MEDICARE

Review of the First 

Year of CMS’s Durable 

Medical Equipment 

Competitive Bidding 

Program’s Round 1 

Rebid

Report to Congressional Committees

May 2012

GAO-12-693

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United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-693, a report to 

congressional committees

May 2012

MEDICARE

Review of the First Year of CMS’s Durable Medical 

Equipment Competitive Bidding Program’s Round 1 

Rebid

Why GAO Did This Study

To achieve Medicare savings for DME, 

the Medicare Prescription Drug, 

Improvement, and Modernization Act 

of 2003 (MMA) required that CMS 

implement the CBP for certain DME. In 

2008, the Medicare Improvements for 

Patients and Providers Act (MIPPA) 

terminated the first round of supplier

contracts and required CMS to repeat 

the CBP round 1—referred to as the 

round 1 rebid, resulting in the award of 

contracts to suppliers with payments 

that began January 1, 2011. CMS has 

estimated that the rebid will lead to 

significant savings for Medicare. 

MIPPA requires GAO to examine 

certain aspects of the CBP. In this 

report, GAO reviews (1) the outcomes 

of the CBP round 1 rebid process; 

(2) the effect of the CBP round 1 rebid 

on DME suppliers; (3) how the CBP 

round 1 rebid has affected Medicare 

beneficiary access to and satisfaction 

with selected DME; and (4) the extent 

to which the CBP round 1 rebid has 

affected the utilization of selected DME 

items. 

To examine CBP outcomes and 

effects, GAO analyzed data from CMS 

and its feedback provided to bidding 

suppliers, analyzed 2011 CBP data 

about different types of suppliers, and 

interviewed CMS and CBP contractor 

officials, DME industry groups, and 

suppliers. To examine CBP’s effects 

on beneficiary access, GAO analyzed 

Medicare claims data for the first six 

months of 2011 because the data for 

those months were the most complete, 

and compared it to the same months in 

2010.

What GAO Found

The Centers for Medicare and Medicaid Services (CMS), within the Department 

of Health and Human Services (HHS), implemented the durable medical 

equipment (DME) competitive bidding program’s (CBP) bidding process for the 

round 1 rebid. Nearly the same number of suppliers submitted a similar number 

of bids for both the CBP round 1 rebid and round 1. Many suppliers continued to 

have difficulty complying with financial documentation requirements; however, 

the number of bids disqualified in the round 1 rebid was significantly less than for 

round 1. After being notified of their bid results, some suppliers were found to 

have bids that were disqualified incorrectly and were subsequently offered 

round 1 rebid contracts. About one-third of the bidding suppliers were awarded 

CBP contracts.

Relatively few CBP contract suppliers (those awarded CBP contracts) had their 

contracts terminated by CMS, voluntarily canceled their contracts, or were 

involved in ownership changes. Under the CBP, non-contract suppliers (those 

not awarded CBP contracts) can grandfather certain rental DME for beneficiaries 

they were servicing prior to the implementation of CBP until CBP-covered 

beneficiaries’ rental periods expire. Also, some CBP contract suppliers entered 

into subcontracting agreements with non-contract suppliers to furnish certain 

services to CBP-covered beneficiaries in the round 1 rebid.

CMS’s ongoing multiple monitoring activities generally indicate that beneficiary 

DME access and satisfaction have not been affected by CBP. Although some of 

these efforts have limitations, in the aggregate, they provide useful information to 

CMS regarding beneficiary access and satisfaction.

Early data indicate that utilization has decreased in some CBP-covered DME 

categories. GAO’s review of Medicare claims data found that fewer beneficiaries 

in competitive bidding areas received some CBP-covered items in any of the first 

six months of 2011 than in the same month of 2010.

Although the first year of the CBP round 1 rebid has been completed, it is too 

soon to determine its full effects on Medicare beneficiaries and DME suppliers.

GAO found that, in general, the round 1 rebid was successfully implemented.

GAO also found that utilization of selected DME declined in the CBP areas; while 

there are many possible reasons for this, it does not necessarily indicate that 

beneficiaries have not had access to needed DME. GAO does not assume that 

all pre-CBP utilization was appropriate and the CBP may have reduced 

unnecessary utilization of DME. More experience with DME competitive bidding 

is needed, particularly to see if evidence of beneficiary access problems 

emerges. For that reason, it is important to continue monitoring changes in the 

number of suppliers serving CBP-covered beneficiaries.

In commenting on a draft of this report, HHS noted that the CBP round 1 rebid 

resulted in savings of more than $200 million in its first year. HHS also cited the 

results of CMS’s monitoring of beneficiaries’ access to DME in CBP areas as 

evidence that the CBP did not affect beneficiaries adversely.

View GAO-12-693. For more information, 

contact Kathleen M. King at (202) 512-7114 or 

kingk@gao.gov.
Page i GAO-12-693 DME Competitive Bidding Program

Letter 1 

Background 6

Outcomes of CMS’s Implementation of the CBP Round 1 Rebid 18

Effects on Suppliers of the First Year of the CBP Round 1 Rebid 27

Although CMS’s Monitoring Activities Have Limitations, They 

Indicate that Beneficiary Access and Satisfaction Have Not Been 

Affected by CBP 35

Early Data Indicate Some Decreases in DME Utilization 43

Both CMS and DME Suppliers Incurred Costs During the CBP 

Round 1 Rebid, but CMS Estimates Significant Medicare Savings 54

Agency Comments and Our Evaluation 55

Concluding Observations 57

Appendix I HCPCS Codes that CMS Determined Are the Top 80 Percent 

Highest Cost and Utilization for CBP Round 1 Rebid 59

Appendix II Comments from the Department of Health and Human Services 61

Appendix III GAO Contact and Staff Acknowledgments 65

Related GAO Products 66

Tables

Table 1: CBP Round 1 Rebid Contract Awards by Supplier Size as 

of November 3, 2010 19

Table 2: CBP Round 1 Rebid Bid Counts by Process Step as of 

November 3, 2010 20

Table 3: Number and Percentage of CBP Round 1 Rebid 

Disqualified Bids by Reason for Disqualification as of 

November 3, 2010 22

Table 4: Results of CMS’s Post-Bid Review Process in CBP Round 1 

and CBP Round 1 Rebid 27

Table 5: CBP Round 1 Rebid Contract Supplier Terminations and 

Cancelations, January 1 through October 31, 2011 28

Contents
Page ii GAO-12-693 DME Competitive Bidding Program

Table 6: Eight Ownership Changes Involving CBP Contract 

Suppliers, November 3, 2010, through November 3, 2011 29

Table 7: Top Three Grandfathered Product Categories, CBP 

Round 1 Rebid, January 2011 and November 2011 

Compared 31

Table 8: Contract Suppliers New to a Product Category, CBP 

Round 1 Rebid 34

Table 9: Contract Suppliers New to a Competitive Bidding Area, 

CBP Round 1 Rebid 35

Table 10: CMS Operational Costs for CBP, May 2009 through 

December 2010 54

Figures

Figure 1: CBP Timeline, 1997-2013 12

Figure 2: Excerpts from the Letters CMS Sent Bidding Suppliers 

Regarding the Opportunity for Postbid Review of 

Disqualified Bids in CBP Round 1 and CBP Round 1 Rebid 26

Figure 3: Percentage of DME Suppliers that Grandfathered in CBP 

Round 1 Rebid by Month, 2011 32

Figure 4: Number of CBP Inquiries to 1-800-MEDICARE by Month, 

2011 37

Figure 5: Percent of CBP-related Inquiries to 1-800-MEDICARE 

Compared to All DMEPOS-related Inquiries by Quarter, 

2011 38

Figure 6: Number of CBP Inquiries to 1-800-MEDICARE by CBP 

Round 1 Rebid Product Category by Quarter, 2011 39

Figure 7: CBP Complaints to 1-800-MEDICARE by Quarter, 2011 40

Figure 8: Change in the Number of Distinct Medicare Beneficiaries 

Furnished Selected CBP-covered CPAP/RAD Product 

Category Items; Round 1 Rebid’s First 6 Months 2011 45

Figure 9: Change in the Number of Distinct Medicare Beneficiaries 

Furnished Selected CBP-covered Enteral Product 

Category Items; Round 1 Rebid’s First 6 Months 2011 47

Figure 10: Change in the Number of Distinct Medicare 

Beneficiaries Furnished Selected CBP-covered Hospital 

Bed Product Category Items; Round 1 Rebid’s First 

6 Months 2011 48

Figure 11: Change in the Number of Distinct Medicare 

Beneficiaries Furnished Selected CBP-covered Oxygen 

Product Category Items; Round 1 Rebid’s First 6 Months 

2011 49
Page iii GAO-12-693 DME Competitive Bidding Program

Figure 12: Change in the Number of Distinct Medicare 

Beneficiaries Furnished Selected CBP-covered Standard 

Power Wheelchair Product Category Items; Round 1 

Rebid’s First 6 Months 2011 51

Figure 13: Change in the Number of Distinct Medicare 

Beneficiaries Furnished Selected CBP-covered Walkers 

Product Category Items; Round 1 Rebid’s First 6 Months 

2011 52
Page iv GAO-12-693 DME Competitive Bidding Program

Abbreviations

CBP competitive bidding program

CMS Centers for Medicare & Medicaid Services

CAO competitive acquisition ombudsman

CPAP/RAD continuous positive airway pressure devices and

 respiratory assist devices

CSR customer service representative

DBidS Durable Medical Equipment, Prosthetics, Orthotics, 

 and Supplies Bidding System

DME durable medical equipment

DMEPOS durable medical equipment, prosthetics, orthotics, 

 and supplies

HCPCS Healthcare Common Procedure Coding System

HHS Department of Health and Human Services

MIPPA Medicare Improvements for Patients and Providers Act 

 of 2008

MMA Medicare Prescription Drug, Improvement, and

 Modernization Act of 2003

NSC National Supplier Clearinghouse

NF nursing facilities

OIG Office of Inspector General

PAOC Program Advisory and Oversight Committee

PTAN provider transaction access number

SNF skilled nursing facilities

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Page 1 GAO-12-693 DME Competitive Bidding Program

United States Government Accountability Office

Washington, DC 20548

May 9, 2012

The Honorable Max Baucus

Chairman

The Honorable Orrin Hatch

Ranking Member

Committee on Finance

United States Senate

The Honorable Fred Upton

Chairman

The Honorable Henry Waxman

Ranking Member

Committee on Energy and Commerce

House of Representatives

The Honorable Dave Camp

Chairman

The Honorable Sander Levin

Ranking Member

Committee on Ways and Means

House of Representatives

In 2010, Medicare—a federal health insurance program1

—spent 

$8.1 billion on durable medical equipment (DME), prosthetics, orthotics, 

and related supplies for beneficiaries.2

 

1

Medicare is for people age 65 and older, individuals under age 65 with certain disabilities, 

and individuals diagnosed with end-stage renal disease. 

The Medicare program is 

administered by the Centers for Medicare and Medicaid (CMS) within the 

2

DME is equipment that serves a medical purpose, can withstand repeated use, is 

generally not useful in the absence of an illness or injury, and is appropriate for use in the 

home including, for example, wheelchairs and hospital beds. Prosthetic devices (other 

than dental) are defined as devices needed to replace body parts or functions such as 

artificial limbs, enteral nutrition, and cardiac pacemakers. Orthotic devices are defined as 

providing rigid or semi-rigid support for weak or deformed body parts or restricting or 

eliminating motion in a diseased or injured part of the body, such as leg, arm, back, and 

neck braces. Medicare-reimbursed supplies are items that are used and consumed with 

DME, such as drugs used for inhalation therapy, or that need to be replaced frequently 

(usually daily), such as surgical dressings. Collectively DME, prosthetics, and orthotics are 

referred to as DMEPOS. For this report, the term DME refers to all DMEPOS items 

included in the CBP.

 
Page 2 GAO-12-693 DME Competitive Bidding Program

Department of Health and Human Services (HHS). Most Medicare 

beneficiaries participate in Medicare Part B,3 which helps pay for 

DMEPOS items and supplies, such as oxygen, wheelchairs, hospital 

beds, walkers, orthotics, prosthetics, and supplies if they are medically 

necessary and prescribed by a physician. Medicare beneficiaries typically 

obtain DMEPOS items from suppliers, which submit claims for payment to 

Medicare on behalf of beneficiaries. Both we and the HHS Office of 

Inspector General (OIG) have reported that Medicare and its beneficiaries 

have sometimes paid higher-than-market rates for various medical 

equipment and supply items.4

To achieve Medicare savings for DMEPOS and to address DMEPOS 

fraud concerns, Congress, through the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 (MMA),

These overpayments increase costs to 

both Medicare and its beneficiaries.

5

 

3

Medicare Part B helps pay for certain physician, outpatient hospital, laboratory, and other 

services, and medical equipment and supplies—DMEPOS. Beneficiaries are required to 

pay a monthly premium for Part B coverage, an annual deductible, and coinsurance. In 

general, Medicare beneficiaries pay 20 percent—the coinsurance—of the Medicare fee 

schedule payment rate for the DMEPOS item after reaching their annual Medicare Part B 

deductible. In 2010, CMs reported that Medicare Part B and beneficiaries paid 

approximately $14.3 billion for DMEPOS. 

required CMS to 

phase in a competitive bidding program (CBP). Under CBP, DME 

suppliers are competitively selected to furnish certain DME product 

4

GAO, Medicare: CMS Has Addressed Some Implementation Problems from Round 1 of 

the Durable Medical Equipment Competitive Bidding Program for the Round 1 Rebid, 

GAO-10-1057T (Washington, D.C.: Sept. 15, 2010); Medicare: CMS Working to Address 

Problems from Round 1 of the Durable Medical Equipment Competitive Bidding Program,

GAO-10-27 (Washington, D.C.: Nov. 6, 2009); Medicare: Competitive Bidding for Medical 

Equipment and Supplies Could Reduce Program Payments, but Adequate Oversight Is 

Critical, GAO-08-767T (Washington, D.C.: May 6, 2008); Medicare: Past Experience Can 

Guide Future Competitive Bidding for Medical Equipment and Supplies, GAO-04-765

(Washington, D.C.: Sept. 7, 2004); Department of Health and Human Services Office of 

Inspector General, A Comparison of Prices for Power Wheelchairs in the Medicare 

Program, OEI-03-03-00460 (Washington, D.C.: April 2004); and Janet Rehnquist, 

Inspector General, Department of Health and Human Services, Medicare Reimbursement 

for Medical Equipment and Supplies, testimony before the Senate Committee on 

Appropriations, Subcommittee on Labor, Health and Human Services, and Education, 

107th Cong., 2nd sess., June 12, 2002.

5

Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 

No. 108-173, § 302(b), 117 Stat. 2066, 2224-30 (2003) (codified as amended at 42 U.S.C. 

§ 1395w-3). 
Page 3 GAO-12-693 DME Competitive Bidding Program

categories6 to Medicare beneficiaries in designated competitive bidding 

areas.7 On January 1, 2011, CMS began operating the CBP—referred to 

as the CBP round 1 rebid—in nine competitive bidding areas8 for selected 

DME items in nine product categories.9 The DME suppliers that won CBP 

contracts—contract suppliers—are paid at the competitively determined 

payments for the CBP-covered DME items10 which must be less than or 

equal to Medicare’s fee schedule11 payments for the same items. Of the 

estimated 47 million Medicare beneficiaries, about 2 million CBP-covered 

beneficiaries reside in the nine competitive bidding areas.12

 

6

A product category is a grouping of related items used to treat a similar medical 

condition.

7

A competitive bidding area is either a metropolitan statistical area or a part thereof.

Metropolitan statistical areas are designated by the Office of Management and Budget 

and include major cities and the suburban areas surrounding them.

