Medicare Participation and Competitive Bidding: How Your Status Affects Your Reimbursement


In January of 2016, new authority granted to CMS to build on DME competitive bidding to set pricing more broadly and nationally took effect. This authority allows CMS to use pricing established as a result of competitive bidding programs for specific DME products in certain parts of the country to be applied more broadly to those same DME products in non-competitive bid areas.  On May 19, 2016, the AOPA SmartBrief included an article highlighting reports from CMS underscoring the success of these efforts, essentially concluding that since DME providers accepted this reduced pricing, everything must be fine at these rates.  This contention could prove very important in the future as CMS continues to look for ways to reduce spending by cutting reimbursement.

The May 24, 2016 SmartBrief contained a link to an article in HME News citing feedback from leaders in the DME world stating that the analysis by CMS was simplistic, inappropriately using one or two small bits of isolated information, as the basis for reaching a broad generalized conclusion about the effectiveness of applying competitive bid rates to non-bid areas relative to both market-based and patient care based impacts.

This matter is NOT directly germane to either orthotics or prosthetics because the authority Congress has granted to CMS with respect to competitive bidding for prosthetics and orthotics is limited to a very small subset, i.e., off-the-shelf (OTS) orthotics, and CMS has, to date, never competitively bid any such OTS orthotics devices.  The changes in Medicare reimbursement referenced in this notice does not currently have a direct impact on prosthetics and/or orthotics.  That said, AOPA tends to agree with DME industry sources quoted by HME News that the analysis seems to rest on a somewhat questionable assumption that if the nation’s largest health care payer unilaterally, and seemingly without any rulemaking process, reduces its payment for devices, and if the impacted provider community largely continues to deliver those devices, that one can assume both that the reduced payment is fair, and that the impacted providers will be able to remain as viable, operating businesses in the long term, and that neither the quality of care, nor the access to care for the patient community will be adversely impacted.

The circumstance above has prompted some in the O&P industry to ask the question, what options does a provider have if they decide that Medicare payment is not enough?  Or stated differently, if in the future, Medicare precipitously cuts O&P reimbursement, similar to what was outlined in its recent announcements about major cuts in DME fee schedule pricing, what could you do?  While entirely theoretical, this article will take a few minutes to outline reversion to being a non-participating Medicare provider as a potential alternative to simply accepting unsustainable reimbursement rates.

Be a Participating or a Non-Participating Medicare Provider—It’s Your Choice, and What That Means
The term “participation” is often misunderstood in the context of the Medicare program.  Rather than the traditional meaning of the term, which implies that by participating you have the ability to provide services to Medicare patients, “participation” in the Medicare program only relates to how you submit claims and receive reimbursement under the Medicare program.  The ability to provide services to Medicare beneficiaries is established when you enroll in the Medicare program as a DMEPOS supplier, regardless of whether you decide to be a participating provider or not.  When you submit your initial application to the National Supplier Clearinghouse to become a DMEPOS supplier, you have the option to complete and submit a Medicare Participation Agreement (Form CMS-460). If you do not complete the participation agreement, you will automatically be enrolled as a non-participating supplier. If you choose to complete this form and become a Medicare participating supplier, you are bound by the terms of the participation agreement for at least the remainder of the current calendar year.  It is very important that you make an informed decision as to whether becoming a participating provider is in the best interest of your organization.

If you enroll as a Medicare participating provider, you agree in advance, to accept assignment on all Medicare claims submitted during the term of the participation agreement.  What this means is that for every Medicare claim you submit that is approved for payment, you will receive 80% of the Medicare published allowed amount directly from the Medicare program. It is your responsibility to collect the remaining 20% from the patient directly or by submitting a claim to their secondary or supplemental insurance carrier.  Alternatively, providers who elect a non-participating status are free to make an individual decision, on a claim by claim basis, whether or not to accept assignment.  Theoretically you can elect to be a non-participating provider and still accept assignment on all of your Medicare claims.  Non-participating status allows you the freedom to accept assignment on some claims but not others.  In the context of the potential impact of any future decision to apply competitive bidding rates to OTS orthoses in non-bid areas, non-participating status allows suppliers to not be tied to the reduced rates by choosing to not accept assignment on the claim.  When submitting a non-assigned claim, suppliers may collect their full usual and customary charge from the Medicare beneficiary at the time of delivery of the completed device.  Non-assigned claims must still be submitted to Medicare by the supplier and, if approved, Medicare will send payment of 80% of the Medicare allowed amount directly to the patient.  It is important to note that not accepting assignment on a claim does not change the supplier’s financial liability for services that are deemed not medically necessary by Medicare.  If a non-assigned claim is deemed not medically necessary, the supplier is required to immediately refund any money collected from the patient at the time of delivery unless a properly executed Advanced Beneficiary Notice (ABN) is in the supplier’s files.

