Rural Medical Suppliers Spared, Temporarily, from Rate Adjustment

The change reverts to a 50/50 blended rate calculation from 2016 in an effort to stabilize rural supplier markets.

Citing concerns that durable medical equipment suppliers in rural areas are closing down, the Centers for Medicare & Medicaid Services released an interim final rule Wednesday to halt rate adjustments that had been putting pressure on some of these suppliers.

The change will take effect June 1 and last through the end of the year, temporarily reinstating an older rate adjustment calculation, the agency said.

"This action will help Medicare beneficiaries in rural areas continue to access life-sustaining durable medical equipment, like oxygen equipment," CMS Administrator Seema Verma said in the written announcement.

• The week's theme: This announcement comes a day after CMS debuted its new Rural Health Strategy to promote quality and affordable healthcare for 60 million Americans in less-populated areas.
   
• What's affected: The interim final rule applies to certain durable medical equipment (DME) and feeding tube supplies provided in rural areas and non-contiguous areas (such as Hawaii, Alaska, and the U.S. territories) that are not subject to the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Competitive Bidding Program (DMEPOS CBP).
   
• The change: There was a transitional year in 2016, when Medicare calculated payments for certain supplies in the affected areas by blending competitive bid rates with the traditional fee schedule amounts (50/50 blended rates). Beginning in 2017, the fully adjusted fee schedule took effect, significantly reducing reimbursements, CMS said. The change announced Wednesday reverts to the 50/50 blending formula until the end of 2018.
   
• The rates: Returning to the blended calculation will increase reimbursements anywhere from 30% to 231% depending on the DMEPOS item. A table of state averages is included in a fact sheet.
   
• More to come in 2019: The agency noted that it intends to address these rates with a subsequent round of notice-and-comment rulemaking for 2019 and the years to follow.
   
• How much it will cost: Making this change will cost $290 million in Medicare benefit payments and $70 million in Medicare beneficiary cost-sharing, according to CMS estimates. Medicaid pays the cost sharing for dual eligible beneficiaries, with $10 million to come from the federal government and another $10 million to come from the states.
   
• Measuring the benefit: "We are unable to quantify the benefits of this interim final rule with comment period at this time; however, the goal of this interim final rule," CMS wrote in the rule, "is to preserve beneficiary access to DME items and services in rural and non-contiguous areas not subject to the CBP during a transition period in which CMS will continue to study the impact of the change in payment rates on access to items and services in these areas."

• Decline in suppliers: The number of supplier locations providing relevant items and services in the affected areas declined 7%, from 13,535 to 12,617, in 2016, the agency wrote in its interim final rule. "We are concerned that national chain suppliers of oxygen may close locations in more remote areas if the rate they are paid for furnishing items in a market where the volume of services is low does not justify the overhead expenses of retaining the locations," the agency wrote.
   
• Notice-and-comment waived: The agency exercised its discretion to waive a formal notice-and-comment rulemaking processing, opting instead to move forward with an interim final rule, with a comment period. Some suppliers are shutting down as a result of the adjustments that took effect January 1, 2017; delaying any longer could risk further harm to rural markets, the agency said.

Stakeholders are encouraged to comment on the interim final rule until 5 p.m. July 9.

Editor's note: This story was updated Thursday, May 10, to include additional information.