A Few Thoughts on the July 1 Fee Schedule Reduction

Posted on in HME Government Issues

By Mark Higley, VGM Regulatory

July 1 has arrived and brings to the DME industry the double whammy of the Round 2 recompete lower single-payment amounts to 91 metropolitan divisions in 117 bidding areas affecting almost half of the Medicare fee-for-service population and the second portion of the “phase-in” that CMS dubs as “adjustments to nationwide rates based on DMEPOS competitive bidding program (CBP) pricing.” 

Today I’ll offer some thoughts on the nationwide rollout (otherwise known as “rural rollout”) issue.  Look for further commentary soon regarding the recompete.

As you know, the Affordable Care Act amended the Medicare Modernization Act to mandate the use of DMEPOS competitive bidding payment amounts to downwardly “adjust” the Medicare fee schedule in all non-bid areas. As the chart below indicates, this began January 1, 2016, and from then until June 30, 2016, the DMEPOS fee schedule was based 50 percent on the 2015 fee schedule and 50 percent of the “national expansion” rates.

Key: CBR1 = Round 1; CBR2 = Round 2; (X) = number of CBAs; CBNR = nationwide rollout

Somewhat simply stated, these rates were derived from an average of Round 1 and Round 2 CBA current payment amounts, averaged within eight Bureau of Economic Analysis (BEA) boundaries (see map) and applied to the applicable state. Effective July 1, 2016, the DMEPOS fee schedule was reduced again to reflect 100 percent of the national expansion rates, which now include the comparatively lower Round 2 “recompete” single-payment amounts in the calculation.

The cumulative cuts to the fee schedule under these fully adjusted rates are substantial, with fees for many items reduced by 50-80 percent compared to the 2015 rates. (See the CMS fact sheet for several common items with the fees and percentage change from 2015 to July 1, 2016, and an excellent regional  analysis from our friends at AAHomecare.)

CMS has published the new fee schedule in ZIP format, but you can access both the DME and enteral schedules via Excel files at You might recall that last October CMS released a file of rural ZIP codes that allow a 10 percent “adjustment” to the new bidding-derived fees (or 110 percent of the average of SPAs from all eight BEA regions). Here is an example:

Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)
Revised July 2016 Fee Schedule

Key: NR = Non-rural or regional; R = Rural

However – and this is a common question this week – what about the fee schedule codes that have NO “rural add on”? Why don’t they? Here is an example:

Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)
Revised July 2016 Fee Schedule

text here

Generally, there are four reasons why a fee schedule would have no rural add-on:

  1. The item is not a competitively bid item. Remember, these files are the complete DMEPOS/PEN fee schedules, not just a listing of Round 2 recompete bid items. Non-bid items have not been affected, so there is no rural add-on.
  2. The item was bid but no longer is. CMS dubs these codes as “R110 methodology,” with “R” meaning “retired.” The amount listed on the state fee schedule is 110 percent of SPAs from previous bid programs. There is no 10 percent add-on; the “NR” column already includes the add-on.
  3. The item was a Round 1-only code. CMS dubs this as the “C110 methodology,” with “C” meaning current SPAs. Remember that Round 1 had only nine metro areas, so CMS refers to these as “For Items Included in 10 or Fewer CBAs.” The fee schedule amounts for these items are adjusted so that they are equal to 110 percent of the average of the SPAs for the nine Round 1 metro areas (or the “10 or fewer CBAs”).

    We have been asked to create a fee schedule spreadsheet of ONLY bid codes so that the DME provider does not have to ascertain whether the “blank” rural column is a non-bid item. Go again to

  4. The state or territory is outside the contiguous U.S. (e.g., Alaska, Hawaii, Puerto Rico). Fee schedule amounts for areas outside this area are adjusted so that they are equal to the higher of the average of the single-payment amounts for CBAs outside the contiguous United States (currently applicable only to Honolulu) or the national ceiling amount.

The Fight in D.C. Continues

HME providers who have been following our government relations updates recognize the efforts of VGM and the industry to somehow mitigate these drastic reductions. CMS continues to contend that the phase-in of adjusted rates has not negatively impacted health outcomes or access to DMEPOS (based on data indicating that suppliers continue to accept the revised rates established in January 2016 as payment in full for most claims).

Nevertheless, based on concerns that the deep reimbursement cuts will jeopardize the availability of DME for Medicare beneficiaries, particularly in rural areas, Congress is considering legislation to extend the transition to the fully-adjusted DMEPOS fee schedule. The Senate recently approved S. 2736, the Patient Access to Durable Medical Equipment Act of 2016, which would extend the current transitional blended rates through June 30, 2017; fully adjusted rates would then be implemented for services furnished on or after July 1, 2017. Scheduled House consideration of its version of the bill was delayed, but Congress could still take action to block the July 1 rates retroactively.

The House is set to return yesterday, when our congressional champions were looking for opportunities to move legislation quickly.

We sincerely appreciate the efforts our Senate and House leaders have put forth thus far; their offices have worked diligently to get this legislation cleared through the Senate. Continuing grassroots efforts and calls are vital to improving the likelihood of seeing this legislation passed. Please continue to monitor any calls for action as industry stakeholders work with congressional offices to determine the most effective course of action to see this legislation passed in the House and sent to the president’s desk!

Stay Involved!

As the July reimbursement cuts to DME have been implemented, it is imperative that providers continue to advocate for the cuts to be retroactively delayed. There are many tools and resources in the VGM Action Center to engage with your local media and message your elected officials. You are encouraged to use these tools and play an important role in the grassroots efforts to support the DME industry.

Get Your Patients Involved, Too

People for Quality Care has created a grassroots engagement encouraging patients to reach out to their members of Congress. Click here for more information.

We are asking DME providers to give this informational sheet to their patients who will be directly affected by this expansion to the competitive bidding program.

As always, if you have questions or concerns about the competitive bidding program, contact me at 888.224.1631 (office), 319-504-9515 (cell) or at [email protected]