The obvious question that remains is, how can non-participation status help my business should Medicare decide to apply competitive bidding rates to OTS orthoses in non-competitive bidding areas?  While this discussion remains hypothetical as OTS orthoses have yet to be included in any Medicare competitive bidding program, let’s take a look at a potential scenario where non-participation status may be to your benefit.  Again, this is a hypothetical scenario for illustration purpose only.

Let’s assume that the Medicare allowed amount for an OTS walking boot is $150 and your company’s usual and customary charge for this item is $200.  Let’s also assume that through application of competitive bidding rates, Medicare reduces the allowed amount for a walking boot to $100.  If you have elected to be a participating Medicare supplier and you submit a claim for a walking boot in this scenario, Medicare would reimburse you $80 and you could collect an additional $20 from the patient or their secondary/supplemental insurance.  Total reimbursement in this scenario would be limited to $100.  If you have elected to be a non-participating provider, you could choose not to accept assignment on the claim and charge the patient up to $200 at the time of delivery.  You would still be required to submit a non-assigned claim to Medicare and Medicare would send a payment of $80 directly to the patient, representing 80% of the reduced allowed amount as a result of the application of competitive bidding prices.

While this scenario may present some business challenges relative to your patient’s willingness to pay more for the device than Medicare is willing to reimburse them, it remains a viable alternative to simply accepting reduced reimbursement should Medicare ultimately decide to bring OTS orthoses into the competitive bidding environment.

While the inclusion of competitive bidding pricing does not appear to be imminent for OTS orthoses, since the decision to be a Medicare participating provider is applicable for a full calendar year, it may be prudent to review your current Medicare participation status and decide whether Medicare participation is in your company’s best  interest.  If you are currently a participating supplier your next opportunity to change your status is effective January 1, 2017.  To change your status from participating to non-participating you must submit a written notification on your company letterhead to the National Supplier Clearinghouse during the annual open enrollment period which spans from mid-November until December 31st of each year.  This letter must be signed by the authorized official for your company on file with the NSC.  It is important to note that the participation decision applies to all locations under a single Tax ID.

Your Patients May Be Your Best Advocates—Keep Them Informed!
Beyond a provider’s option to choose Medicare participating vs. non-participating status, another option that AOPA members should consider is assuring optimal communication with your Medicare patients on any changes in Medicare’s payment policies.  For example, in the recent CMS announcement on the ‘success’ of its payment reduction policies in the DME arena, it was noted that the measuring stick they used did not include any confirmation ‘that neither the quality of care, nor the access to care for the patient community will be adversely impacted.’  Medicare may not take the initiative to speak to its beneficiaries about changes, and that may be all the more reason why you may want to strengthen your own outreach to your Medicare patients.  If Medicare takes steps which make it harder for you to deliver what the patient expects, poses additional steps which delay your ability to make timely delivery, cuts payments which in turn force you to scale back services—those are all things you likely want to tell your patients about.  If patients are unhappy or unsatisfied because Medicare belt-tightening results in less options or quality/timeliness limitations in the care they receive, by having alerted them in advance, they will know that it is Medicare to whom they should voice their disappointment, rather than thinking you have somehow shortchanged them.  Your patients are your best advocates—Medicare listens to them much more closely than they listen to any providers.  So, it is very much in your interest to take steps to assure your patients are ‘in the loop’ on how new Medicare changes may be impacting them.

AOPA hopes that the information in this article has been helpful, especially in the context of the recent announcement by CMS regarding the perceived effectiveness of applying competitive bidding rates for DME in non-competitive bidding areas.  While the decision to become a Medicare participating provider must be made according to the individual needs of your company, it is important to consider the impact of this decision carefully.