8

The nine CBP round 1 rebid competitive bidding areas are: Charlotte (CharlotteGastonia-Concord, North Carolina and South Carolina); Cincinnati (Cincinnati-Middletown, 

Ohio, Kentucky, and Indiana); Cleveland (Cleveland-Elyria-Mentor, Ohio); Dallas (DallasFort Worth-Arlington, Texas); Kansas City (Kansas City, Missouri and Kansas); Miami 

(Miami-Fort Lauderdale-Pompano Beach, Florida); Orlando (Orlando-Kissimmee, Florida); 

Pittsburgh (Pittsburgh, Pennsylvania); and Riverside (Riverside-San Bernardino-Ontario, 

California).

9

The CBP round 1 rebid’s nine product categories are: complex power wheelchairs 

(complex rehabilitative power wheelchairs and related accessories—limited to group 2—

power wheelchairs with power options); CPAP/RAD (continuous positive airway pressure 

devices, respiratory assist devices, and related supplies and accessories); enteral (enteral 

nutrients, equipment, and supplies); hospital beds (hospital beds and related accessories); 

mail-order diabetic supplies; oxygen (oxygen supplies and equipment); standard power 

wheelchairs (standard power wheelchairs, scooters, and related accessories); walkers 

(walkers and related accessories); and support surfaces (support surfaces limited to 

group 2 mattresses and overlays—pressure reducing support surfaces for persons with or 

at high risk for pressure ulcers—in the Miami competitive bidding area only.) 

10The terms CBP-covered items and CBP-covered beneficiaries are used since not all 

Medicare-covered DME items are included in the CBP and not all beneficiaries residing in 

a CBP competitive bidding area are covered by CBP.

11In general, DME fee schedule rates are subject to national floor and ceiling limits, and 

may be updated by the consumer price index for all urban consumers. Medicare payment

for DME is generally equal to 80 percent of the lesser of either the supplier’s actual charge 

or the Medicare fee schedule for a particular item or service.

12Beneficiaries who reside in the CBP competitive bidding areas and are enrolled in 

Medicare Advantage health plans, which are operated by private companies, are not 

subject to CBP. 
Page 4 GAO-12-693 DME Competitive Bidding Program

CMS began implementing CBP in 2007 and 2008—referred to as 

round 1.13 However, the Medicare Improvements for Patient and 

Providers Act of 2008 (MIPPA)14 terminated the CBP round 1 supplier 

contracts on July 15, 2008, and required CMS to repeat the CBP 

round 1—referred to as the round 1 rebid. To compensate for the loss of 

the projected Medicare savings due to the termination of CBP round 1 

and delay of CBP and to ensure budget neutrality, MIPPA reduced the 

Medicare payments for the DME items that had been included in round 1 

by 9.5 percent nationally.15

MIPPA requires us to examine particular issues regarding early results 

from the ongoing CBP round 1 rebid.

In 2009, CMS began the CBP round 1 rebid 

bidding process, and in January 2011, the CBP round 1 rebid began.

16

To examine the outcomes of the CBP round 1 rebid, we analyzed data 

from CMS and reviewed feedback that CMS provided to suppliers to 

explain bid deficiencies. We also reviewed CMS’s notification to suppliers 

that did not win a contract describing the opportunity to have their bids 

reviewed. To examine the effect of the CBP round 1 rebid on DME 

suppliers, we analyzed 2011 CMS data on contract suppliers including 

those that were terminated by CMS or voluntarily withdrew from CBP, 

grandfathered suppliers, subcontracting suppliers, and suppliers’ 

ownership changes, and interviewed CMS and CBP contractor officials, 

DME industry groups, and selected suppliers.

In this report, we review (1) the 

outcomes of the CBP round 1 rebid process including bid disqualifications 

and contracts awarded; (2) the effect of the CBP round 1 rebid on DME 

suppliers; (3) how the CBP round 1 rebid has affected Medicare 

beneficiary access to and satisfaction with selected DME; (4) the extent to 

which the CBP round 1 rebid has affected the utilization of selected DME 

items; and (5) the costs for CMS to implement, and for DME suppliers to 

participate, in CBP.

 

13CMS conducted demonstrations from 1999 to 2002 that showed that DME competitive 

bidding would save money for both the Medicare program and for Medicare beneficiaries 

in lower coinsurance.

14Pub. L. No. 110-275, § 154(a)(1), 122 Stat. 2494, 2560-3 (2008) (codified, as amended, 

at 42 U.S.C. § 1395w-3). 

15Pub. L. No. 110-275, § 154(a)(2), 122 Stat. at 2563 (2008) (codified, as amended, at 

42 U.S.C. § 1395m(a)(14)).

16Pub. L. No. 110-275, § 154(c), 122 Stat. at 2565-6.
Page 5 GAO-12-693 DME Competitive Bidding Program

To examine how the CBP round 1 rebid has affected Medicare 

beneficiary access to and satisfaction with selected DME items, 

we analyzed 2011 CMS data, including CBP inquiry data from the 

1-800-MEDICARE beneficiary help line, CBP complaint data, and 

interviewed CMS and CBP contractor officials and Medicare beneficiary 

advocacy groups. To examine the extent to which the CBP round 1 rebid 

has affected the beneficiary utilization of certain DME items, we obtained 

and analyzed the first six months of Medicare claims data both pre-CBP 

(2010) and post-CBP (2011) because data for those months are the most 

complete. We used these data to determine whether the number of CBPcovered beneficiaries utilizing CBP-covered items and services increased 

or decreased in the first 6 months of 2011 when the CBP round 1 began 

compared to the same time period in 2010. We compared the number of 

Medicare beneficiaries using selected CBP-covered items—chosen by 

CMS as the top 80 percent highest cost and highest utilization items—in 

the nine competitive bidding areas to non-competitive bidding areas (see 

appendix I for the DME items included in our analysis).17

To describe the costs for CMS to implement and for DME suppliers to 

participate in CBP, we reported the CBP round 1 rebid preimplementation costs provided to us by CMS. We also interviewed CMS 

officials, DME supplier trade groups, and selected DME suppliers to 

obtain descriptions and estimates of CBP-related administrative costs and 

suppliers’ participation expenses.

In submitting 

claims for Medicare payments, suppliers use a standardized coding 

system—the Healthcare Common Procedure Coding System (HCPCS).

Since HCPCS codes identify a category of like DMEPOS items, for 

example, hospital beds, individual HCPCS codes can include a broad 

range of items that serve the same general purpose but that vary in price 

and characteristics and do not identify an item’s manufacturer, or brand or 

trade name, we determined that an analysis to compare utilization of 

items included in the same HCPCS code would not be meaningful.

To assess the reliability for all the data we received from CMS, we 

reviewed and identified outliers in data, and interviewed CMS and other 

appropriate officials to clarify and resolve any discrepancies. We 

 

17Contract suppliers submit the HCPCS codes for the CBP-covered items they plan to 

furnish each quarter to CMS through the Palmetto GBA website

https://www.dmecompetitivebid.com/secure/cbicsecure.nsf/FormC, which also provides a 

listing by product category of the top HCPCS codes.
Page 6 GAO-12-693 DME Competitive Bidding Program

assessed the reliability of the Medicare claims data from the 100 Percent 

Standard Analytic Files from CMS by reviewing existing information about 

the data and the systems that produced them, performing appropriate 

electronic data checks, and interviewing individuals from CMS, CMS’s 

Pricing, Data Analysis and Coding Contractor, and two DME Medicare 

Administrative Contractors. We determined that these data were 

sufficiently reliable for the purposes of this report.

Our findings are based on the limited evidence available at the time we 

did our work, and more data will become available as CBP continues. We 

conducted this performance audit from May 2011 through May 2012 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings based on our audit 

objectives.

Medicare pays for most DMEPOS through fee schedules based on 

suppliers’ previous charges to Medicare.18 The fee schedule payment is 

generally equal to 80 percent of the lesser of either the supplier’s actual 

charge or the Medicare fee schedule for a particular item or service. In 

general, Medicare beneficiaries are responsible for paying the supplier 

the remaining 20 percent—the coinsurance.19

 

18Medicare adjusts fee schedules for DMEPOS for each state, reflecting geographic price 

differences that are subject to national floor and ceiling limits. The applicable state fee 

schedule is determined by the Medicare beneficiary’s residence, not the supplier’s 

location.

To process all Medicare 

19For suppliers, Medicare assignment—accepting Medicare’s reimbursement amount for 

an item as payment in full and limiting the amount the beneficiary can be billed for that 

item—is optional. If a supplier agrees to assignment, then Medicare generally pays 

80 percent of the amount to the supplier and the Medicare beneficiary is responsible for 

paying the supplier the remaining 20 percent—referred to as the coinsurance payment, 

once the beneficiary’s annual deductible has been met. If the supplier does not accept 

assignment, the supplier is not limited to charging the beneficiary 20 percent of the 

Medicare reimbursement for that item or service and the beneficiary can be billed for 

whatever balance is due. For CBP-covered items, Medicare assignment is mandatory for 

suppliers.

Background 

Medicare Payments
Page 7 GAO-12-693 DME Competitive Bidding Program

DMEPOS payment claims including coverage and payment 

determinations, CMS contracts with four DME Medicare Administrative 

Contractors.

CMS and its CBP implementation contractor—Palmetto GBA—administer 

and implement CBP and its bidding rounds. To be eligible to submit bids 

to furnish CBP-covered DME items in one or more product categories in 

one or more of the competitive bidding areas, suppliers must first meet 

several requirements. Specifically, suppliers must have an active National 

Supplier Clearinghouse (NSC)20 number that makes them eligible to bill 

Medicare for DME, have met Medicare enrollment and quality 

standards,21 have a surety bond,22 and be accredited. After the bid 

window closes, Palmetto GBA reviews bids to determine whether each 

supplier’s bid submission is complete and compliant with the bidding 

requirements, and whether the supplier’s financial score23

 

20The National Supplier Clearinghouse is the CMS contractor responsible for processing 

Medicare enrollment applications for DMEPOS suppliers and may revoke a supplier’s 

enrollment if, for example, a supplier loses its Medicare accreditation. Beginning in 2012, 

CMS has a new contractor to conduct automated screening of Medicare enrollment for all 

providers and suppliers including DMEPOS suppliers. CMS also has a new contractor to 

conduct site visits to ensure that enrolled suppliers have a physical facility on an 

appropriate site, but the NSC continues to conduct site visits for DMEPOS suppliers. 

meets CMS’s 

minimum financial standard threshold to be eligible to compete on price. If 

the bid meets these requirements, it is considered a qualified bid and can 

then compete on price. Before comparing prices, Palmetto GBA reviews 

each qualified bid’s estimated capacity projections—the supplier’s 

anticipated ability to provide the volume of items claimed in the bid in light 

of the supplier’s historical capacity, expansion plans, and financial score.

21For a list of Medicare enrollment standards applying to all DMEPOS suppliers, see 

42 C.F.R. § 424.57(c). For a list of Medicare quality standards applying to all DMEPOS 

suppliers, see https://www.cms.gov/medicareprovidersupenroll/10_DMEPOS 

supplierstandards.asp (accessed on April 20, 2012). 

22Certain DMEPOS suppliers are required to post a $50,000 surety bond for each 

business location. Surety bonds are designed to reduce the amount of money that is lost 

due to fraudulent or abusive billing schemes by suppliers.

23The financial score is used to determine a supplier’s financial viability and is calculated 

using the bidding supplier’s credit score and 10 financial measures that CMS describes as 

standard accounting measures. 

The CBP
Page 8 GAO-12-693 DME Competitive Bidding Program

Palmetto GBA uses several steps to compare prices and identify the 

winning bids.24 First, Palmetto GBA reviews the DME bid item prices 

submitted by suppliers with qualified bids and uses a methodology to 

calculate what is known as a composite bid to allow for a comparison of 

prices submitted across bidding suppliers with qualified bids. A composite 

bid is determined by summing all of the weights assigned to each item in 

a product category—with each item weight calculated using national 

beneficiary utilization data for that item compared to the other items within 

that product category. Once the composite price has been calculated, the 

bids are ordered by the lowest to highest composite bid price in each 

product category in each competitive bidding area. When the bids have 

been ordered, Palmetto GBA calculates the cumulative projected capacity 

of the competing bids—which indicates the capacity that each supplier 

projects it could furnish throughout an entire competitive bidding area 

each year. Palmetto GBA begins with the lowest composite price and 

moves up the ordered list to identify the bid where the suppliers’ 

cumulative projected capacity meets or exceeds CMS’s estimated 

beneficiary demand, which is referred to as the pivotal bid. Although 

many bids can be qualified to compete on price, only those with 

composite prices that are equal to or less than the pivotal bid are 

determined to be winning suppliers, based on price, and are used to 

establish Medicare’s CBP single payment amounts for each item in a 

product category in a competitive bidding area. Specifically, for each item, 

the winning bids’ price offers are ordered from lowest to highest and the 

median bid price offered by these suppliers for that item becomes the 

single payment amount. To ensure there is a sufficient number of 

suppliers and to meet its target goal of awarding at least five contracts in 

each product category in each competitive bidding area,25

 

24For a figure indicating the CBP process steps used to identify winning bids, see page 10 

of 

CMS caps the 

estimated projected capacity of any single supplier to 20 percent of the 

total projected beneficiary demand for each product category in each 

GAO-10-27. 

25If there are five suppliers with qualified bids, CMS will award at least five contracts in 

each product category in each competitive bidding area. If there are less than five 

suppliers with qualified bids, CMS must award contracts to at least two suppliers if the 

suppliers have sufficient capacity to satisfy beneficiary demand in the product category in 

the competitive bidding area.
Page 9 GAO-12-693 DME Competitive Bidding Program

competitive bidding area, regardless of the capacity estimated by the 

supplier in its bid.26

The CBP single payment amounts are required to be less than or equal to 

the Medicare fee-for-service payments for the same items.27 The same 

DME item may have a different CBP single payment amount in each 

competitive bidding area. CMS offers the winning suppliers 3-year 

contracts to furnish items in the product categories and competitive 

bidding areas in which they won.28 All contract suppliers that accept the 

contract offers must maintain their Medicare billing privileges, state 

licensure, and accreditation throughout the contract period and accept 

assignment on all DME items under their contracts.29

CBP round 1 was conducted in 2007 and 2008 for 10 competitive bidding 

areas.

CMS is required, 

under federal law, to conduct another bidding round to select contract 

suppliers no less often than once every three years.

30

 

26CMS’s cap of a supplier’s estimated projected capacity to 20 percent does not limit the 

number of items a supplier can furnish if awarded a contract and suppliers may be able to 

furnish more than 20 percent of the beneficiary demand in a product category in a 

competitive bidding area.

For the bidding, CMS chose certain DME items in 10 product 

categories—generally high-cost and high-volume items and services—

that were most likely to result in Medicare savings if competitively 

acquired. The round 1 contract suppliers were announced in May 2008.

However, round 1’s bid submission and contract award processes caused 

concerns about CMS’s CBP implementation. In our November 2009 

report, we found problems with the bidding process, including poor timing 

27The single payment amount is the median of the winning supplier bids for an individual 

DME item within each product category in each competitive bidding area. The use of the 

median in setting an item’s single payment amount means that the CBP payment may be 

less than or more than a particular winning supplier’s bid price for the item.

28The contract period for the CBP round 1 rebid’s mail-order diabetic supplies product 

category is two years. 

29Medicare assignment is mandatory for CBP contract suppliers and means that a 

supplier accepts the CBP single payment amount as payment-in-full from Medicare, and 

can only bill a beneficiary 20 percent of the payment amount.

30To begin the program’s national phase-in, the CBP round 1’s 10 competitive bidding 

areas were chosen from the largest metropolitan statistical areas. The competitive bidding 

areas for round 1 and the round 1 rebid were the same except that round 1 included the 

San Juan (San Juan-Caguas-Guaynabo, Puerto Rico) area.

