From North Central Oklahoma Ostomy Outlook July 2016:

July 2016 Adjustments of Medicare Fees;
But Ostomy Supplies Not Affected (this time)

by Bob Baumel, North Central OK Ostomy Association

Our March 2016 newsletter included the Medicare “Fees” (allowables), effective January 2016, for a long list of ostomy products (see our list online at www.ostomyok.org/newsletter/news1603a.shtml). For people with Part B of Original Medicare, these “Fees” limit the amounts that Medicare will pay. Now, Medicare has announced fee adjustments, effective July 2016, for many products categorized as DMEPOS (Durable Medical Equipment, Prosthetics, Orthotics and Supplies), which is a general category that includes ostomy supplies. However, ostomy supplies aren’t included in these latest adjustments, so the fees we published in March 2016 are still current.

The July 2016 DMEPOS Medicare Fee adjustments apply only to products subject to competitive bidding. Ostomy supplies are not currently included in competitive bidding, although there has been a proposal (which UOAA is fighting) to include them. But for those products under competitive bidding, which were subject to the latest adjustments, the fees have, in some cases, been cut drastically, as shown in the following table:

Selected DMEPOS Items: Fees and Percentage Change from 2015 to 2016

DMEPOS Item HCPCS¹

2015 Fee

2016 Urban Fee-July

Percent Change Urban

2016 Rural Fee-July

Percent Change Rural

Oxygen Concentrator (monthly) E1390

$180.92

$78.74

-56%

$86.61

-52%

CPAP (rental) E0601

$101.94

$40.60

-60%

$44.66

-56%

Hospital Bed (rental)

E0260

$134.38

$60.50

-55%

$66.55

-50%

NPWT Pump (rental) E2402

$1,642.09

$646.98

-61%

$711.68

-57%

Manual Wheelchair (rental) K0001

$57.06

$22.79

-60%

$24.97

-56%

Power Wheelchair (rental) K0823

$577.42

$272.45

-53%

$299.69

-48%

Walker (purchase) E0143

$110.92

$46.57

-58%

$51.23

-54%

Commode Chair (purchase) E0163

$117.62

$52.15

-56%

$57.36

-51%

TENS (purchase) E0730

$399.67

$71.51

-82%

$78.93

-80%

Nebulizer (rental) E0570

$17.87

$5.80

-68%

$6.35

-64%

Powered Mattress (rental) E0277

$662.42

$190.94

-71%

$206.55

-69%

Insulin Pump (rental)² E0784

$463.44

$418.23

-10%

$418.23

-10%

Enteral Pump (rental) B9002

$121.70

$61.06

-50%

$67.90

-44%

Enteral Supplies (daily) B4035

$11.95

$5.31

-56%

$5.84

-51%

Enteral Nutrients (per 100 calories) B4150-B4154

$1.12

$0.63

-44%

$0.70

-38%

¹ HCPCS = Healthcare Common Procedure Coding System; codes used to identify items for billing purposes
² Item included in 10 or fewer CBAs

Understanding this table requires knowing some facts about competitive bidding. In certain metropolitan areas called “Competitive Bidding Areas” (CBAs), suppliers submit bids to become Medicare Contract Suppliers. There are currently about 130 CBAs around the country. Here in Oklahoma, we have two CBAs, one in the Oklahoma City area, the other in the Tulsa area. The 3 cities where our group meets (Stillwater, Enid and Ponca City) are not in CBAs. Within each CBA, the winning bids determine the prices that Medicare suppliers can charge, and Medicare beneficiaries must buy from those suppliers in order to obtain coverage.

The process just described shows how Medicare rates are set within the CBAs. Meanwhile, in the rest of the country (outside of the CBAs), Medicare payments were, initially, still based on previously determined Fees. There is, however, a second step in the process, which has kicked in this year (2016). At this stage, the rates determined by competitive bidding in the CBAs are applied to the rest of the country, by adjusting the Fees in all areas outside of the CBAs to match the competitively bid rates. Adjusted fees are determined for each state, with separate fees set for urban and rural areas of the state (the fee reductions in rural areas aren’t quite as steep as in urban areas). Since this process has reduced many of the fees drastically, compared with 2015, the adjustments for 2016 have been applied in two steps, with 50% of the reduction applied in January 2016, and the other 50% in July 2016. The above table shows how the current fees, as of July 2016 (after both adjustments have been applied), compare with the 2015 fees. And since actual fees vary somewhat from state to state, the table shows averages of the 48 contiguous states.

Competitive bidding can save money for both Medicare and patients by reducing costs of supplies. However, it also reduces the choices of products available to patients. It does this in two ways. It reduces the choice of available suppliers, because smaller suppliers who can’t compete on price get winnowed out in the bidding process. And it reduces the products sold by each supplier because only the lowest cost products survive the process.

Such a process may be reasonable for product categories that can be considered “generic” – where one product in the category is basically equivalent to any other. But ostomy supplies aren’t generic. Ostomates vary greatly, due to variables such as skin chemistry and geometry, stoma placement and construction, nature of stoma output, etc. For this reason, a product that works well for one ostomate often works terribly for another. Thus, we need a wide variety of available products, even if some are more expensive. And when it comes to costs, even if competitive bidding can reduce costs of supplies, if it forces some ostomates to use ill-fitting, leaky pouching systems, it can cause complications, and even hospitalizations, with the ultimate effect of increasing costs.


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This page last revised 2016-07-07

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