CMS Updates Medicare DMEPOS Policies, Including Overhaul Of Pricing Framework For New HCPCS Codes

The Centers for Medicare & Medicaid Services (CMS) has adopted — with limited changes — its controversial plan to rewrite Medicare pricing rules for new items of durable medical equipment (DME), prosthetics, orthotics and supplies (DMEPOS) as part of its annual DMEPOS policy update for calendar year (CY) 2020. The rule also makes minor changes to DMEPOS competitive bidding program (CBP) rules, streamlines certain requirements for ordering DMEPOS items, and makes other related policy changes. The rule is effective January 1, 2020.

Revised Pricing Policy for New DMEPOS

CMS currently uses an arcane "gap-fill" process to establish rates for new DMEPOS items. In short, if pricing is not available for the item in the statutory "base year" (1986 or 1987, depending on the item), CMS considers current fees for comparable items, supplier prices, manufacturer's suggested retail prices (MSRPs), or wholesale prices. That amount is then subject to a series of deflation adjustments and statutory updates to achieve the new Medicare rate. CMS's reliance on the pricing of existing products has been a point of contention when a manufacturer does not believe any items currently on the market are comparable to the innovative technology. At the same time, CMS does not believe that MSRPs "represent accurate pricing from actual retail markets."

To "improve ... transparency and predictability," CMS is adopting a new framework for setting fees for new DMEPOS items (i.e., new Healthcare Common Procedure Coding System (HCPCS) codes that do not have a fee schedule pricing history). As it proposed, CMS will first seek to use existing fee schedule amounts for DMEPOS that it determines to be "comparable" based on the following five components and attributes (the new product does not need to be comparable within each category, and there is no prioritization of the categories):

Comparable Item Analysis

(Any combination of, but not limited to, the categories below for a device or its subcomponents)

Components Attributes Physical Components Aesthetics, Design, Customized vs. Standard, Material, Portable, Size, Temperature Range/Tolerance, Weight Mechanical Components Automated vs. Manual, Brittleness, Ductility, Durability, Elasticity, Fatigue, Flexibility, Hardness, Load Capacity, Flow-Control, Permeability, Strength Electrical Components Capacitance, Conductivity, Dielectric Constant, Frequency, Generator, Impedance, Piezo-electric, Power, Power Source, Resistance Function...