CBP Round 1
Page 10 GAO-12-693 DME Competitive Bidding Program

and lack of clarity in bid submission information and CMS’s inability to 

inform suppliers of missing financial documentation.31

The enactment of MIPPA stopped CBP round 1 two weeks after it began 

operating and required CMS to repeat the competition for CBP round 1 in 

2009. MIPPA also imposed additional criteria for how CMS should 

conduct later CBP rounds and expand the CBP to additional areas. In 

addition, MIPPA required that CMS notify bidding suppliers about any 

missing financial documentation if the suppliers submitted their 

documentation within a time period known as the covered document 

review date.

We also found that 

CMS did not provide suppliers with timely and clear bid submission 

information, used an inadequate electronic bid submission system, and 

did not have a process to inform bidders of missing financial 

documentation—42 percent of all submitted bids were disqualified due to 

incomplete financial documentation. In our report, we recommended that 

if CMS reviews suppliers’ disqualified bids during the round 1 rebid and 

future rounds, it should notify all suppliers of any such process, give 

suppliers equal opportunity for such reviews, and clearly indicate how 

suppliers can request a review.

32

In October 2009, CMS began the CBP round 1 rebid process;

MIPPA also required CMS to create a competitive 

acquisition ombudsman (CAO) to respond to inquiries and complaints 

made by DME suppliers and individuals concerning the CBP’s 

application. The CAO can work with Palmetto GBA and its local offices.

33

 

31See 

its 60-day 

bid window closed in December 2009. In July 2010, CMS announced the 

competitively determined DME single payment amounts. On January 1, 

2011, CBP began with 356 contract suppliers awarded contracts to 

GAO-10-27. 

32MIPPA provided that this process only applies to the timely submission of financial 

documentation and does not apply to any determination by CMS as to the accuracy or 

completeness of the documentation submitted or whether the documents meet applicable 

requirements.

33In the CBP round 1 rebid, the product categories were revised to delete the negative 

pressure wound therapy category—pumps that apply controlled negative or 

subatmospheric pressure used to treat ulcers or wounds that have not responded to 

traditional wound treatment methods—and to exclude group 3 complex rehabilitative 

power wheelchairs (must meet the highest performance requirements, for example, be 

able to travel at least 12 miles on a single charge of batteries) from the entire CBP, and to 

delete San Juan (San Juan-Caguas-Guaynabo, Puerto Rico) as a competitive bidding 

area.

CBP Round 1 Rebid
Page 11 GAO-12-693 DME Competitive Bidding Program

provide DME items and services in nine DME product categories in nine 

competitive bidding areas.34

In January 2012, CMS began CBP’s bidding process for round 2. 

Round 2 will cover 91 metropolitan statistical areas and CMS has 

determined the competitive bidding areas within those MSAs. The 

60-day round 2 bid window was open from January 30, 2012, to 

March 30, 2012. CMS intends to announce the round 2 winning contract 

suppliers in spring 2013, and for the contracts and single payment 

amounts to become effective July 1, 2013.

CMS has stated that the CBP round 1 rebid 

single payment amounts resulted in an average savings of 42 percent in 

2011 compared to 2010 for the same items.

Round 2 will operate for 3 years and includes the same product 

categories as the round 1 rebid except for the addition of the negative 

pressure wound therapy category, the deletion of the complex power 

wheelchairs and mail-order diabetic supplies categories, and the 

expansion of the support surfaces category35 to all competitive bidding 

areas. A national mail-order diabetic supplies program36 competition will 

be conducted at the same time as round 2, and will require bidding 

suppliers to demonstrate that their bids cover at least 50 percent, by sales 

volume, of all types of diabetic testing strips on the market.37

 

34The CBP round 1 rebid 3-year contracts expire on December 31, 2013. On April 17, 

2012, CMS announced that it planned to begin the bidding process for the second round 

of contracts in fall 2012.

(See fig. 1 

for CBP’s legislative history and program implementation time line.)

35Support surfaces are pressure reducing support surfaces for persons with or at high risk 

for pressure ulcers.

36The national mail-order competition includes all 50 states, District of Columbia, Puerto 

Rico, U.S. Virgin Islands, Guam, and American Samoa.

37To indicate the testing strip brands they intend to furnish to meet the 50 percent 

requirement, bidding suppliers complete a National Mail-Order 50 Percent Compliance 

form as part of their CBP bid submission.

CBP Round 2
Page 12 GAO-12-693 DME Competitive Bidding Program

Figure 1: CBP Timeline, 1997-2013

a

Pub. L. No. 105-33, § 4319(a), 111 Stat. 251, 392-4 (1997) (codified, as amended, at 42 U.S.C. 

§ 1395w-3).
Page 13 GAO-12-693 DME Competitive Bidding Program

b

Pub. L. No. 108-173, § 302(b), 117 Stat. 2066, 2224-30 (2003) (codified, as amended, at 42 U.S.C.

§ 1395w-3). Items and services covered by the competition were DME and related supplies, off-theshelf orthotics, and enteral nutrients and related equipment and supplies.

c

CMS, Medicare Program; Competitive Acquisition for Certain Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies (DMEPOS) and Other Issues; Final Rule, 72 Fed. Reg. 17,992 

(Apr. 10, 2007).

d

Medicare Improvements for Patients and Providers Act of 2008. Pub. L. No. 110-275, § 154(a)(2), 

122 Stat. 2494, 2560-3 (2008) (codified, as amended, at 42 U.S.C. § 1395w-3). 

e

CMS, Medicare Program: Surety Bond Requirement for Suppliers of DMEPOS, Final Rule, 74 Fed. 

Reg. 166 (Jan. 2, 2009).

f

CMS must notify suppliers of missing financial documentation if their financial documents are 

submitted within the covered document review date, which is the later of: (1) 30 days before the final 

date for the close of the bid window; or (2) 30 days after the bid window opens.

The CBP makes specific provisions for certain types of individual DME 

suppliers that can bill Medicare. CBP contract suppliers38 are suppliers 

that bid and won a CBP contract for at least one product category in at 

least one competitive bidding area. Non-contract suppliers39

To ensure that small suppliers are considered when selecting contract 

suppliers, CMS set a target that 30 percent of the qualified suppliers in 

each product category in each competitive bidding area are small. CMS 

defines small suppliers as those that generate gross revenue of 

$3.5 million or less in annual receipts that include both Medicare and nonMedicare revenue. In cases where the small supplier target goal is not 

met, CMS can award additional CBP contracts to small suppliers after it 

determines the number of suppliers needed to meet or exceed CMS’s 

estimated beneficiary demand.

that do not 

have a CBP contract may continue to furnish certain DME to beneficiaries 

in the CBP competitive bidding areas as grandfathered suppliers for 

existing rental agreements or as subcontractors to contract suppliers.

Between 2 to 20 small suppliers are allowed to group together as a 

network to submit a bid as a single entity under CBP, and to provide 

services as a contract network if awarded a CBP contract. The suppliers 

 

38A contract supplier may be a small or large supplier, a member of a small supplier 

network, a grandfathering supplier for certain CBP product categories not won, a 

subcontractor for another contract supplier, or a combination thereof.

39A non-contract supplier operating in a competitive bidding area may also be a 

grandfathering supplier for certain CBP product categories, a subcontractor for another 

contract supplier, or a combination.

Types of CBP Suppliers

Small Suppliers and Networks
Page 14 GAO-12-693 DME Competitive Bidding Program

involved must certify that they cannot independently furnish all the 

competitively bid items in the product category to beneficiaries throughout 

the entire competitive bidding area for which the network is submitting a 

bid.

Some suppliers not awarded contracts have the option to choose to 

continue to furnish certain CBP-covered rental items to beneficiaries who 

were their customers when CBP began on January 1, 2011, and who are 

residing in the competitive bidding areas. These suppliers are referred to 

as grandfathered suppliers.40 It is the beneficiaries’ choice whether to 

remain with their grandfathered supplier or to select a CBP contract 

supplier.41 Many CBP-covered items that are rented can be grandfathered 

including, for example, oxygen and oxygen equipment,42 capped rental 

DME43—such as hospital beds—and inexpensive and routinely 

purchased DME for the remaining rental months.44

 

40Where a beneficiary permanently resides determines whether they are a CBP-covered 

beneficiary; a beneficiary’s residence is the address used for Social Security.

Once the relevant 

rental periods expire or a beneficiary decides to select a contract supplier, 

the grandfathered supplier can no longer provide the CBP-covered items 

and services to the beneficiary.

41If a non-contract supplier chooses not to grandfather, or the beneficiary chooses to 

select a contract supplier, the beneficiary’s current and new supplier must coordinate the 

pick-up and delivery of the affected DME equipment, and CMS requires certain beneficiary 

notifications be made.

42Suppliers that furnished oxygen and oxygen equipment to a beneficiary during the 

36th month of continuous use are required to continue to furnish the equipment after the 

36 months for any period of medical need during the remainder of the reasonable useful 

lifetime of the equipment; this obligation cannot be transferred to a contract supplier or any 

other suppliers.

43Capped rental DME items have a limited time period during which they can be rented 

and paid for by Medicare.

44CBP’s mail-order diabetic testing supplies and enteral nutrition product categories

cannot be grandfathered. CMS announced in December 2011 that Medicare claims 

submitted for maintenance and servicing of enteral nutrition pumps during 2011 would be 

paid if the non-contract supplier furnished the pump to a beneficiary in a competitive 

bidding area and the pump had been rented for at least 15 continuous months at the time 

of CBP’s implementation on January 1, 2011. The supplier that provided the pump in the 

15th month of the rental period is responsible for furnishing, maintaining, and servicing the 

pump—whether it is a contract supplier or not—until the pump is no longer medically 

necessary for the beneficiary or reaches the end of its reasonable useful lifetime.

Grandfathered Suppliers
Page 15 GAO-12-693 DME Competitive Bidding Program

Subcontracting allows contract suppliers to work with suppliers that are 

Medicare-accredited to provide limited services to CBP-covered 

beneficiaries.45

Skilled nursing facilities (SNF)

A supplier that subcontracts may perform only three 

services: (1) purchase inventory and fill orders, fabricate or fit items from 

its own inventory or contract with other companies to purchase items 

necessary to fill an order, (2) deliver CBP-covered items to beneficiaries, 

and (3) repair rented equipment. For CBP, subcontracting suppliers may 

include suppliers that did not bid, that bid and lost, or that won contracts 

but subcontract with other contract suppliers for a product category not 

won. The contract suppliers are responsible for billing Medicare for any 

services that their subcontract suppliers perform since subcontract 

suppliers are not eligible to bill Medicare themselves. Contract suppliers 

are to disclose to CMS each subcontracting agreement and are also 

responsible for ensuring that their subcontractors are Medicareaccredited for the product categories covered by the subcontracting 

agreement.

46 and nursing facilities (NF)47 are the only 

entities that can bid to win a CBP contract as a CBP specialty supplier. If 

such a facility wins a specialty supplier contract, the facility can only 

furnish the CBP enteral nutrients, equipment, and supplies product 

category to its own residents covered under Medicare Part B. The 

facilities may also choose to submit bids to win CBP contracts as a 

regular contract supplier. If they win a regular contract, they may then 

furnish the CBP-covered items in the product category they have won to 

beneficiaries throughout their competitive bidding area.

 

45Subcontracting is not limited to CBP; any enrolled DME supplier that bills Medicare for 

the item it furnishes may subcontract certain services consistent with the DME supplier 

standards.

46A SNF provides residents with restorative services such as physical or speech therapy.

A SNF provides a level of care distinguishable from the intensive care furnished by a 

general hospital or the custodial or supportive care furnished by nursing homes primarily 

designed to provide daily services above the level of room and board.

47A NF provides residents with skilled nursing care and related services for those who 

require medical or nursing care, rehabilitation of injured, disabled, or sick persons, or on a 

regular basis, health-related care and services to individuals who because of their mental 

or physical condition require care and services above the level of room and board. Neither 

a SNF nor a NF can be a facility that primarily cares for and treats mental diseases.

Subcontractor Suppliers

Specialty Suppliers 
Page 16 GAO-12-693 DME Competitive Bidding Program

To assist beneficiaries in locating a contract supplier in their competitive 

bidding area, CMS maintains a CBP supplier locator tool on the Medicare 

website.48 The supplier locator contains the names of the contract 

suppliers in each competitive bidding area and the product categories for 

which they furnish CBP-covered items. The contract suppliers submit 

information to CMS each quarter on a form that lists the specific items 

they furnish—including the brand names and equipment models which 

CMS uses to update the supplier locator.

Beneficiaries with CBP questions—referred to by CMS as inquiries—are 

directed to call 1-800-MEDICARE. Callers are assisted by CBP customer 

service representatives (CSR) trained to answer questions about CBP in 

general and to assist beneficiaries in finding CBP suppliers. Beneficiaries 

calling from area codes in competitive bidding areas hear a prompt at the 

beginning of their call, which takes them directly to a CBP CSR. 

Beneficiaries calling from an area code not in a competitive bidding area 

can also reach a CBP CSR through a series of prompts.

CSRs use CBP scripts—written responses to commonly asked 

questions—when initially responding to CBP-related calls.49 CSRs read a 

response to the beneficiary either from a script about CBP in general, or 

from a script specific to one of the nine product categories.50

 

48The tool is located at 

If the 

beneficiary’s inquiry cannot be addressed by the scripts, the CSR will 

forward it to an advanced-level CSR trained to research a CBP-related 

question and respond after completing research on the caller’s inquiry. 

For example, an advanced CSR might work with a beneficiary traveling 

www.medicare.gov/supplier/. 

49Scripts address topics that may arise during a beneficiary call to 1-800-MEDICARE 

regarding CBP, and cover issues such as urgent needs for new supplies, and 

beneficiaries who are unable to locate a contract supplier in their area. The scripts instruct 

CSRs how to assist beneficiaries; for example, when a CSR conducts a three-way call 

with a beneficiary and a contract supplier, the CSR will read a script that says, “My name

is [CSR NAME] from 1-800-MEDICARE. I have a beneficiary on the line who is looking for 

[NAME THE SUPPLY]. His/her name is [BENEFICIARY NAME] and he/she called us 

because [REASON]. We are calling you because [EXPLAIN THE ISSUE AND WHAT THE 

SUPPLIER CAN DO TO HELP].” 

50A single encounter between a caller and a CSR may be counted as more than one 

inquiry, since an inquiry is counted by the number of scripts which the CSR uses to 

respond to the call. The number of inquiries does not reflect the number of unique 

beneficiaries who called. 

CBP Online Contract 

Supplier Locator

CBP Beneficiary 

Assistance through 

1-800-MEDICARE 
Page 17 GAO-12-693 DME Competitive Bidding Program

outside a competitive bidding area to ensure the beneficiary continues to 

receive necessary DME.

CMS defines a CBP complaint as a CBP inquiry that cannot be resolved 

by any CSR with 1-800-MEDICARE and is sent to another entity for 

resolution. The CBP-related entities include: Palmetto GBA, the CMS 

regional offices, and the CAO.51 Palmetto GBA investigates all beneficiary 

or supplier complaints related to alleged CBP contract violations, supplier 

or quality standard violations, and CBP and Medicare program violations, 

including fraud and abuse. CMS’s regional offices are the focal point for 

unresolved calls; for example, the offices may assist when a CSR is 

unable to help a beneficiary find a contract supplier. The CAO responds 

to other unresolved CBP questions from both suppliers and individuals.

CMS conducts several monitoring activities to determine whether 

beneficiary access or satisfaction have been affected by the 

implementation of CBP. CMS monitors outcomes such as 

hospitalizations, physician visits, and deaths for beneficiaries in 

competitive bidding areas, because these outcomes may reflect issues 

with beneficiary access to necessary DME.52 CMS posts to its Web site 

monthly reports on these outcomes in competitive bidding areas and in 

comparison areas to demonstrate the effects of CBP on health outcomes.

