Changes to Competitive Bidding for 2019

Posted on in Government and Advocacy

By Mark Higley, VP, Regulatory Affairs, VGM & Associates

This article is featured in “Industry Snapshots: Forecasting 2019,” VGM’s latest playbook, available at

On Nov. 1, 2018, CMS posted its final rule that establishes new payment policies, procedures, and rates for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), starting Jan. 1, 2019.

The final rule included the same positive provisions as CMS had in a previous July 2018 proposed rule. I’ve outlined the major features of the rule below.

Competitive Bid Areas (CBAs)

CMS is suspending the competitive bid program (CBP) starting Jan. 1, 2019. At that point, any Medicare DMEPOS provider will be able to supply items to beneficiaries in those “former” bid areas. During this gap (which will likely last for two years through 2020), beneficiaries may receive DMEPOS items from any Medicare-enrolled DMEPOS provider until new contracts are awarded under the next round of the CBP. Pricing during this gap period in the bid areas will be the current single payment amounts (SPAs) in effect now in the CBAs plus a consumer price index (CPI) increase.

Non-Competitive Bid Areas

Payment in rural and non-contiguous areas will be at the current higher 50/50 blended payment rates that started June 1, 2018 – as provided for in CMS’ May 11, 2018 Interim Final Rule – through Dec. 31, 2020. In the remaining non-CBAs, the payment rates will be at the current lower 100-percent adjusted fee schedules that are based upon bid rates. These rates will be updated in 2020 with a small inflation index.

Lead Item Pricing

CMS will use “lead item pricing” in the next round of bidding. This means that bidders will submit a bid for the item in each product category with the highest total national Medicare allowed charges the previous year. All other items in the product category will be priced off that lead item, based on the relative payment levels reflected in the 2015 Medicare fee schedules (prior to competitive bid-based pricing). The product categories are not yet public. The bid ceiling will be the 2015 unadjusted (higher) fee schedules. CMS plans to phase-in ventilators, off-the-shelf back braces, and off-the-shelf knee braces in the next round of competitive bidding. They are asking for public comments on the inclusion of these additional items. 

Maximum Winning Bid

CMS will establish the SPA for the lead item in each product category in a CBA based upon the maximum (highest) bid amount by providers in the winning range. This is the same method as using clearing price, where no bidder will get paid less than its bid.

CMS will start bidder education in 2019 (we believe perhaps as early as March) and will be issuing sub-regulatory guidance on a number of details that are not included in the regulation.

Surety Bonds

CMS will be implementing the new surety bond requirement with the next round of bidding. Bidders will be required to obtain a $50,000 surety bond for each competitive bid area for which they plan to submit bids. The surety bond company will vet potential bidders to make sure they have the financial capability to serve that bid area. This should result in fewer inexperienced bidders and bidders being more financially qualified.

New Oxygen Payment Policies

CMS will create a new class for portable liquid oxygen equipment by splitting the existing class of portable gaseous and portable liquid oxygen. CMS will increase the payment amount for the new portable liquid oxygen class so that it is the same as the OGPE (oxygen generating portable equipment) rate.

CMS will add a liquid, high-flow oxygen contents class for prescribed flow rates of greater than four liters per minute. The payment rate for this class will be increased by 50 percent compared to portable oxygen. CMS will change the way that it calculates budget neutrality. Under the new methodology, rather than applying the offset to payment for stationary equipment and oxygen contents only, CMS will apply the offset to all oxygen and oxygen equipment classes and HCPCS codes beginning Jan. 1, 2019.

CMS offered an example of impact of new budget neutrality method and additional oxygen payment classes:

Impact of New Budget Neutrality Method and Additional Oxygen Payment Classes

HCPCS Code/Item 2018 Rate 2019 Rate
E1390 $70.23 $72.59
E0434 $17.29 Portable gas $16.04
Portable liquid $34.73
K0738/E1392 $37.44 $34.73
E0441 $53.32 $49.46
E0443 $53.32 Portable gas & liquid oxygen contents < 4lpm $49.46
Portable liquid contents > 4lpm $74.19

There are more changes to come. But, as in the past, VGM will provide the tools and resources to help you navigate the changing reimbursement climate. Some of the offerings we have in store after CMS makes the Request for Bid documents and timeline available include educational seminars, webinars, and online materials, such as a bid calculator to help you ensure your bid fits your needs.

One such resource is our series of playbooks launched in 2018, which address issues, trends, and opportunities facing the industry. “Industry Snapshots: Forecasting 2019,” our latest playbook, features articles on topics you should focus on in 2019 and beyond. Members can download “Industry Snapshots: Forecasting 2019” – along with the previous playbooks – for free at

Mark also recorded a podcast on Industry Matters.