The Division of Workers’ Compensation has posted an order adjusting the Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) section of the Official Medical Fee Schedule to conform to the second quarter 2016 changes in the Medicare payment system as required by Labor Code section 5307.1.

The update includes all changes identified in Center for Medicare and Medicaid Services Change Request (CR) number 9554. The April 2016 DMEPOS Rural ZIP code file containing Quarter 2, 2016 rural ZIP Code changes, will replace the January 2016 DMEPOS Rural ZIP code file, for services rendered on or after April 1, 2016. There are no other changes to the DMEPOS fee schedule for the second quarter of 2016.

The order adopting the adjustment can be found on the DWC website. The fee schedule classifies most DMEPOS into one of the six categories:

1) Inexpensive or other routinely purchased DME (IRP)
2) Items requiring frequent and substantial servicing
3) Customized items
4) Other prosthetic and orthotic devices
5) Capped rental items
6) Oxygen and oxygen equipment

The DMEPOS Competitive Bidding Program (CBP) implemented by CMS was mandated by Congress through the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The statute requires that Medicare replace the older fee schedule payment methodology for DMEPOS items with a competitive bid process. The intent was to improve the effectiveness of the Medicare methodology for setting DMEPOS payment amounts.CMS is required by law to recompete contracts under the DMEPOS Competitive Bidding Program at least once every three years. The Round 2 and national mail-order program contract periods expire on June 30, 2016. Round 2 Recompete and the national mail-order recompete contracts are scheduled to become effective on July 1, 2016, and will expire on December 31, 2018.

But some are very critical of this CMS Compteitive Bid Program. A recent article in Forbes characterizes the CMS competitive bidding process as a “fiasco.” It reasons “The CMS award model allows it to re-set pricing based on a formula that is tied to the standard deviations observed across the most competitive bids. In other words, the bidders are not bound by their own bids.  The CMS award calculus is based on a “musical chairs” philosophy. Low bidders don’t win based on price or by providing evidence that supports their price, they win based on where their price happens to fall “relative to peers” when the auction ends. A supplier could bid $30 for a product or service and “win” at a price set by the CMS at $42.”

This outcome is the result of the language of the CBP which states “Contracts are awarded to the Medicare suppliers who offer the best price and meet applicable quality and financial standards. Contracted suppliers will be paid the bid price amount. The bid price amount is derived from the median of all winning bids for an item.”