CMS also conducted a pre and post-implementation survey to measure 

beneficiary satisfaction with CBP. The pre-implementation survey was 

conducted from June 24 to August 3, 2010, and the post-implementation 

survey was conducted from August 29 to October 20, 2011. CMS 

surveyed beneficiaries in the nine CBP competitive bidding areas as well 

as nine comparison markets, chosen to allow a comparison with 

competitive bidding areas.53

 

51The CAO program is within the Office of the Medicare Beneficiary Ombudsman, which is 

responsible for resolving inquiries and complaints for all aspects of the Medicare program.

CMS may also conduct secret shopping in 

52CMS publicizes health status monitoring results publicly available on its website at 

http://www.cms.gov/DMEPOSCompetitiveBid/01A3_Monitoring.asp#TopOfPage. 

53For example, for the Cincinnati competitive bidding area, CMS chose Indianapolis, 

Indiana as the comparison market.

CMS’s CBP Monitoring 

Activities
Page 18 GAO-12-693 DME Competitive Bidding Program

response to complaints such as those concerning diabetic testing 

suppliers.54

The number of bidding suppliers and the number of contracts awarded in 

the CBP round 1 rebid were very similar to CBP round 1. Improvements 

were made to the bidding process for the CBP round 1 rebid, and 

significantly fewer bids were disqualified; nevertheless, many suppliers 

still had difficulty meeting bid requirements. As in round 1, some suppliers 

that requested that CMS review their disqualified bids were found to have 

been incorrectly disqualified and offered a contract.

Nearly the same number of suppliers bid in both CBP round 1 (1,010 

suppliers) and the CBP round 1 rebid (1,011 suppliers). About a third of 

all the suppliers that bid were awarded at least one CBP contract, and 

CMS generally met its target—that 30 percent of the suppliers awarded a 

contract for each product category in each competitive bidding area be 

small—by awarding contracts to 219 small suppliers of the 356 winning 

suppliers.55,56 (See table 1.)

 

54In secret shopping, individuals posing as beneficiaries request items such as specific 

diabetic supplies from contract suppliers to determine whether the suppliers offer the 

supplies they say they furnish.

55To meet CMS’s 30 percent target for small supplier participation, small suppliers with 

bids that originally lost on price could be offered a contract if there were an insufficient 

number of small suppliers that won on price alone for each product category in each 

competitive bidding area. CMS’s inclusion of small suppliers that originally lost on price did 

not affect the original single payment amounts.

56In CBP round 1, 63 percent of the total number of suppliers that bid and were awarded 

at least one contract were small.

Outcomes of CMS’s 

Implementation of the 

CBP Round 1 Rebid

Nearly the Same Number 

of Suppliers Bid As in 

Round 1, and About the 

Same Percentage of 

Submitted Bids Resulted in 

Contracts 
Page 19 GAO-12-693 DME Competitive Bidding Program

Table 1: CBP Round 1 Rebid Contract Awards by Supplier Size as of November 3, 2010

Size of bidders Number of bidders Percentage of bidders

Number of bidders 

awarded contracts 

Percentage of bidders 

awarded contracts 

Small suppliers 619 61 219 62a

Large suppliers 340 34 137 38

Unknown 52 5 0 0 

Total 1,011 100 356 100

Source: CMS and Palmetto GBA data as of November 3, 2010.

Notes: Categories characterizing size are based on revenue reported on suppliers’ financial 

documents. Small suppliers reported gross revenues of $3.5 million or less in both Medicare and nonMedicare revenues and large suppliers reported more than $3.5 million in both Medicare and nonMedicare revenues. Bidders that did not report this information or submitted bid packages with 

missing financial documents are categorized as unknown.

a

According to CMS, 219 small suppliers—or 62 percent of all winning suppliers—received 51 percent 

of the total 1,217 contracts awarded as of November 3, 2010.

The number of bids that were disqualified in the initial bid review and, 

therefore, not eligible to compete on price was significantly less in 

CBP round 1 rebid than in CBP round 1. In CBP round 1 rebid, about 

30 percent of bids submitted were disqualified for at least one or more 

reasons (1,854 of 6,215 submitted). Therefore, about 70 percent of all 

bids submitted were qualified and used to determine the pivotal bid, which 

was then used to establish single payment amounts for each item that 

was included in the CBP round 1 rebid.57

About 20 percent of bids submitted in the CBP round 1 rebid resulted in 

contracts between CMS and suppliers (1,217 out of 6,215)—which is 

comparable to 22 percent of bids that resulted in contracts between CMS 

and suppliers in CBP round 1 (1,372 out of 6,374.) (See table 2 for 

round 1 rebid results.)

In contrast, in CBP round 1, 

almost 50 percent of bids submitted were disqualified during the initial bid 

review (3,143 of 6,374 submitted) and only about half of all bids submitted 

were qualified to compete on price.

 

57Because the median price of all bids equal or less than the pivotal bid was used to set 

single payment amounts for all competitively bid items, Medicare’s CBP payment amount 

could be less or more than a particular winning supplier’s actual bid for an item.
Page 20 GAO-12-693 DME Competitive Bidding Program

Table 2: CBP Round 1 Rebid Bid Counts by Process Step as of November 3, 2010

Process step

Number of 

round 1 rebid bids

Percentage of 

total bids reviewed

1. Bid review

Bids reviewed 6,215 100%

Bids disqualified on initial reviewa (1,854) 29.8

2. Winner selection

Qualified bids used to determine pivotal bids 4,361 70.2

Bids that lost only on price (3,074) 49.5

Bids that won on price, were contracts with small suppliers added 

to meet 30 percent target, or both

1,287 20.7

3. Contract offers

Initial round of contract offers 1,287 20.7

Contract offers rescinded by CMS after initial roundb (11) 0.2

Additional contract offers extendedc 48 0.8

4. Contract outcomes

Total contract offers made 1,324 21.3

Contract offers rejected by suppliersd (107) 1.7

Final contracts 1,217 19.6

Source: GAO analysis of CMS data as of November 3, 2010.

Notes: Numbers in parentheses are decreases. The number of bids submitted is higher than the 

number of bidding suppliers because suppliers could submit bids in multiple product categories and 

multiple competitive bidding areas.

a

Some of the bids that were disqualified during the initial bid review would have lost on price had they 

not been disqualified for at least one other reason. Some bids that were disqualified during the initial 

bid review were later found to have been incorrectly disqualified.

b

CMS made these contract offers, but later rescinded them because CMS found that commonlycontrolled or owned suppliers had submitted separate bids for the same product category in the same 

competitive bidding area. These suppliers were disqualified because suppliers are prohibited by CMS 

from bidding against themselves for the same product category in the same competitive bidding area.

c

After 107 contract offers were rejected, CMS extended additional contract offers to small suppliers in 

specific product categories and competitive bidding areas to meet CMS’s 30 percent target for small 

supplier participation.

d

CMS extended these contract offers, but suppliers did not accept them.

CMS made initial contract offers for CBP round 1 rebid within the 3-month 

period between July 1, 2010, and September 24, 2010, and announced 

the winning contract suppliers on November 3, 2010. Although CBP 

round 1 rebid contracts began on January 1, 2011, CMS made additional 

contract offers between December 17, 2010, and January 24, 2011.
Page 21 GAO-12-693 DME Competitive Bidding Program

Fewer bids were disqualified in CBP round 1 rebid and CMS provided 

additional feedback to suppliers that had bids disqualified, indicating to 

suppliers all the reasons for disqualification. While CMS improved the 

CBP bidding process, many suppliers still had difficulty complying with bid 

submission requirements, and had particular difficulty with financial 

documentation requirements. Although the majority of suppliers with 

disqualified bids that contacted CMS with questions were found to have 

been correctly disqualified, some suppliers were later found to have 

incorrectly disqualified bids and were offered contracts.

About 20 percent fewer bids were disqualified during the initial bid review 

of CBP round 1 rebid than in round 1. The number of bids disqualified in 

CBP round 1 rebid would have been higher if many suppliers had not 

benefited from a new process giving suppliers the opportunity to be 

notified of and submit missing required financial documentation58

Suppliers had bids disqualified for one or more reasons, and for the 

CBP round 1 rebid CMS increased its feedback to suppliers by using 

11 general reason codes—four more than were used in CBP round 1—to 

provide feedback to suppliers that had bids disqualified. For example, 

109 distinct

—a 

process that was not available during CBP round 1.

59

 

58Financial documentation means a financial, tax, or other document required to be 

submitted in order to meet CMS’s financial standards for CBP.

suppliers had 356 bids disqualified because they did not 

meet all state licensure requirements in every state of the competitive 

bidding areas for the product category in which they submitted bids. (See 

table 3.) In November 2010, CMS sent a letter to suppliers that were not 

offered a CBP contract notifying them of all the reasons that their bids 

were disqualified, including whether their bids would have lost on price—

59The term distinct is used to indicate a supplier that is not being double-counted. For 

example, if a supplier had multiple bids disqualified because the bids did not meet 

licensure requirements, the supplier is only counted one time for having bids disqualified 

for that reason. If a supplier had a bid disqualified for two or more reasons, the supplier 

would be counted as one distinct supplier for each reason that its bids were disqualified.

Despite Improvements and 

Fewer Bid 

Disqualifications, Many 

Suppliers Still Had 

Difficulty Meeting Bid 

Requirements

Fewer Bids Were Disqualified 

in CBP Round 1 Rebid
Page 22 GAO-12-693 DME Competitive Bidding Program

either for that reason alone or in addition to another bid submission 

deficiency reason.60

Table 3: Number and Percentage of CBP Round 1 Rebid Disqualified Bids by Reason for Disqualification as of November 3, 

2010 

Reason for bid disqualification

Bids disqualified 

during initial bid 

review

Percentage of bids 

disqualifieda

Unacceptable (incomplete or inaccurate) financial documentation

(Suppliers failed to submit hardcopy financial documentation as required) 834 45%

Did not meet all state licensure requirements

(Suppliers were responsible for meeting all applicable state licensure requirements for the 

product category in every state of a competitive bidding areas they submitted a bid) 356 19

Did not meet supplier financial standards

(Supplier financial standards indicated that CMS believed that the supplier was unlikely for 

financial reasons to be able to fulfill its contract obligations) 293 16

Missing required hardcopy documentation

(Suppliers must submit financial documentation in hardcopy) 216 12

Bid price for one or more item was deemed not bona fide

(All bid prices could not be higher than the Medicare fee schedule but not lower than the 

cost to the supplier) 169 9 

Did not meet accreditation requirements

(Suppliers must have been accredited by a CMS-approved accreditation organization for 

the product categories in which they submitted bids) 71 4 

National Supplier Clearinghouse (NSC) number was revoked or inactive

(Suppliers must have had an active NSC number to be eligible to bill Medicare for DME) 65 4 

Did not meet common ownership rulesb

(Commonly-owned or controlled suppliers were required to submit a single bid to furnish a 

product category in a competitive bidding area) 16 <1

Did not meet network criteria

(A network is a group of between two to 20 small suppliers that collectively submit a bid 

as a single entity and must meet certain criteria—including that they cannot independently 

furnish all of the items in the product category for which the network is submitting a bid to 

beneficiaries throughout the entire geographic area of the competitive bidding area) 12 <1

 

60A CMS official told us CMS changed the way it reported bid disqualifications for CBP 

round 1 rebid by establishing a CBP bid disqualification hierarchy that ranks a supplier’s 

bid disqualifications on the basis of the reason codes. Although a supplier that had a bid 

disqualified for more than one reason was notified of all reasons, the CMS official told us 

that CMS only counted a bid that was disqualified for more than one reason code once—

under the highest reason code of the hierarchy. If a bid was disqualified for any reason, 

but would have also lost on price, CMS included it under the “lost on price” reason code—

the highest code of its hierarchy.
Page 23 GAO-12-693 DME Competitive Bidding Program

Reason for bid disqualification

Bids disqualified 

during initial bid 

review

Percentage of bids 

disqualifieda

Did not meet eligibility requirements to bid as a specialty supplier

(A specialty supplier is a skilled nursing facility or nursing facility that is awarded a 

competitive bidding contract to furnish competitively bid items only to its own residents to 

whom it would otherwise furnish Medicare Part B services) 0 0 

Source: GAO analysis of CMS data as of November 3, 2010.

Notes: CMS issued CBP round 1 rebid bid instructions to inform suppliers about bid submission 

requirements.

In addition to the reasons for bid disqualification above, CMS also established a “lost on price” 

category. According to CMS, 1,273 of the 1,854 total bids disqualified—69 percent—would also have 

lost on price had the bid not been disqualified for at least one other reason.

a

Percentages add to more than 100 because a bid could be disqualified for more than one reason.

b

Two or more suppliers are commonly-owned if one or more of them has an ownership interest 

totaling at least five percent of the other supplier. A supplier controls another supplier if one or more 

of its owners is an officer, director, or partner in the other.

Although fewer bids were disqualified in CBP round 1 rebid, many 

suppliers had difficulty meeting the bidding requirements. As occurred in 

CBP round 1, in which 88 percent of disqualified bids were disqualified 

because they failed to provide the required financial documentation or did 

not meet CMS’s minimum financial standard threshold for suppliers, the 

majority of CBP round 1 rebid bids (73 percent) that were disqualified on 

initial bid review were also disqualified for the same reasons.61

Specifically, 44 distinct suppliers (about 4 percent of all bidding suppliers) 

had 293 bids disqualified because the bidding suppliers did not meet 

CMS’s minimum supplier financial standards. Bidding suppliers that did 

not meet minimum financial standards would be unlikely for financial 

reasons to be able to fulfill their contract obligations, in CMS’s judgment. 

In addition, 162 distinct suppliers (about 16 percent of all bidding 

suppliers) submitted 834 bids that were disqualified because of 

unacceptable or inaccurate financial documentation, while 51 distinct 

suppliers (about 5 percent of all bidding suppliers) submitted 216 bids 

with missing financial documentation.

The number of CBP round 1 rebid bids disqualified for missing financial 

documentation would have been higher without CMS’s implementation of 

the MIPPA provision for financial document review. Under this provision, 

 

61These bids may also have been disqualified for one or more other reasons.

Despite Improvements, Many 

Suppliers Had Difficulty with 

Financial Documentation 

Requirements 
Page 24 GAO-12-693 DME Competitive Bidding Program

CMS is required to determine if any suppliers’ financial documents that 

are submitted by a certain time in a CBP bid window—known as the 

covered document review date62—are missing and to notify and 

provide suppliers the opportunity to submit them.63

In both CBP round 1 and the CBP round 1 rebid, the statement of cash 

flow

In CBP round 1 rebid, 

791 suppliers—or 78 percent of all bidding suppliers—submitted their 

financial documentation by the covered document review date. Of those 

eligible to have their financial documentation reviewed, 321 suppliers 

(about 41 percent) were notified that they had missing documentation—

including 184 small suppliers. Of the 321 suppliers that were notified, 

232 suppliers submitted the correct missing documentation, 14 did not 

provide missing documentation, and 75 resubmitted their documentation, 

but were ultimately disqualified for unacceptable (such as incomplete or 

inaccurate) documents. Ninety-three of the 321 suppliers—about 

29 percent—that were notified by CMS that they had missing financial 

documentation, and subsequently provided correct documentation, were 

ultimately awarded one or more CBP contracts.

64

 

62MIPPA and implementing regulations define the covered document review date as the 

later of: (1) 30 days before the final date for the close of the bid window; or (2) 30 days 

after the bid window opens. For CBP round 1 rebid, CMS was required to notify eligible 

suppliers of missing financial documentation within 45 days after the end of the covered 

document review date. For future rounds, CMS must notify eligible suppliers of missing 

financial documentation within 90 days after the end of the covered document review date. 

