred with standard power wheelchairs, walkers, hospital beds, enteral infusion pumps, TENS, support surface mattresses and overlays, and seat lift mechanisms • Simplifies the bid process for bidders and for CMS • Bidders no longer have to submit bids for all HCPCS codes in product categories • Supported by auction economists

  16. Challenges with Lead Item Pricing • Product categories must be discreet to include “like” products • CMS agrees: “it is likely that some of the larger, conglomerate product categories established to promote ‘one stop shopping’ for beneficiaries and referral agents would need to be split into multiple product categories so that lead item pricing is not implemented for categories that include different types of base equipment” • Bidder education! Industry site: https://www.dmecbpeducation.com • The bid amount for the lead item must include costs for furnishing all items in the product category

  17. Surety Bond • Bond will be forfeited if supplier is offered a contract for any product category for a CBA and its composite bid rate is at or below the median composite bid rate for all bidding suppliers included in the calculation of the SPAs for the product category/CBA • The median of the winning bids for the lead item in the product category would be calculated and used to implement the bid surety bond requirement

  18. Bona Fide Bids with Lead Items • Suppliers required to respond to bona fide bid requests to ensure their bid price is reasonable based on ability to provide • Historically, supplier provided a manufacturer invoice to prove the cost is less than bid amount • What about other indirect costs that affect ability to provide? • What about a profit margin?

  19. AAH to CMS: Bona Fide Bid Analysis Recommendations • AAH provided CMS with detailed recommendations • Need for transparency on bona fide bid issues • CMS should conduct bona fide bid analyses on lowest 10% of bids for each product category and CBA • Bidders then need to substantiate bids for the lead item and at least 75% of most utilized non-lead items in the product category • Can bidder substantiate that their bid is sufficiently above its acquisition cost to cover all indirect costs and profit to ensure access? • Look at state Medicaid programs that pay on acquisition cost methodology

  20. AAH to CMS: Bona Fide Bid Analysis Recommendations • AAH provided CMS with detailed recommendations (cont’d) • PC-specific recommendations for capped rental, home oxygen, liquid oxygen, enteral nutrition • Recommended attestation statement “I attest that my company has analyzed the pricing for the lead and non-lead items in this product category, and we would be able to provide all the varying types of items in this product category, based upon my company’s bid price for the lead item. Our bid price for the lead item is sufficient to cover the varying product costs and other direct and indirect costs necessary to provide appropriate products within each item (HCPCS code) and service for all the HCPCS codes in the product category.”

  21. AAH to CMS: Capacity Recommendations • CMS should be transparent about its capacity and demand policies • CMS should only use historical capacity of bidders • CMS should not increase or decrease • New suppliers should have zero capacity • CMS should establish demand at least at 100% of prior year’s utilization • CMS should publicize information on how it determined demand and capacity • Retrospectively and de-identified • For subsequent bid rounds, to educate future bidders

  22. AAH CB 2021 Calculator Overview • An educational tool to help prospective bidders understand how their bid for the lead item would impact the other items in the product category. • Shows how the new SPAs would differ from the current 2019 rates. • Industry leaders believe this would be critical in understanding how the lead item bid will impact the entire product category. • The tool is not customized for an individual business. • Calculators are in MS Excel and are available for download at DMECBPEducation.com

  23. INSTRUCTIONS AND DISCLAIMER INSTRUCTIONS FOR THE CBP 2021 BID CALCULATOR TOOL 1. Choose the CBA you would like to bid on. • Enter your bid amount for the lead item in cell B5. • Column E (Single Payment Amount Based on Lead Item Bid Price) will display your bid amount for each of the non-lead items. • Column F will display the % difference between the 2019 average SPAs or the 2019 fee schedule (for those items not previously in CB) and the bid price calculated based on your lead item bid price. The cell will turn red if the bid price for the non-lead item is lower than the 2019 average SPA for previous CB HCPCS or lower than the 2019 fee schedule for HCPCS not previously in the bid program. The cell will turn green if the bid price for the non-lead item is higher than the 2019 average SPA for previous CB HCPCS or higher than the 2019 fee schedule for HCPCS not previously in the bid program.

  24. INSTRUCTIONS AND DISCLAIMER INSTRUCTIONS FOR THE CBP 2021 BID CALCULATOR TOOL (Cont’d) • Column G will display the $ difference between the 2019 average SPAs or the 2019 fee schedule (for those items not previously in CB) and the bid price calculated based on your lead item bid price. The cell will turn red if the bid price for the non-lead item is lower than the 2019 average SPA for previous CB HCPCS or lower than the 2019 fee schedule for HCPCS not previously in the bid program. The cell will turn green if the bid price for the non-lead item is higher than the 2019 average SPA for previous CB HCPCS or higher than the 2019 fee schedule for HCPCS not previously in the bid program. Disclaimer: This bid calculator compiles publicly available information from government sources on the Medicare competitive bidding program for durable medical equipment, prosthetics, orthotics and supplies. The information comes from CMS’s website (www.cms.gov) and the CBIC website (www.demcompetitivebid.com). This bid calculator is an educational tool and is not intended to provide legal or bidding advice. Bidders are responsible for their bids and should consult their own counsel for legal advice.

  25. Bidders need to pay attention to how the lead item bid impacts other items in the product category.

  26. Notice the E0570 and E0570RR, you must bid the purchase price, but the ratios are calculated on the rental price

  27. Italics represents new HCPCS added to 2021 CB

  28. Questions

  29. Cara Bachenheimer, Esq. Brown & Fortunato 905 S. Fillmore St., Suite 400 Amarillo, Texas 79101 cbachenheimber@bf-law.com Office 806-345-6321 Mobile 571-643-1676

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