Competitive Bidding Round 2019

By: Jeffrey S. Baird, Esq.

On January 31, 2017, CMS announced plans to consolidate all rounds and areas included in the Competitive Bidding Program (“Program”) into a single round of competition – Round 2019. After the current Round 1 2017, Round 2 Recompete, and National Mail-Order competition conclude on December 31, 2018, Round 2019 contracts are (as of December 5, 2017) scheduled to become effective January 1, 2019 through December 31, 2021.  Round 2019 will include 141 CBAs and 11 product categories.

Changes to the Competitive Bidding Program in 2019

CMS also announced several changes to the Program for Round 2019.  For example, CMS is adding insulin pumps and supplies as a product category to be bid in the national CBA. CMS is also adding 10 new CBAs to the program for CPAP devices and related accessories.  In 5 of the 10 new CBAs, payment for the CPAP device, related accessories, and services will be made on a bundled, non capped monthly rental basis, while payment in the other 5 CBAs will be made on a capped monthly rental basis.

CMS is including a lead item bidding methodology for certain items in Round 2019 in which suppliers will bid for a lead item within a grouping of similar equipment that takes into account the costs of furnishing all of the equipment in the grouping.  The single payment amount for the other items within the grouping will be based on their relative differences in fees when compared to the lead item.

Round 2019 bidders must also obtain a $50,000 bid surety bond for each CBA in which it submits a bid, as required by the Medicare Access and CHIP Reauthorization Act of 2015.  Bid surety bonds will be forfeited for bidders that do not accept a contract in which the bidder’s composite bid for the competition is at or below the median composite bid rate for all bidding entities included in the calculation of the single payment amounts within the competition.

Preparing For Round 2019

As DME suppliers prepare for Round 2019, they need to be aware of the following:

• The $50,000 surety bond for each CBA should eliminate the “speculative” bidders: those bidders that previously submitted bids in multiple CBAs but that had no physical ability to serve those CBAs. Their intention was to secure a contract for as many CBAs as possible so that they would have “something valuable to sell.” Most of the speculative bidders were relatively small. At first blush, a speculative bidder might think: “A premium for a $50,000 bond is not that much. I can afford to purchase a number of bonds.” However, the challenge for the speculative bidder is not so much the cost of a premium for a single bond – rather – the challenge is that the speculative bidder must show the insurer that the bidder has the financial ability to honor multiple bonds in the event that CMS “cashes them in.” This will be difficult for small speculative bidders to do.
• In five of the new CBAs, CPAP devices and disposables will be reimbursed on a bundled, non-capped monthly rental basis. This is, in essence, a “demonstration project” designed to determine the viability of bundled reimbursement on a larger scale.
• A deadline has not yet been set for submission of Round 2019 bids. Prospective bidders need to takes steps now to ensure that “their houses are in order” before the deadline hits. Specifically, the prospective bidders need confirm that (i) their state licensure is in place, (ii) they are accredited for those products that the suppliers intend to bid on, and (iii) their financials are updated and show financial viability.
• If two or more suppliers are, in the eyes of the CBIC, “commonly owned” or “commonly controlled,” then they need to decide in advance how they are going to submit bids for Round 2019. For example, if ABC Medical Equipment, Inc. and XYZ Medical Equipment, Inc. are “commonly owned,” and if they desire to submit bids for the same products in the same CBA, then only one of the companies can submit the bid. The other company will have to “ride the bidder's coat tails.” And so the two companies will have to decide which of them will submit the bid. If the two companies decide to dissolve their common ownership relationship before the Round 2019 bid submission deadline, and if e.g., ABC was a losing bidder but was previously added to XYZ's contract, then if the common ownership is dissolved, ABC will be taken off XYZ's contract. On the other hand, if ABC and XYZ intend to submit bids in Round 2019 for different CBA/product category combinations, then they can bid separately.
• Under the Trump Administration, the next round of competitive bidding set to begin on January 1, 2019 has been placed on hold. Initially, it was contemplated that the delay would be short. However, the delay is approaching the one-year mark and as of December 5, 2017, there is no word on when the DME industry can expect instructions/guidance from CMS. It does not appear that there will be time to implement the next round of competitive bidding on January 1, 2019. This means one of two things: (i) the current contracts will continue for an additional time period or (ii) the contracts will terminate pursuant to their terms and any Medicare-enrolled supplier will be allowed to provide competitive bid items.

Jeffrey S. Baird, JD, is Chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or jbaird@bf-law.com.