MIPPA provided that the covered document review date only applies to the timely 

submission of financial documentation and does not apply to any determination by CMS 

as to the accuracy or completeness of the documentation submitted or whether the 

documents meet applicable financial requirements. 

was the most common reason that suppliers were disqualified for 

missing or unacceptable financial documentation. Although CMS provided 

an example of a statement of cash flow in the CBP round 1 rebid bidding 

instructions and suggested that financial statements be compiled by an 

independent accounting firm or prepared by the supplier, Palmetto GBA 

reported that it was obvious that many bidding suppliers still did not 

understand what constituted an acceptable statement of cash flow during 

the CBP round 1 rebid bid submission process. According to CMS, one 

reason that the statement of cash flow was the most difficult financial 

63Once notified, suppliers have 10 business days to submit missing financial 

documentation.

64The statement of cash flow contains 1 year of information for operating, financing, and 

investing activities and the beginning and ending cash balances.
Page 25 GAO-12-693 DME Competitive Bidding Program

document to prepare in both CBP rounds is because it is prepared much 

less often than other types of financial documents—particularly by small 

suppliers. CMS reported that another obstacle in preparing acceptable 

statements of cash flow is that suppliers with very limited understanding 

of accounting practices and how to prepare financial statements compiled 

the statements of cash flow themselves and relied on results generated 

by inexpensive accounting software, which CMS told us was not 

sufficient. As a result, CMS provided additional information in its CBP 

round 2 bidding instructions, and strongly recommended that suppliers’ 

financial statements be compiled by an independent accounting firm to 

discourage suppliers from preparing their own financial documents.

In the CBP round 1 rebid, as in CBP round 1, CMS determined that some 

suppliers’ bids had been incorrectly disqualified. During CBP round 1, we 

reported that CMS did not effectively communicate to suppliers that they 

had an opportunity to have their round 1 bids reviewed. CMS officials told 

us that they conducted a postbidding review process for suppliers which 

contacted the agency with questions or requested a review and 

subsequently found that 10 of the 357 round 1 suppliers that had bids 

reviewed had been incorrectly disqualified. After reviewing the language 

that CMS provided to suppliers during CBP round 1, we determined that 

CMS did not effectively communicate to suppliers that they had an 

opportunity to have disqualified round 1 bids reviewed. As a result, in 

2009, we recommended, and CMS agreed, that if CMS chose to conduct 

a review of disqualification decisions during CBP round 1 rebid and future 

bids, CMS should notify and give all suppliers an equal opportunity for 

review, and clearly indicate how suppliers can request a review.65

 

65Specifically, we recommended that to improve future rounds of the CBP, and if CMS 

decided to conduct a review of disqualification decisions during the CBP round 1 rebid and 

future rounds, CMS should notify all suppliers of any such process, give suppliers equal 

opportunity for such reviews, and clearly indicate how they can request a review. CMS 

responded that it agreed that all suppliers should receive notice about all aspects of the 

CBP and noted that all CBP round 1 bidders were specifically advised in writing of the 

opportunity to ask questions about their bid results. CMS also stated that it continues to 

believe that suppliers should have the opportunity to raise questions or concerns about 

the CBP, including disqualification decisions. Further, CMS stated that it continues to 

believe that the competitive bidding statute and regulations permit CMS to conduct quality 

assurance checks during the course of responding to bidders’ questions as part of CMS’s 

other extensive quality assurance efforts and that CMS remained committed to answering 

suppliers’ questions and will continue to ensure that all suppliers are sufficiently informed 

about opportunities for the CBP round 1 rebid and future rounds. See GAO-10-27. 

As in Round 1, CMS Found 

through Its Clarified 

Postbidding Review Process 

That Some Suppliers’ Round 1 

Rebid Bids Were Incorrectly 

Disqualified
Page 26 GAO-12-693 DME Competitive Bidding Program

Although the notification that CMS provided to suppliers during the CBP 

round 1 rebid provided more information than was provided during CBP 

round 1, CMS did not inform suppliers that a review of a disqualified bid 

could possibly result in reversal of the disqualification and extension of a 

contract offer. (See fig. 2.)

Figure 2: Excerpts from the Letters CMS Sent Bidding Suppliers Regarding the 

Opportunity for Postbid Review of Disqualified Bids in CBP Round 1 and CBP 

Round 1 Rebid

a

In CBP round 1, CMS sent a separate letter to suppliers that lost on price and suppliers that had bids 

disqualified for at least one other reason.

b

In the CBP round 1 rebid, CMS sent the same letter to suppliers that lost on price and had 

disqualified bids, and indicated all the reasons a supplier’s bid was disqualified—including whether 

the bid would have lost on price. CMS announced winning suppliers on November 3, 2010, so 

suppliers were given about 2 weeks to call the customer service center with questions or concerns 

regarding their losing bids. However, Palmetto GBA reported that it was continuing to receive 

inquiries from suppliers that had bids disqualified in CBP round 1 rebid as of June 17, 2011.
Page 27 GAO-12-693 DME Competitive Bidding Program

In both CBP rounds, CMS determined that some suppliers that contacted 

Palmetto GBA and requested a review of their bids had been incorrectly 

disqualified. (See table 4.) CMS told us it received bid inquiries from 

99 suppliers that had bids disqualified in CBP round 1 rebid and 

subsequently extended contracts to 7 of those suppliers—about 

7 percent. In CBP round 1, 10 suppliers—or 3 percent of the 357 

suppliers that contacted Palmetto GBA—were found to have bids that 

were incorrectly disqualified.66 Suppliers’ bids could have been incorrectly 

disqualified for various reasons, such as for issues regarding financial 

documentation, because they were thought not to have the required 

license in the state or product category in which bids were submitted, or 

because the bids were deemed not bona fide.67

Table 4: Results of CMS’s Post-Bid Review Process in CBP Round 1 and CBP Round 1 Rebid 

Postbid review CBP round 1 CBP round 1 rebid

Total number of bids submitted 6,374 6,215

Total number of bidding suppliers 1,010 1,011

Total number of suppliers that requested a review 357 99a

Total number of suppliers that were found to have bids that were incorrectly disqualified 10b 7 

Percentage of suppliers that were offered a contract as a result of the post-bid review 3% 7%

Source: GAO analysis of CMS and Palmetto GBA data.

a

Palmetto GBA reported that the decrease in the number of disqualified suppliers that requested a 

post-bid review during CBP round 1 rebid can be partly attributed to CMS indicating which disqualified 

bids would have lost on price if not disqualified for at least one other reason.

b

Ten suppliers were found to have been incorrectly disqualified, and 7 suppliers were offered 

contracts because they had bids equal to or less than the pivotal bid or were needed to meet CMS’s 

target for small supplier participation.

Both contract and non-contract suppliers have been affected by the first 

year of the CBP round 1 rebid. In the first months of 2011, few CBP 

contract suppliers had their contracts terminated by CMS, voluntarily 

canceled their contracts, or were involved in ownership changes. Since 

the CBP round 1 rebid began, many non-contract suppliers have chosen 

 

66Of the 10 suppliers that were incorrectly disqualified in CBP round 1, 7 suppliers were 

offered contracts for 27 bids because they had bids equal to or less than the pivotal bid or 

were needed to meet CMS’s small supplier participation goal.

67All bids must be bona fide, meaning that they cannot be higher than the Medicare fee 

schedule or lower than the supplier’s cost.

Effects on Suppliers 

of the First Year of the 

CBP Round 1 Rebid
Page 28 GAO-12-693 DME Competitive Bidding Program

to be grandfathered suppliers for certain CBP rental DME. Some contract 

and non-contract suppliers have entered into subcontracting agreements 

to provide certain services to beneficiaries in CBP competitive bidding 

areas. Some suppliers with no previous experience with the DME product 

category or no location in a competitive bidding area were awarded 

contracts as CBP allows.

During the first 10 months of 2011, 16 of the original 356 contract 

suppliers—4 percent—left CBP due to CMS terminating contract 

suppliers (8), or from contract suppliers voluntarily canceling their CBP 

contracts (8). (See table 5.) The 16 contract suppliers had 28 affected 

CBP contracts—about 2 percent of the 1,217 original CBP contracts.

Thirteen of the 16 contract suppliers were small suppliers.

Table 5: CBP Round 1 Rebid Contract Supplier Terminations and Cancelations, January 1 through October 31, 2011

Termination and cancelation reasons

Number of CBP 

contract suppliers

Number of CBP 

contracts

CMS terminations

• National Supplier Clearinghouse (NSC)a revoked supplier’s PTAN 

(provider transaction access number)

3 5 

• Contract supplier non-operational and not accredited 1 5 

• Contract supplier losing accreditation 2 3 

• Contract supplier being inactivated or non-operational 2 3 

Contract supplier cancelationsb

• Contract supplier being inactive and voluntarily withdrew from Medicare 7 8 

• Contract supplier had a change of ownership and voluntarily withdrew from 

Medicare

1 4 

Total 16 28

Source: GAO analysis of CMS data.

a

The NSC is a CMS contractor responsible for DMEPOS supplier enrollment in Medicare and may 

revoke a supplier’s enrollment, for example, if a supplier loses its Medicare accreditation.

b

Effective July 1, 2011, CMS decided to report contracts as canceled rather than terminated when the 

contract supplier voluntarily withdrew from Medicare through the NSC.

CBP contracts can be terminated by CMS when a contract supplier fails 

to meet CBP requirements, for example, when Medicare accreditation is 

not maintained. A contract supplier can end its CBP contracts by 

voluntarily withdrawing from Medicare. For example, one contract supplier 

testified at a CMS CBP Program Advisory and Oversight Committee 

(PAOC) meeting that it had bid on numerous product categories but won 

Four Percent of the 

Original Contract 

Suppliers Had Contracts 

Terminated or Canceled in 

CBP’s First 10 Months of 

2011
Page 29 GAO-12-693 DME Competitive Bidding Program

only one contract and would be closing its business due to lost revenue; 

the supplier withdrew from Medicare in May 2011.

Twenty-one of the 28 contracts involved two competitive bidding areas—

Miami (15) and Riverside (6). Eighteen contracts involved two product 

categories—oxygen (10) and standard power wheelchairs (8). The 

Riverside competitive bidding area had six of the eight standard power 

wheelchair contracts that were ended.

Eight DME supplier ownership changes—about 2 percent of the original 

356 contract suppliers—occurred from November 3, 2010, when the 

winning contract suppliers were first announced, through November 30, 

2011.68

Table 6: Eight Ownership Changes Involving CBP Contract Suppliers, November 3, 2010, through November 3, 2011

While contract suppliers can be sold, their CBP contracts cannot.

If a contract supplier’s ownership changes, CMS decides whether the 

CBP contract can be assumed by the new purchasing supplier—which 

can be another contract supplier or a non-contract supplier—by 

determining if the purchasing supplier meets the CBP contract supplier 

standards. In all nine changes, CMS determined that the new owners 

would assume the CBP contracts involved. (See table 6.)

Supplier ownership change transaction Which supplier assumes the involved CBP contract Total

Non-contract supplier purchases a 

contract supplier

CMS allows the purchasing non-contract supplier to assume the purchased 

contract supplier’s contract or contracts 4 

Contract supplier purchases another 

contract supplier

CMS allows the purchasing contract supplier to assume the purchased contract 

supplier’s contract or contracts 4 

Source: GAO analysis of CMS data.

 

68A change in ownership results in either (a) a new entity or company that did not exist 

before the merger or acquisition transaction; or (b) a successor entity or company that 

exists before the transaction, merges or acquires a contract supplier, and continues to 

exist as it did before the transaction. For this discussion, we use the terms purchase or 

bought to include both acquisitions and mergers.

Eight DME Contract 

Supplier Ownership 

Changes Occurred in 

CBP’s First 11 Months
Page 30 GAO-12-693 DME Competitive Bidding Program

The CBP provides a grandfathering option that temporarily benefits some 

non-contract suppliers while also temporarily disadvantaging some 

contract suppliers. For non-contract suppliers, grandfathering allows them 

to retain Medicare revenues for some CBP-covered capped rental DME 

items for the length of the items’ rental periods, if the beneficiary involved 

chooses to remain with the grandfathered supplier until the rental period 

expires. For contract suppliers that won CBP contracts for the same DME 

capped rental DME items, grandfathering may be a temporary 

disadvantage in both limiting the number of Medicare beneficiaries they 

can serve and the amount of Medicare revenue they can immediately try 

to gain. Unless the beneficiary served by a grandfathered supplier 

decides to choose a contract supplier, the contract suppliers cannot try to 

furnish items to the same beneficiary and thus cannot increase their CBP 

Medicare revenue as quickly as they may have anticipated.

The degree of grandfathering varies among the allowed product 

categories and competitive bidding areas.69 In CBP’s first 11 months of 

2011, the top three grandfathered product categories—both by the 

number of beneficiaries renting items and by the allowed Medicare 

payments to grandfathered suppliers—were CPAP/RAD,70 hospital beds, 

and oxygen.71 (See table 7.)

 

69CMS determines the grandfathered suppliers by whether they are submitting Medicare 

claims for furnishing CBP-covered DME items to the same beneficiary they were before 

CBP began on January 1, 2011.

70CPAP/RAD means continuous positive airway pressure devices and respiratory assist 

devices; CPAP may be used, for example, to treat sleep apnea.

71Since oxygen is rented for a much longer time period than the 13-month capped rental 

period, CMS decided grandfathered suppliers for oxygen would be paid at CBP single 

payment amounts; grandfathering suppliers furnishing capped rental items and 

inexpensive and routinely purchased DME are paid at the Medicare fee schedule.

CBP Grandfathering 

Option Temporarily Affects 

Medicare Revenues for 

Some Suppliers
Page 31 GAO-12-693 DME Competitive Bidding Program

Table 7: Top Three Grandfathered Product Categories, CBP Round 1 Rebid, January 2011 and November 2011 Compared 

Beneficiaries continuing to rent from the 

same supplier as before CBP

Allowed Medicare payments to 

grandfathered non-contract suppliers

Product category

(rental items only) January November January November

Oxygen 16,732 4,952 $2,167,352 $627,069

Hospital beds 9,462 850 976,108 81,289

CPAP/RAD 8,558 1,294 903,996 105,791

Total 34,752 7,096 $4,047,456 $814,149

Source: GAO analysis of CMS and CMS’s Pricing, Data Analysis and Coding contractor data as of November 30, 2011.

The number of grandfathered suppliers has generally steadily declined 

during 2011 as rental periods expire or beneficiaries chose contract 

suppliers. In January 2011 when the CBP round 1 rebid began, there 

were 1,364 grandfathered suppliers or 58 percent of the 2,363 suppliers 

that billed for beneficiaries they had been serving as of December 31, 

2010. In comparison, in December 2011, there were 575 grandfathering 

suppliers or 22 percent of the 2,594 suppliers that billed for beneficiaries 

they had been serving as of December 31, 2010. (See fig. 3.)
Page 32 GAO-12-693 DME Competitive Bidding Program

Figure 3: Percentage of DME Suppliers that Grandfathered in CBP Round 1 Rebid 

by Month, 2011

Notes: There were 2,363 DME suppliers that submitted Medicare claims in December 2010 for CBPcovered items in the nine CBP competitive bidding areas before CBP began on January 1, 2011. The 

percentage figure entry for each month is calculated using the number of grandfathering suppliers 

that submitted eligible Medicare claims that month. The 2011 monthly numbers of grandfathering 

suppliers fluctuate each month based on when suppliers submitted their Medicare claims.

At the end of July 2011, about 31 percent of contract suppliers had 

subcontracting agreements. There were 112 distinct72

Some contract suppliers that were new to the competitive bidding area 

where they won or were new to a product category they won have 

subcontracting agreements with non-contract suppliers. Among the 

contract suppliers 

that had at least one subcontracting agreement with one of 211 distinct 

subcontractor suppliers. Four contract suppliers had terminated some of 

their subcontracts, and three contract suppliers had subcontracting 

agreements pending CMS approval.

