1. W W W. D I N S L A W. C O M April 17, 2009 A Primer on CMS’ DMEPOS Competitive Bidding Program Mark A. McAndrew Dinsmore & Shohl LLP 255 East Fifth Street Cincinnati, OH 45202 513.977.8380 Mark.McAndrew@dinslaw.com

2. 2 DME Competitive Bidding Section 302 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) mandated nationwide competitive bidding for most DME. Objectives of the DME Competitive Bidding Program: –To implement competitive bidding for DME and use the process to determine appropriate prices for categories of DME covered by Medicare Part B; –To protect beneficiary access to quality DME; –To reduce the amount Medicare pays for DME and bring the reimbursement amount more in line with that of a competitive market; and –To reduce fraud.

3. 3 Where are we? April 10, 2007 CMS publishes final rules for the new Medicare DMEPOS Competitive Bidding Program and moves to implement the program in the ten largest MSAs Summer 2007Bids submitted from suppliers; CMS awards approximately 325 contracts to qualified suppliers amid widespread criticism from the industry July 1, 2008Program implemented July 15, 2008Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) enacted; supplier contracts terminated; 18 month delay of competitive bidding program implemented; Round 1 re-bid ordered for 2009.

4. 4 Are we there yet? January 16, 2009 CMS publishes interim final rules amending changes to the original final rule as a result of MIPPA May 4, 2009 DME providers, as a condition of the issuance or renewal of a provider number, and therefore a requirement to bid must have a surety bond of $50,000 in place Summer 2009 (est.)Bidder registration and submission of re-bids for round one September 30, 2009 Accreditation deadline 1 st Quarter 2010 (est.) Winners announced; re-bid implemented

5. 5 Surety Bond Requirements As of May 4, 2009, applies to suppliers seeking to enroll or change the ownership of a DMEPOS supplier. Applies to each assigned NPI for which the DMEPOS supplier is seeking to obtain Medicare billing privileges. Existing DMEPOS suppliers have until October 2, 2009 to submit a surety bond for each assigned NPI. Suppliers enrolling a new practice location also must submit a new surety bond or an amendment or rider to the existing bond, showing the new practice location is covered by an additional base surety bond of $50,000. Some exemptions from bond requirements: –Certain physician and non-physician practitioners –OT, PT, speech language pathologists –Registered nurses, clinical nurse specialists –clinical social workers, clinical psychologists

6. 6 Basic Information – Where? The Round One re-bid will occur in the following MSAs: –Cincinnati--Middletown (Ohio, Kentucky and Indiana) –Cleveland--Elyria--Mentor (Ohio) –Charlotte--Gastonia--Concord (North Carolina and South Carolina) –Dallas--Fort Worth--Arlington (Texas) –Kansas City (Missouri and Kansas) –Miami--Fort Lauderdale--Miami Beach (Florida) –Orlando (Florida) –Pittsburgh (Pennsylvania) –Riverside--San Bernardino--Ontario (California)

7. 7 Cincinnati--Middletown MSA

8. 8 Cleveland--Elyria--Mentor MSA

9. 9 Basic Information – What? The initial product categories chosen are: –Oxygen Supplies and Equipment –Standard Power Wheelchairs, Scooters, and Related Accessories –Complex Rehabilitative Power Wheelchairs and Related Accessories –Mail-Order Diabetic Supplies –Enteral Nutrients, Equipment, and Supplies –Continuous Positive Airway Pressure (CPAP) Devices, Respiratory Assist Devices (RADs), and Related Supplies and Accessories –Hospital Beds and Related Accessories –Negative Pressure Wound Therapy (NPWT) Pumps and Related Supplies and Accessories –Walkers and Related Accessories –Support Surfaces (group 2 mattresses and overlays) in Miami –Final list of HCPCS codes will be published on the CIBC website at: http://www.dmecompetitivebid.com prior to the opening of the bid window. http://www.dmecompetitivebid.com

10. 10 Basic Information - Accreditation CMS has approved the following organizations for accreditation: –The Joint Commission (www.jointcommission.org)www.jointcommission.org –National Association of Boards of Pharmacy (www.nabp.net)www.nabp.net –Board of Orthotist/Prosthetist Certification (www.bocusa.org)www.bocusa.org –The Compliance Team, Inc. (www.exemplaryprovider.com)www.exemplaryprovider.com –American Board for Certification in Orthotics & Prosthetics, Inc. (www.abcop.org)www.abcop.org –The National Board of Accreditation for Orthotic Suppliers (www.nbaos.org)www.nbaos.org –Commission on Accreditation of Rehabilitation Facilities (www.carf.org)www.carf.org –Community Health Accreditation Program (www.chapinc.org)www.chapinc.org –HealthCare Quality Association on Accreditation (www.hqaa.org)www.hqaa.org –Accreditation Commission for Health Care, Inc. (www.achs.org)www.achs.org

11. 11 Bidder Eligibility and Qualifications Be in compliance with the supplier enrollment standards Disclosure of certain compliance-related issues All necessary licenses required to perform under the program Satisfy quality standards Satisfy financial standards, including the submission of tax, financial or other documents from the most recent one year period Meet accreditation standards at the time of bid submission unless a grace period applies –For grace period to apply, a supplier must have submitted its application for accreditation to a CMS approved accreditation organization and be waiting for the process to be completed

12. 12 Terms of Supplier Contracts with CMS Three year term, subject to option/renewal No discrimination against Medicare beneficiaries Change of ownership notification requirements Requirement to furnish items to any beneficiary with permanent residence in, or who visits, CBA Certain remedies for supplier breaches Disclosure of subcontracting arrangements

13. 13 Creation of Supplier Networks CMS expressly permits up to 20 small suppliers (i.e., those with less than $3.5 million in annual gross revenues) to form networks to join together to submit bids. Requirements: –A single legal entity must be formed for the purpose of submitting a bid as a network. –All legal contracts must be in place and signed before the network entity may submit a bid. –No more than 20 members in the network. –Only small suppliers that are unable independently to serve the entire CBA may join the network. –Network members can join only one network per product category per CBA (i.e., a supplier can join different networks for different product categories, or join different networks in different CBAs).

14. 14 Creation of Supplier Networks Requirements (cont.) –Network members may not bid separately (i.e., independently) for the same product category for which the network submits a bid in the same CBA. –Each member of the network must be independently eligible to bid. –For bid evaluation purposes, a network’s combined total market share for each product category cannot exceed 20 percent of the Medicare demand for that product category in the CBA at the time of bidding. However, once a network receives a contract, the network may expand and exceed the 20 percent capacity. –Each member of a network must furnish all the items in the product category for which the network is awarded a contract. –Each member of the network must satisfy all eligibility, financial, quality and accreditation requirements.

15. 15 What Can You Do to Get Ready? Accreditation Pay close attention to timetables –Strict requirements for bid information and follow up information –Make sure the application information is correct the first time; no judicial review or reconsideration of rejected bids If you plan to join a network or engage a subcontractor, make sure your legal agreements are carefully and tightly written.

16. 16 Questions Mark A. McAndrew Dinsmore & Shohl LLP 255 East Fifth Street Cincinnati, OH 45202 513.977.8380 Mark.McAndrew@dinslaw.com