 

72The term distinct is used to indicate that a supplier is not being double-counted. For 

example, if the same contract supplier has numerous subcontractors, it is counted as one 

distinct contract supplier that is subcontracting.

About 31 Percent of CBP 

Contract Suppliers 

Reported They Had 

Subcontracts with Other 

Suppliers in CBP’s First 

8 Months
Page 33 GAO-12-693 DME Competitive Bidding Program

44 distinct contract suppliers that did not have a previous business 

location in the competitive bidding area where they won at least one 

contract, 30 percent (13 suppliers) had at least one subcontracting 

agreement with a non-contract supplier. For the 43 distinct contract 

suppliers that were new to a product category, 37 percent (16 suppliers) 

had at least one subcontracting agreement.73

Although CMS requires contract suppliers to notify it of their 

subcontracting agreements, contract suppliers do not have to provide 

CMS with copies of their subcontracting agreements or report what they 

pay their subcontract suppliers. Contract suppliers are free to negotiate 

their own subcontracting agreements as CMS does not have 

subcontracting guidelines or an agreement template. For example, one 

subcontract supplier told us it negotiated with a contract supplier for a flat 

rate for hospital bed deliveries of $60 and another subcontract supplier 

had a $75 rate; one also negotiated a $20 delivery fee for walkers. Two 

subcontract suppliers told us that they have a 30-day termination notice 

provision in their agreements with contract suppliers.

As allowed under CBP, CMS awarded round 1 rebid contracts to some 

suppliers that at the time they bid had no previous experience in at least 

one product category, or were new to at least one competitive bidding 

area—did not have a prior business location in the area—or both.74 There 

were 43 distinct75

 

73Although these contract suppliers have subcontracts, it is not known whether the 

subcontracts are related to the contract supplier not having had prior experience in a 

product category or not having had a prior business location in the competitive bidding 

area.

contract suppliers new to a product category and 

44 new to a competitive bidding area—each were about 12 percent of the 

356 original contract suppliers awarded contracts. Nine distinct contract 

suppliers were new to both a product category and a competitive bidding 

area; four of these were small suppliers.

74All suppliers offered a CBP contract must be accredited and licensed.

75We determined the number of distinct suppliers, since contract suppliers can be counted 

more than once if they are new to more than one product category or more than one 

competitive bidding area.

As CBP Allows, Some 

Suppliers with No Previous 

Experience in a Product 

Category or with No 

Location in a Competitive 

Bidding Area Were 

Awarded Contracts
Page 34 GAO-12-693 DME Competitive Bidding Program

Of the 43 distinct contract suppliers with no previous experience for a 

product category they won, 23 are small suppliers. The enteral nutrition76

Table 8: Contract Suppliers New to a Product Category, CBP Round 1 Rebid

product category had the most contract suppliers new to a product 

category—19; the complex power wheelchairs product category had 

none. (See table 8.)

Product category

Contract 

suppliers new 

to the product 

category 

Percentage of contract 

suppliers new to the product 

category compared to all 

contract suppliers in the 

product category

1 Enteral nutrients 19 13%

2 Oxygen and oxygen equipment 10 5 

3 Walkers 10 8 

4 Hospital beds 9 9 

5 CPAP/RAD 6 6 

6 Mail-order diabetic supplies 6 29

7 Standard power wheelchairs 5 4 

8 Support surfaces (Miami only) 3 21

9 Complex power wheelchairs 0 0 

Total 68

Source: GAO analysis of CMS data.

Notes: Since contract suppliers may be new to more than one product category, some suppliers are 

counted more than once. Among the 68 contract suppliers new to a product category, there are 

43 distinct contract suppliers among the nine product categories. The entries in the percentage 

column are based on the percentage of contract suppliers that are new to the product category as 

compared to all contract suppliers in the same product category; the percentage column’s entries do 

not, therefore, add up to 100 percent.

Additionally, 44 distinct contract suppliers were new to a competitive 

bidding area where they won at least one contract; 18 were small 

suppliers. While all of the competitive bidding areas had suppliers new to 

the area, the Cleveland competitive bidding area had the most (21), and 

the Miami area had the least (3). (See table 9.)

 

76Enteral nutrition equipment and supplies are used to provide enteral nutrients through a 

tube into the stomach or small intestine commonly referred to as tube feeding.
Page 35 GAO-12-693 DME Competitive Bidding Program

Table 9: Contract Suppliers New to a Competitive Bidding Area, CBP Round 1 Rebid

Competitive bidding area

Distinct contract 

suppliers new to 

the competitive 

bidding area

Percentage of distinct 

contract suppliers new to 

the competitive bidding 

area compared to 

all distinct contract 

suppliers for the area

1 Cleveland 21 34%

2 Pittsburgh 16 26

3 Cincinnati 13 20 

4 Charlotte 11 19

5 Kansas City 11 21

6 Orlando 10 15

7 Riverside 8 12

8 Dallas 4 5 

9 Miami 3 3 

Total 97

Source: GAO analysis of CMS data.

Notes: Since contract suppliers may be new to more than one competitive bidding area, some 

suppliers are counted more than once. Among the nine competitive bidding areas, there are 

97 suppliers new to areas—44 are distinct contract suppliers. The entries in the percentage column 

are based on the percentage of contract suppliers that are new to a competitive bidding area as 

compared to all contract suppliers in the same competitive bidding area; the percentage column’s 

entries do not, therefore, add up to 100 percent.

CMS’s monitoring efforts reported declining inquiries and complaints over 

the first year of CBP implementation, high levels of beneficiary 

satisfaction, and no changes in health outcomes. Although some of these 

efforts have limitations, in the aggregate, they provide useful information 

to CMS regarding beneficiary access and satisfaction.

Although CMS’s 

Monitoring Activities 

Have Limitations, 

They Indicate that 

Beneficiary Access 

and Satisfaction Have 

Not Been Affected by 

CBP
Page 36 GAO-12-693 DME Competitive Bidding Program

Information collected from CMS’s monitoring of inquiries to 

1-800-MEDICARE suggests that CBP has not adversely affected 

beneficiary access to or satisfaction with DME. Calls to 1-800-MEDICARE 

regarding CBP declined during the first year of CBP implementation, and 

2 percent of calls were from beneficiaries with an urgent need for CBPcovered DME. CBP-related calls comprised a small fraction of all calls to 

1-800-MEDICARE.

In 2011, CMS classified 127,466 CBP-related calls to 1-800-MEDICARE 

as inquiries. (See fig. 4.) The total number of CBP-related inquiries to 

1-800-MEDICARE declined from 19,887 in January 2011 to 4,501 in 

December 2011. In the first 3 months of CBP implementation, most 

inquiries were regarding CBP in general. In subsequent months, there 

were more inquiries about specific CBP-covered products than about 

CBP generally. Over 2 million beneficiaries were involved in CBP round 1 

rebid; the ratio of inquiries to 1-800-MEDICARE compared with CBP 

beneficiaries is approximately 1 inquiry for every 16 beneficiaries.77

 

77According to CMS, each beneficiary may make more than one call to 1-800-MEDICARE, 

and each call would be classified as at least one inquiry. The ratio does not represent the 

percentage of beneficiaries who called 1-800-MEDICARE. 

CBP Inquiries and 

Complaints Decreased 

During CBP’s First Year 

2011
Page 37 GAO-12-693 DME Competitive Bidding Program

Figure 4: Number of CBP Inquiries to 1-800-MEDICARE by Month, 2011

Inquiries to 1-800-MEDICARE regarding CBP comprise less than one-half 

of 1 percent of inquiries to 1-800-MEDICARE. On average, CBP-related 

calls to 1-800-MEDICARE comprise nearly 13 percent of all DMEPOSrelated calls. The proportion of DME-related 1-800-MEDICARE inquiries 

pertaining to CBP fell in 2011 from 19 percent in the first quarter to less 

than 7 percent in the fourth quarter. (See fig. 5.) Inquiries and complaints 

to 1-800-MEDICARE regarding DMEPOS in general, including CBPrelated calls, have remained fairly steady from 2010 to 2011.
Page 38 GAO-12-693 DME Competitive Bidding Program

Figure 5: Percent of CBP-related Inquiries to 1-800-MEDICARE Compared to All 

DMEPOS-related Inquiries by Quarter, 2011

Note: DMEPOS-related inquiries include CBP inquiries.

The majority of product-specific inquiries to 1-800-MEDICARE—over 

40,000—were about mail-order diabetic supplies. There were 

approximately 5,000 inquiries regarding standard power wheelchairs, 

4,000 inquiries regarding CPAP/RAD, and 3,000 regarding walkers. (See 

fig. 6.)
Page 39 GAO-12-693 DME Competitive Bidding Program

Figure 6: Number of CBP Inquiries to 1-800-MEDICARE by CBP Round 1 Rebid Product Category by Quarter, 2011

CSRs at 1-800-MEDICARE may respond to beneficiaries with timesensitive inquiries. In 2011, there were no life-threatening inquiries related 

to CBP78

 

78Life-threatening inquiries are defined as situations in which without assistance, 

beneficiaries would be unable to access equipment needed immediately to sustain life. In 

life-threatening situations, CSRs instruct beneficiaries to call 911.

and 2,539 immediate-needs inquiries—about 2 percent of all 

inquiries. Immediate needs inquiries are defined as situations in which 
Page 40 GAO-12-693 DME Competitive Bidding Program

beneficiaries have less than 2 days of life-sustaining DME, or in which 

beneficiaries’ medical condition will be worsened if they are unable to 

access DME.

In the first year of CBP, CMS classified 151 calls as complaints. (See 

fig. 7.) Seventy-seven percent of these complaints—or 116 complaints—

occurred in the first half of 2011.

Figure 7: CBP Complaints to 1-800-MEDICARE by Quarter, 2011

CMS’s definition of inquiry and complaint may be an optimistic 

characterization of beneficiary calls. According to CMS, all calls are first 

classified as inquiries and are only classified as complaints when they 

remain unresolved by CSRs. However, CSRs are able to address most 

beneficiary inquiries, so the definition of inquiry encompasses the majority 

of types of calls to 1-800-MEDICARE. Inquiries may be recorded as 

complaints because of their level of complexity, rather than as a reflection 

of beneficiary dissatisfaction. CMS officials told us CSRs may forward 

complex inquiries to another entity for response, and these inquiries 

would be classified as complaints regardless of whether the beneficiary 

intended to log a complaint.

CBP Complaints 

Decreased During 2011, 

But CMS’s Definition of 

Complaint May Not Reveal 

Beneficiary Access 

Problems
Page 41 GAO-12-693 DME Competitive Bidding Program

CMS has multiple ongoing monitoring efforts to ensure that CBP 

beneficiaries can access DME and are satisfied with the program. While 

these tools have limitations, CMS’s monitoring of the first year of CBP 

implementation does not show evidence that beneficiaries have been 

affected negatively by CBP. Some of these tools—such as the beneficiary 

satisfaction survey—finished collecting data at the end of 2011. CMS’s 

claims and health outcomes monitoring tool found no changes in health 

outcomes in competitive bidding areas in 2011, but this method may not 

fully capture the relationship between access to DME and health 

outcomes. Other tools—such as secret shopping—are limited in scope, 

so their data will not provide beneficiary access information on the 

program as a whole.

The results of CMS’s beneficiary satisfaction survey were generally 

positive, although the survey had limitations. CMS obtained responses 

from at least 400 beneficiaries in each of the nine competitive bidding 

areas, and in each of nine non-CBP comparison markets—areas chosen 

to closely match the makeup of each of the competitive bidding areas. 

Responses were collected by telephone in these 18 locations both preCBP and post-CBP. The survey collected beneficiary satisfaction ratings 

on a five-point scale for six topic questions about the beneficiary’s initial 

interaction with DME suppliers, the training received regarding the DME 

item, the delivery of the DME item, the quality of service provided by the 

supplier, the customer service provided by the supplier, and the supplier’s 

overall complaint handling. Respondents answered these questions with 

one of five options from “very poor” to “very good.”79

The survey design did not capture responses from beneficiaries living in 

those locations who may have needed, but did not obtain, DME during 

the period; that is, if a beneficiary’s access problems resulted in his not 

receiving DME, that beneficiary would not be included in the survey. The 

survey’s sampling methodology also did not ensure that all socioeconomic groups were represented, so it does not confirm that all 

beneficiaries within an area had equal access.

Follow-up questions 

were not used to obtain more detailed information.

 

79Respondents could also answer “not applicable.”

CMS Monitored 

Beneficiary Satisfaction 

and Health Outcomes 

During the First Year of 

Implementation 
Page 42 GAO-12-693 DME Competitive Bidding Program

CMS’s beneficiary satisfaction survey did not reveal systemic beneficiary 

access or satisfaction problems with CBP. For all six questions in the 

competitive bidding areas, approximately 67 percent of beneficiaries 

reported their services as being “very good”. Beneficiaries in competitive 

bidding areas rated as “good” or “very good” their initial interaction with 

the DME supplier (89 percent), the training received (86 percent), delivery 

(91 percent), quality (90 percent), customer service (88 percent), and 

complaint handling (84 percent). Results within competitive bidding areas 

show a drop of one to three percentage points on each of the six 

questions from pre-implementation to post-implementation. Beneficiaries 

in the comparison markets rated their experiences similarly to those in 

competitive bidding markets: these beneficiaries rated as “good” or “very 

good” their initial interaction with the DME supplier (93 percent), the 

training received (89 percent), delivery (93 percent), quality (93 percent), 

customer service (91 percent), and complaint handling (88 percent).

CMS’s daily monitoring of national Medicare claims data in real time 

found no changes in health outcomes in competitive bidding areas in 

2011, but this method may not fully capture the relationship between 

access to DME and health outcomes. CMS tracks health outcomes—

such as hospitalizations, emergency room visits, physician visits, 

admissions to skilled nursing facilities, and deaths—for beneficiaries likely 

to use a CBP-covered product and who have used a CBP-covered 

product, in both competitive bidding areas and similar comparison areas. 

CMS reports that, in 2011, the rate of use of hospital services, emergency 

room visits, physician visits, and skilled nursing facility care for 

beneficiaries in competitive bidding areas remained consistent with 

national trends. While these results are reassuring, these measures do 

not show directly whether beneficiaries received the DME they needed on 

time, or whether health outcomes were caused by problems accessing 

CBP-covered DME.

In the first 6 months of 2011, CMS’s online supplier locator tool may not 

have provided beneficiaries with up-to-date item availability for two 

reasons. First, CMS’s update of its requirements after the second quarter 

no longer required suppliers to list the brands and models they had made 
Page 43 GAO-12-693 DME Competitive Bidding Program

available to beneficiaries in the previous quarter.80 Therefore, CMS did 

not have records of supplies actually furnished, only of the type of 

supplies that contract suppliers intended to furnish. Second, suppliers we 

spoke with reported problems submitting the required forms in the first 

quarter of 2011, which may have caused a delay in updating information 

on the online supplier locator tool. These suppliers reported that the 

online submission form was unavailable during the period they were 

required to submit their first quarter data. They told us they had to submit 

hard copies of the forms, a time-consuming process which may have 

caused delays in reporting.

CMS data show that fewer distinct beneficiaries81 in competitive bidding 

areas received CBP-covered DME items in 2011 than in 2010 for the six 

product categories that we analyzed.82 However, we do not assume that 

the utilization in 2010 was the appropriate level of Medicare utilization and 

the decline in the number of beneficiaries served between 2010 and 2011 

does not necessarily indicate that beneficiaries did not have access to 

needed DME. For example, the number of beneficiaries served in 2010 

may have been inflated by suppliers billing for unnecessary items; and 

2011 claims data may not yet be complete. Data on the utilization of mailorder diabetic testing supplies is limited because some beneficiaries used 

non-CBP retail suppliers.

 

80Initially, CMS required contract suppliers to submit a “form c” including information on 

both the brands supplied in the prior quarter and the brands they expected to furnish for 

the upcoming quarter. CMS issued a notice on September 28, 2011, stating that for the 

third quarter of 2011, contract suppliers only need to submit information on the brands and 

models they plan to offer during the next quarter, and are no longer required to provide 

information on items furnished during the previous quarter.

81Each distinct Medicare beneficiary is only counted once in each of the 6 months

analyzed in 2010 and 2011 for each product category in a competitive bidding area, 

regardless of how many items that beneficiary received.

82We did not include these round 1 rebid product categories: (1) the mail-order diabetic 

testing supplies category due to some beneficiaries switching to non-mail order sources, a 

concern being studied by the HHS OIG; (2) the complex power wheelchair category due to 

potential data reliability concerns reported by a CMS contractor; and (3) the support 

surfaces category because it is limited to only the Miami competitive bidding area in the 

round 1 rebid.

Early Data Indicate 

Some Decreases in 

DME Utilization
Page 44 GAO-12-693 DME Competitive Bidding Program

For the six CBP product categories we analyzed for CBP’s first 6 months 

of 2011, initial Medicare claim data trends generally indicate a decrease 

in the number of CBP-covered Medicare beneficiaries who were furnished 

certain CBP-covered items.83 The decrease is evident when comparing 

changes in the number of distinct CBP-covered beneficiaries served in 

2011 compared to 2010 in both the nine competitive bidding areas and 

non-competitive bidding areas.84

• CBP’s round 1 rebid competitive bidding areas were selected by 

CMS, in part because they had high utilization, implying that some 

utilization may have been unnecessary.

However, such decline in the number of 

beneficiaries served does not necessarily indicate beneficiaries do not 

have access to needed DME as CMS told us that possible reasons for the 

decline in utilization may be the result of:

• CBP bidding requirements may have eliminated some suppliers that 

previously may have been involved in potentially fraudulent Medicare 

claims billing which could have inflated pre-CBP utilization. CBP 

Medicare claims can be more closely monitored for possible fraud 

because there are fewer suppliers furnishing items.

• Some suppliers may have increased their Medicare claims 

submissions prior to the CBP round 1 rebid’s start date, which could 

have inflated 2010 utilization. 

• Because suppliers have up to 1 year from the date of service to 

submit claims, the 2011 claims data may not yet be complete.

For the CPAP/RAD product category, the number of distinct CBP-covered 

beneficiaries who were furnished these items in the nine CBP competitive 

bidding areas was smaller in each of the first 6 months of 2011 than in the 

 

83Medicare claims for the first 6 months of 2011 are based on data from claims processed 

as of February 17, 2012. Our analysis compares the change in the number of distinct 

Medicare beneficiaries furnished certain CBP-covered items in each product category—

those among the top 34 HCPCS codes items that CMS determined represent the top 

80 percent highest cost and highest utilization—in the nine competitive bidding areas and 

in non-competitive bidding areas. DME items included in our analysis are included in 

appendix I.

84Our analysis used the 2010 utilization data for comparison because it was the year 

immediately prior to CBP beginning in January 2011, and does not assume that 2010’s 

utilization is the appropriate level for any of the CBP product categories.

Early Data Generally 

Indicate Utilization 

Decreases for Six CBP 

Product Categories
Page 45 GAO-12-693 DME Competitive Bidding Program

same months of 2010. For example, in May 2010, 21,382 beneficiaries 

residing in the competitive bidding areas were furnished one or more 

CPAP/RAD product category items, while in May 2011, the number of 

beneficiaries furnished these items had declined by about 8 percent to 

19,572. In contrast, in non-CBP competitive bidding areas, more 

beneficiaries were served in each of the first 6 months of 2011 compared 

to the same months in 2010. For example, in May 2010, 308,728 

beneficiaries not residing in competitive bidding areas were furnished one 

or more CPAP/RAD product category items, while in May 2011, the 

number of beneficiaries furnished these items had risen to 333,746—for 

an increase of about 8 percent. (See fig. 8.)

Figure 8: Change in the Number of Distinct Medicare Beneficiaries Furnished 

Selected CBP-covered CPAP/RAD Product Category Items; Round 1 Rebid’s First 

6 Months 2011

Notes: This analysis was based on Medicare claims data for the first 6 months of 2011, processed as 

of February 17, 2012. Our analysis is based on the 6 HCPCS codes related to this product category 

that are among the 34 HCPCS codes across all CBP product categories that CMS determined are the 

top 80 percent highest cost and highest utilization codes. (See appendix 1.) 
Page 46 GAO-12-693 DME Competitive Bidding Program

For the enteral product category, there were fewer beneficiaries served in 

both the nine CBP competitive bidding areas and the non-competitive 

bidding areas in the first 6 months of 2011 compared to the same months 

of 2010. However, for every month between January and June, the 

number of beneficiaries served in competitive bidding areas showed a 

larger decrease from 2010 to 2011 than occurred in the same month for 

non-competitive bidding areas. For example, in May 2010, 5,378 

beneficiaries residing in the competitive bidding areas were furnished one 

or more enteral product category items, while in May 2011, the number of 

beneficiaries furnished these items had decreased by almost 15 percent 

to 4,576. Similarly, in May 2010, 62,298 beneficiaries not residing in 

competitive bidding areas were furnished one or more enteral product 

category items, while in May 2011, the number of beneficiaries furnished 

these items decreased by about 9 percent to 56,680. Although both CBP 

competitive bidding areas and the non-competitive bidding areas showed 

a decrease in the number of beneficiaries served in May 2011 as 

compared to May 2010, the competitive bidding areas had an additional 

6 percent decrease than the non-competitive bidding areas. (See fig.9.)
Page 47 GAO-12-693 DME Competitive Bidding Program

Figure 9: Change in the Number of Distinct Medicare Beneficiaries Furnished 

Selected CBP-covered Enteral Product Category Items; Round 1 Rebid’s First 

6 Months 2011

Notes: This analysis was based on Medicare claims data for the first 6 months of 2011, processed as 

of February 17, 2012. Our analysis is based on the 4 HCPCS codes related to this product category 

that are among the 34 HCPCS codes across all CBP product categories that CMS determined are the 

top 80 percent highest cost and highest utilization codes. (See appendix 1.) 

For the hospital beds product category, the number of distinct CBPcovered beneficiaries who were served these items was smaller in each 

of the first 6 months of 2011 than in the same months of 2010. (See 

fig. 10.) In non-CBP competitive bidding areas, more beneficiaries were 

served in the first 3 months of 2011 than in the first 3 months of 2010 but 

progressively fewer beneficiaries were served in April, May, and June of 

2011 than in the same months of 2010.
Page 48 GAO-12-693 DME Competitive Bidding Program

Figure 10: Change in the Number of Distinct Medicare Beneficiaries Furnished 

Selected CBP-covered Hospital Bed Product Category Items; Round 1 Rebid’s First 

6 Months 2011

Notes: This analysis was based on Medicare claims data for the first 6 months of 2011, processed as 

of February 17, 2012. Our analysis is based on the 3 HCPCS codes related to this product category 

that are among the 34 HCPCS codes across all CBP product categories that CMS determined are the 

top 80 percent highest cost and highest utilization codes. (See appendix 1.) 

For the oxygen product category, the number of distinct CBP-covered 

beneficiaries who were served these items in the nine CBP competitive 

bidding areas was smaller in each of the first 6 months of 2011 than in the 

same months of 2010. (See fig. 11.) Similar to what occurred for the 

hospital bed category, in non-CBP competitive bidding areas, more 

beneficiaries were served in the first 3 months of 2011 than in the first 

3 months of 2010, but progressively fewer beneficiaries were served in 

April, May, and June of 2011 than in the same months of 2010.
Page 49 GAO-12-693 DME Competitive Bidding Program

Figure 11: Change in the Number of Distinct Medicare Beneficiaries Furnished 

Selected CBP-covered Oxygen Product Category Items; Round 1 Rebid’s First 

6 Months 2011

Notes: This analysis was based on Medicare claims data for the first 6 months of 2011, processed as 

of February 17, 2012. Our analysis is based on the 6 HCPCS codes related to this product category 

that are among the 34 HCPCS codes across all CBP product categories that CMS determined are the 

top 80 percent highest cost and highest utilization codes. (See appendix 1.) 

For the standard power wheelchair product category, the number of 

distinct CBP-covered beneficiaries who were served these items in the 

nine CBP competitive bidding areas was also smaller in the first 6 months 

of 2011 than in the same months of 2010.85

 

85CMS told us that it found a noticeable spike in the number of standard power 

wheelchairs furnished in December 2010 for several competitive bidding areas. CMS said 

that there were 44 percent more claims in December 2010 than the average month in 

2010 across all competitive bidding areas for this product category. 

While we included 

information about changes in utilization of the standard power wheelchair 
Page 50 GAO-12-693 DME Competitive Bidding Program

product category in competitive bidding areas, we did not include like 

information for non-competitive bidding areas because CMS changed the 

payment policy for standard power wheelchairs in non-competitive 

bidding areas only, making comparison to non-competitive bidding areas 

difficult. The payment policy change, effective January 1, 2011, 

eliminated the option for the lump sum purchase payment for standard 

power wheelchairs in all non-competitive bidding areas. (See fig. 12.) We 

also did not include utilization data for the complex wheelchair product 

category as it is unreliable due to suppliers’ inconsistent use of Medicare 

claims payment modifiers.86

 

86Through its Pricing, Data Analysis and Coding Contractor-generated CBP monitoring 

reports, CMS has determined that some contract suppliers have been inconsistently using 

the Medicare claim payment modifiers for some items’ HCPCS codes that are included in 

both the CBP standard and complex power wheelchair product categories. Because the 

two product categories have different CBP payments for the same items, the payment 

modifiers distinguish whether the item is for a standard or a complex power wheelchair.
Page 51 GAO-12-693 DME Competitive Bidding Program

Figure 12: Change in the Number of Distinct Medicare Beneficiaries Furnished 

Selected CBP-covered Standard Power Wheelchair Product Category Items; 

Round 1 Rebid’s First 6 Months 2011

Notes: This analysis was based on Medicare claims data for the first 6 months of 2011, processed as 

of February 17, 2012. Our analysis is based on the 3 HCPCS codes related to this product category 

that are among the 34 HCPCS codes across all CBP product categories that CMS determined are the 

top 80 percent highest cost and highest utilization codes. (See appendix 1.) 

For the walkers product category, the number of distinct CBP-covered 

beneficiaries who were furnished these items in the nine CBP competitive 

bidding areas was smaller in each of the first 6 months of 2011 than in the 

same months of 2010.87

 

87CMS told us that the Medicare claims data for walkers may not capture a CBP 

exemption that allows physicians and other practitioners to furnish certain items, such as 

walkers, to their own patients as part of their professional service and hospitals to furnish 

certain items to the hospital’s own patients during an admission or on the date of 

discharge.

While more beneficiaries were served in nonCBP competitive bidding areas in January 2011 than in January 2010, 
Page 52 GAO-12-693 DME Competitive Bidding Program

fewer beneficiaries were served in February through June of 2011 

compared to the same months of 2010. (See fig. 13.)

Figure 13: Change in the Number of Distinct Medicare Beneficiaries Furnished 

Selected CBP-covered Walkers Product Category Items; Round 1 Rebid’s First 

6 Months 2011

Notes: This analysis was based on Medicare claims data for the first 6 months of 2011, processed as 

of February 17, 2012. Our analysis is based on the 3 HCPCS codes related to this product category 

that are among the 34 HCPCS codes across all CBP product categories that CMS determined are the 

top 80 percent highest cost and highest utilization codes. (See appendix 1.) 
Page 53 GAO-12-693 DME Competitive Bidding Program

Although CBP-covered beneficiaries pay less for their diabetic testing 

supplies if they choose a CBP mail-order contract supplier, CMS has 

determined that some CBP-covered beneficiaries who had been receiving 

their supplies by mail-order in 2010 have been switching to non-mailorder sources in 2011. This switching would decrease both CBP’s mailorder utilization and its anticipated Medicare savings.

CBP’s diabetic testing supplies product category is the only category that 

allows CBP-covered beneficiaries to choose how to receive their 

supplies—delivered by mail-order from a CBP contract supplier or 

furnished by a non-mail-order retail or storefront supplier. The 

beneficiary’s choice determines whether the CBP-covered supplies are 

paid at the CBP single payment amounts or at the Medicare fee schedule 

payments, and whether the beneficiary’s coinsurance is based on the 

lower CBP payment or the higher fee schedule payment.

The HHS OIG is studying the extent to which and why beneficiaries have 

switched from mail-order to non-mail-order suppliers between 2010 (the 

year prior to CBP) and 2011 (the first year of CBP).

88 There are concerns 

that suppliers may be providing testing supplies by mail-order but billing 

at the non-mail-order fee schedule payments, or may be incentivizing 

beneficiaries to choose non-mail-order instead of mail-order. The HHS 

OIG has stated that either of these activities could affect CBP mail-order 

utilization and projected CBP Medicare savings.

 

88In order to not duplicate efforts, we consulted with the HHS OIG about its work and 

agreed to focus our work on the aggregate CBP mail-order utilization. Since these data 

are affected by beneficiaries switching from mail or non-mail-order, and the reasons for 

the switching are being studied by the OIG, we determined that, at this point in the CBP, 

the utilization data were unreliable for our purposes.

CBP’s Mail-order Diabetic 

Testing Supplies Utilization 

Data Affected by Some 

CBP-covered Beneficiaries 

Choosing Higher Cost 

Non-CBP Non-mail-order 

Retail Suppliers
Page 54 GAO-12-693 DME Competitive Bidding Program

Both CMS and suppliers incurred costs related to CBP. However, CMS 

estimates that CBP savings to Medicare and to beneficiaries are greater 

than its costs.

CMS told us that it spent nearly $20 million on pre-implementation costs 

for the CBP round 1 rebid from May 2009 through December 2010. In 

August 2009, CMS began the suppliers’ bidding education campaign, and 

the round 1 rebid bid window opened on October 21, 2009. The CBP 

costs incurred during this time included outreach materials for 

beneficiaries, referral agents, and others, an IT contract, and other 

implementation costs. (See table 10.)

Table 10: CMS Operational Costs for CBP, May 2009 through December 2010

Cost description Cost to CMS Percentage of total cost

Palmetto GBA contract to implement CBP $11,466,333 58.24%

CMS CBP-related administrative costsa 3,002,000 15.25

Public outreach materials related to CBP 2,516,294 12.78

IT contract for CBP bid submission systemb 1,597,614 8.11

CAO and office to respond to CBP-related questions and complaintsc 1,000,666 5.08

PAOC meetingsd 105,000 0.53

Total $19,687,907 100

Source: GAO analysis of information provided by CMS.

Notes: This table does not include training and salaries for 1-800-MEDICARE phone workers, script 

answer development, or CMS regional office caseworkers. While CMS trained CSRs to respond 

solely to CBP-related calls, CMS did not provide cost information for these CSRs.

a

CMS’s internal administrative costs include 12 CMS staff that primarily work on CBP in the Division 

of DMEPOS Policy or the Division of DMEPOS Competitive Bidding, using average salary and other 

employment costs of $158,000 per employee.

b

CMS developed the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies bidding 

system (DBidS) to correct the operational problems identified in the previous system.

c

Costs for the CAO and her office include four employees using average salary and other 

employment costs of $158,000 per employee.

d

PAOC members are appointed by the HHS Secretary to advise CMS on implementing the CBP. One 

PAOC meeting was held during this time period on April 5, 2011.

Both CMS and DME 

Suppliers Incurred 

Costs During the CBP 

Round 1 Rebid, but 

CMS Estimates 

Significant Medicare 

Savings 

CMS Reported Costs of 

Nearly $20 Million in the 

18 Months Prior to the 

Round 1 Rebid Start, and 

Contract Suppliers 

Reported Varying Costs to 

Participate
Page 55 GAO-12-693 DME Competitive Bidding Program

In its 2007 CBP Final Rule, CMS estimated that a bidding supplier spends 

an average of $2,303.16 to prepare bids for CBP, and in May 2011, CMS 

officials told us that this estimate had not changed. Suppliers and supplier 

organizations told us they incurred varying costs when preparing a bid, 

including fees for legal and financial services. For example, one supplier 

hired a new staff member to oversee the bidding process, and some 

suppliers reported paying for assistance in compiling the required 

financial documentation. Some suppliers reported additional legal 

services to prepare their bids.

Contract suppliers also incurred expenses for participating in the 

program. Winning suppliers may incur additional expenses to fulfill their 

contractual obligations—for example, one supplier told us that it paid up 

to $1,500 for updates to a software program in order to provide CMS the 

data required under CBP. Suppliers that subcontract with contract 

suppliers stated that they also incur expenses, such as the costs involved 

in negotiating an agreement with the contract supplier.

CMS’s estimated savings to both the Medicare program and beneficiaries 

is significantly higher than its costs. In a 2012 report,89 CMS estimated 

the CBP saved Medicare approximately $202.1 million in its first year of 

implementation, a decrease in expenditures of over 42 percent in the nine 

competitive bidding areas. This estimate is larger than the CMS’s 2011 

estimate, which did not include possible reductions in claims due to a 

decline in utilization. According to CMS, most savings come from the 

oxygen, mail-order diabetic supplies, and standard power wheelchair 

product categories. CMS also reported that CBP resulted in savings for

beneficiaries.

HHS reviewed a draft of this report and provided written comments which 

are reprinted in appendix II. HHS also provided technical comments, 

which we incorporated as appropriate.

 

89CMS’s April 17, 2012 Competitive Bidding One Year Implementation Update can be 

found at http://www.cms.gov/MEDICARE/MEDICARE-FEE-FOR-SERVICE-PAYMENT/ 

DMEPOSCOMPETITIVEBID/INDEX.HTML. 

CMS Estimates that CBP 

Round 1 Rebid Will Result 

in Significant Savings for 

Both the Medicare 

Program and Beneficiaries

Agency Comments

and Our Evaluation
Page 56 GAO-12-693 DME Competitive Bidding Program

HHS made several general comments. First, HHS noted that the CBP 

round 1 rebid resulted in savings of more than $200 million in its first year, 

and that the Department anticipates additional savings of more than 

$25 billion to the Medicare program between 2013 and 2022 as CBP 

expands in round 2. Second, HHS commented that we had not fully 

accounted for the robust nature of CMS’s real-time claims monitoring 

system that measures the health status of Medicare beneficiaries using 

DME in both CBP and comparison areas, which HHS said indicates that 

CBP-covered beneficiaries have not been adversely affected by CBP .

We revised the report to incorporate more details about the monitoring 

program, but we believe that our original description of the program was 

accurate. We concluded that, in the aggregate, CMS’s monitoring efforts 

provide useful information about beneficiary access and satisfaction.

Third, HHS stated that we agreed with its view that the CBP round 1 rebid 

had reduced unnecessary utilization of DME. We noted that the CBP may 

have successfully reduced unnecessary DME utilization, because 

utilization has been reduced and CMS has not detected adverse health 

consequences, but our analysis does not allow us to conclude definitively 

that unnecessary utilization has been reduced. Moreover, we concluded 

that more experience with DME competitive bidding is needed to assess 

the program’s full effects. Fourth, HHS suggested that January 2011 was 

not an appropriate month to use in our examples of utilization changes 

associated with the round 1 rebid because it was the first month of the 

rebid. We agree and have changed our examples to May 2011.

Finally, HHS discussed differences between CMS’s methods for 

measuring DME utilization changes associated with the CBP and our 

methodology, and noted disparities between CMS’s results and our 

findings. HHS noted that CMS monitors all DME claims in real-time in 

both CBP and matched comparison areas, and that its analyses are 

comparisons between the types of areas. As HHS noted, we analyzed 

claims data for DME items accounting for 80 percent of DME costs and 

utilization, not all items. We compared DME utilization in CBP round 1 

rebid areas to the rest of the country, not to specific comparator areas. In 

addition, we analyzed claims for services provided in the months January 

through June in 2011 and compared them to the same months in 2010.

Because the process of filing and processing Medicare claims can be 

lengthy, we used data for claims that had been processed by CMS’s 

payment contractors as of February 2012. We believe that our methods 

are valid. Further, our results are similar to results that CMS reported to 

us in its technical comments. For example, CMS found that 14 percent 

fewer beneficiaries had claims for hospital bed product category items in 

CBP areas in 2011 than in 2010. We found that about 13 percent fewer 
Page 57 GAO-12-693 DME Competitive Bidding Program

beneficiaries had claims for these items in May 2011 than in May 2010 in 

the CBP areas.

Although the first year of the CBP round 1 rebid’s contracts has been 

completed, it is important to continue to closely monitor the CBP as the 

program expands into 91 additional areas in round 2. Our findings are 

based on the limited evidence available at the time we did our work. It is 

too soon to determine the full effects the CBP may have on Medicare 

beneficiaries and DME suppliers.

We found that, in general, the round 1 rebid was successfully 

implemented. Nearly the same number of suppliers participated in the 

round 1 rebid as in CBP round 1. Few contract suppliers left Medicare 

during CBP’s first year. CMS’s beneficiary satisfaction survey and other 

monitoring activities, although limited, does not show evidence that 

beneficiaries have been affected negatively by CBP. Utilization of 

selected DME items declined in the round 1 rebid competitive bidding 

areas; however, we do not assume that all pre-CBP utilization was 

appropriate and CBP may have reduced unnecessary utilization of DME, 

particularly because CMS chose to implement the CBP round 1 rebid in 

areas with what it suspected were relatively high levels of unnecessary 

utilization.

More experience with DME competitive bidding is needed, particularly to 

see if evidence of beneficiary access problems emerges. In the program’s 

first year, the prevalence of grandfathered suppliers for rental items may 

have ameliorated beneficiary access concerns. The number of 

grandfathered suppliers will continue to decrease as rental periods expire.

Further, it is not known if the number of subcontracting suppliers will 

remain consistent or whether any change in subcontracting may affect 

beneficiary access to DME. While few contract suppliers voluntarily 

withdrew from CBP or were terminated by CMS in the first contract year, 

an increase in either outcome throughout the remaining contract period 

could have implications for beneficiary access and the CBP itself.

Additionally, it will be important to determine if DME utilization trends 

similar to those in the round 1 rebid occur as the program expands into 

round 2’s competitive bidding areas.

We are sending copies of this report to the Secretary of Health and 

Human Services. The report will also be available at no charge on our 

website at http://www.gao.gov. 

Concluding 

Observations 
Page 58 GAO-12-693 DME Competitive Bidding Program

If you or your staffs have any questions about this report, please contact 

me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix III.

Kathleen M. King

Director, Health Care
Appendix I: HCPCS Codes that CMS 

Determined Are the Top 80 Percent Highest 

Cost and Utilization for CBP Round 1 Rebid

Page 59 GAO-12-693 DME Competitive Bidding Program

Product Category HCPCS Code Description

Complex Rehabilitative Power 

Wheelchairs and Related 

Accessories (Group 2)

K0835 Power wheelchair, group 2 standard, single power option, sling/solid 

seat/back, patient weight capacity up to and including 300 pounds

K0836 Power wheelchair, group 2 standard, single power option, captains chair, 

patient weight capacity up to and including 300 pounds

K0843 Power wheelchair, group 2 heavy duty, multiple power option, sling/solid 

seat/back, patient weight capacity 301 to 450 pounds

Continuous Positive Airway Pressure 

Devices, Respiratory Assist Devices, 

and Related Supplies and 

Accessories (CPAP/RAD)

A7030 Full face mask used with positive airway pressure device (each) 

A7034 Nasal interface (mask or cannula type) used with positive airway pressure 

device, with or without head strap

A7037 Tubing used with positive airway pressure device

E0470 Respiratory assist device, bi-level pressure capability, without backup rate 

feature, used with noninvasive interface, e.g., nasal or facial mask 

(intermittent assist device with continuous positive airway pressure device) 

E0562 Humidifier, heated, used with positive airway pressure device

E0601 Continuous airway pressure (CPAP) device

Enteral Nutrients, Equipment, and 

Supplies 

B4035 Enteral feeding supply kit; pump fed, per day; includes but not limited to 

feeding/flushing syringe, administration set tubing, dressings, tape

B4150 Enteral formula, nutritionally complete with intact nutrients, includes 

proteins, fats, carbohydrates, vitamins and minerals, may include fiber, 

administered through an enteral feeding tube, 100 calories =1 unit

B4152 Enteral formula, nutritionally complete, calorically dense (equal to or 

greater than 1.5 kcal/ml) with intact nutrients, includes proteins, fats, 

carbohydrates, vitamins and minerals, may Include fiber, administered 

through an enteral feeding tube, 100 calories =1 unit

B4154 Enteral formula, nutritionally complete, for special metabolic needs, 

excludes inherited disease of metabolism, includes altered composition of 

proteins, fats, carbohydrates, vitamins and/or minerals, may include fiber, 

administered through an enteral feeding tube, 100 calories =1 unit

Hospital Beds and Related 

Accessories

E0260 Hospital bed, semi-electric (head and foot adjustment), with any type side 

rails, with mattress

E0261 Hospital bed, semi-electric (head and foot adjustment), with any type side 

rails, without mattress

E0303 Hospital bed, heavy duty, extra wide, with weight capacity greater than 350 

pounds, but less than or equal to 600 pounds, with any type side rails, with 

mattress

Mail-Order Diabetic Suppliesa A4253 Blood glucose test or reagent strips for home blood glucose monitor, per 50 

strips: item delivered via mail

A4259 Lancets, per box of 100: item delivered via mail

A4256 Normal, low and high calibrator solution/chips: item delivered via mail

Appendix I: HCPCS Codes that CMS 

Determined Are the Top 80 Percent Highest 

Cost and Utilization for CBP Round 1 Rebid 
Appendix I: HCPCS Codes that CMS 

Determined Are the Top 80 Percent Highest 

Cost and Utilization for CBP Round 1 Rebid

Page 60 GAO-12-693 DME Competitive Bidding Program

Product Category HCPCS Code Description

Oxygen Supplies and Equipment E0424 Stationary compressed gaseous oxygen system, rental; includes container, 

contents, regulator, flowmeter, humidifier, nebulizer, cannula or mask, and 

tubing

E0439 Stationary liquid oxygen system, rental; includes container, contents, 

regulator, flowmeter, humidifier, nebulizer, cannula or mask, and tubing 

E1390 Oxygen concentrator, single delivery port, capable of delivering 85 percent 

or greater oxygen concentration at the prescribed flow rate

E1391 Oxygen concentrator, dual delivery port, capable of delivering 85 percent or 

greater oxygen concentration at the prescribed flow rate (each) 

E0431 Portable gaseous oxygen system, rental; includes portable container, 

regulator, flowmeter, humidifier, cannula or mask, and tubing 

E0434 Portable liquid oxygen system, rental; includes portable container, supply 

reservoir, humidifier, flowmeter, refill adaptor, contents gauge, cannula or 

mask, and tubing

Standard Power Wheelchairs, 

Scooters, and Related Accessories

K0823 Power wheelchair, group 2 standard, captains chair, patient weight capacity 

up to and including 300 pounds

K0822 Power wheelchair, group 2 standard, sling/solid seat/back, patient weight 

capacity up to and including 300 pounds

K0825 Power wheelchair, group 2 heavy duty, captains chair, patient weight 

capacity 301 to 450 pounds

Support Surfaces 

(Group 2 Mattresses and Overlays)

E0277 Powered pressure reducing air mattress

E0372 Powered air overlay for mattress, standard mattress length and width

E0373 Non-powered advanced pressure reducing mattress

Walkers and Related Accessories E0135 Walker, folding (pickup), adjustable or fixed height

E0143 Walker, folding, wheeled, adjustable or fixed height

E0156 Seat attachment, walker

Source: GAO analysis of CMS and Palmetto GBA information.

a

The three HCPCS codes under the mail-order diabetic supplies product category must also include 

the modifier “KL” at the end to indicate that these supplies were furnished by mail-order.
Appendix II: Comments from the Department 

of Health and Human Services

Page 61 GAO-12-693 DME Competitive Bidding Program

Appendix II: Comments from the Department 

of Health and Human Services
Appendix II: Comments from the Department 

of Health and Human Services

Page 62 GAO-12-693 DME Competitive Bidding Program
Appendix II: Comments from the Department 

of Health and Human Services

Page 63 GAO-12-693 DME Competitive Bidding Program
Appendix II: Comments from the Department 

of Health and Human Services

Page 64 GAO-12-693 DME Competitive Bidding Program
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 65 GAO-12-693 DME Competitive Bidding Program

Kathleen M. King, (202) 512-7114 or kingk@gao.gov

In addition to the contact named above, key contributors to this report 

were Martin T. Gahart, Assistant Director; Krister Friday, Dan Lee, Lisa 

Motley, Michelle Paluga, Katherine Perry, Hemi Tewarson, and Opal 

Winebrenner.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 
Related GAO Products

Page 66 GAO-12-693 DME Competitive Bidding Program

Medicare: Issues for Manufacturer-level Competitive Bidding for Durable 

Medical Equipment, GAO-11-337R. Washington, D.C.: May 31, 2011.

Medicare: CMS Has Addressed Some Implementation Problems from 

Round 1 of the Durable Medical Equipment Competitive Bidding Program 

for the Round 1 Rebid, GAO-10-1057T. Washington, D.C.: September 15, 

2010.

Medicare: CMS Working to Address Problems from Round 1 of the 

Durable Medical Equipment Competitive Bidding Program. GAO-10-27. 

Washington, D.C.: November 6, 2009.

Medicare: Covert Testing Exposes Weaknesses in the Durable Medical 

Equipment Supplier Screening Process. GAO-08-955. Washington, D.C.: 

July 3, 2008.

Medicare: Competitive Bidding for Medical Equipment and Supplies 

Could Reduce Program Payments, but Adequate Oversight Is Critical. 

GAO-08-767T. Washington, D.C.: May 6, 2008.

Medicare: Improvements Needed to Address Improper Payments for 

Medical Equipment and Supplies. GAO-07-59. Washington, D.C.: 

January 31, 2007.

Medicare Payment: CMS Methodology Adequate to Estimate National 

Error Rate. GAO-06-300. Washington, D.C.: March 24, 2006.

Medicare Durable Medical Equipment: Class III Devices Do Not Warrant 

a Distinct Annual Payment Update. GAO-06-62. Washington, D.C.: 

March 1, 2006.

Medicare: More Effective Screening and Stronger Enrollment Standards 

Needed for Medical Equipment Suppliers. GAO-05-656. Washington, 

D.C.: September 22, 2005.

Medicare: CMS’s Program Safeguards Did Not Deter Growth in Spending 

for Power Wheelchairs. GAO-05-43. Washington, D.C.: November 17, 

2004.

Medicare: Past Experience Can Guide Future Competitive Bidding for 

Medical Equipment and Supplies. GAO-04-765. Washington, D.C.: 

September 7, 2004.

Related GAO Products
Related GAO Products

Page 67 GAO-12-693 DME Competitive Bidding Program

Medicare: CMS Did Not Control Rising Power Wheelchair Spending. 

GAO-04-716T. Washington, D.C.: April 28, 2004.

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