I 
113TH CONGRESS 
1ST SESSION H. R. 1717 
To amend title XVIII of the Social Security Act to establish a market 
pricing program for durable medical equipment, prosthetics, orthotics, 
and supplies (DMEPOS) under part B of the Medicare program. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 24, 2013 
Mr. PRICE of Georgia (for himself, Mr. LARSON of Connecticut, Mr. THOMP-
SON of Pennsylvania, Mr. BRALEY of Iowa, Mr. ROE of Tennessee, Mr. 
RYAN of Ohio, Mr. TIBERI, Mr. LOEBSACK, Mr. JOYCE, Mr. MCKINLEY, 
Mrs. CAPITO, Mr. DESJARLAIS, Mrs. BLACKBURN, Mr. BARLETTA, Mr. 
GRIMM, Mr. AUSTIN SCOTT of Georgia, Mr. HARPER, Mr. MARINO, Mr. 
CRENSHAW, Mr. KING of New York, Mr. JOHNSON of Ohio, Mr. FOR-
TENBERRY, Mr. CHABOT, Mr. POSEY, Mr. LANKFORD, and Mr. 
NUNNELEE) introduced the following bill; which was referred to the Com-
mittee on Energy and Commerce, and in addition to the Committees on 
Ways and Means and Appropriations, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions 
as fall within the jurisdiction of the committee concerned 
A BILL 
To amend title XVIII of the Social Security Act to establish 
a market pricing program for durable medical equipment, 
prosthetics, orthotics, and supplies (DMEPOS) under 
part B of the Medicare program. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Medicare DMEPOS 
Market Pricing Program Act of 2013’’. 
SEC. 2. TERMINATION OF COMPETITIVE ACQUISITION PRO-
GRAM. 
Section 1847(a)(1) of the Social Security Act (42 
U.S.C. 1395w–3(a)(1)) is amended— 
(1) in subparagraph (B), by striking ‘‘The pro-
grams’’ and inserting ‘‘Subject to subparagraph (G), 
the programs’’; 
(2) in subparagraph (D), by striking clauses (ii) 
and (iii); and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(G) TERMINATION OF PROGRAM; TRANSI-
TION.— 
‘‘(i) NO
ADDITIONAL
COMPETITION 
ROUNDS.—Notwithstanding subparagraph 
(B), the competition under this section 
shall end on December 31, 2013, with 
round 1. The Secretary shall take no fur-
ther action to implement round 2 of the 
competitive acquisition program, the na-
tional mail order competitive acquisition 
program, or any subsequent round of the 
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competitive acquisition program under this 
section. 
‘‘(ii) CONTRACT TERMINATION.—The 
contracts awarded under this section be-
fore the date of the enactment of this sub-
paragraph shall terminate on July 1, 2013, 
and no payment shall be made under this 
title after such date based on such a con-
tract. To the extent that any damages may 
be applicable as a result of the termination 
of such contracts, such damages shall be 
payable from the Federal Supplementary 
Medical Insurance Trust Fund under sec-
tion 1841. Nothing in this clause shall be 
construed to provide an independent cause 
of action or right to administrative or judi-
cial review with regard to the termination 
provided under this clause.’’. 
SEC. 3. TRANSITIONAL PAYMENT AFTER TERMINATION OF 
DMEPOS COMPETITIVE BIDDING PROGRAM. 
(a) TRANSITIONAL PAYMENT RULES.— 
(1) PAYMENT FOR DURABLE MEDICAL EQUIP-
MENT.— 
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(A) IN GENERAL.—Section 1834(a)(1) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395m(a)(1)) is amended— 
(i) in subparagraph (F)(i)— 
(I) by inserting ‘‘and before July 
1, 2013,’’ after ‘‘January 1, 2011,’’; 
(II) by striking ‘‘, subject to sub-
paragraphs (G) and (H),’’; and 
(III) by adding ‘‘and’’ at the end; 
(ii) in subparagraph (F)(ii)— 
(I) by striking ‘‘(and, in the case 
of covered items’’ and all that follows 
through 
‘‘subject 
to 
clause 
(iii) 
shall)’’; and 
(II) by striking ‘‘; and’’ at the 
end and inserting a period; 
(iii) by striking clause (iii) of subpara-
graph (F); 
(iv) by striking subparagraphs (G) 
and (H); and 
(v) by adding at the end the following 
new subparagraph: 
‘‘(G) PAYMENT RATES IN ROUND 1 AREAS 
DURING TRANSITION.— 
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that are furnished in such areas on or 
after January 1, 2015, and before the 
date on which the Secretary imple-
ments the market pricing program 
under section 1847C, the payment 
basis under this subsection for such 
supplies shall be further reduced by 
15 percent after taking into account 
the reduction effected under the pre-
ceding sentence.’’. 
(B) CONFORMING AMENDMENTS.—Section 
1842(s) of the Social Security Act (42 U.S.C. 
1395u(s)) is amended— 
(i) in paragraph (3), in the matter 
preceding subparagraph (A), by inserting 
‘‘and that are furnished in such an area on 
or before July 1, 2013’’ after ‘‘section 
1847(a)’’; and 
(ii) by adding at the end the following 
new paragraph: 
‘‘(4)(A)(i) In the case of items and services described 
in paragraph (2)(D) that are furnished in an area that 
had been designated by the Secretary as a competitive ac-
quisition area under section 1847(a)(1)(B)(i)(I) on or 
after the date on which contracts for the furnishing of 
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such covered items and services expire, the payment basis 
under this subsection for such items and services fur-
nished in such area shall be the amounts described in 
clause (ii). 
‘‘(ii)(I) In the case of items and services described 
in paragraph (2)(D) that were selected to be furnished in 
the competitive acquisition program in a competitive ac-
quisition 
area 
selected 
pursuant 
to 
section 
1847(a)(1)(B)(i)(II) on or after July 1, 2013, and before 
the date on which the Secretary implements the market 
pricing program under section 1847C, subject to subclause 
(II), the payment basis under this subsection for such 
items and services furnished in such areas shall be 95 per-
cent of the amount otherwise established under this sub-
section. 
‘‘(II) In the case of covered items and services de-
scribed in subclause (I) that are furnished during 2014, 
the payment basis under this subsection for such items 
and services furnished in such areas shall be reduced by 
10 percent from the amount described in such subclause. 
In the case of such items and services that are furnished 
in such areas on or after January 1, 2015, and before 
the date on which the Secretary implements the market 
pricing program under section 1847C, the payment basis 
under this subsection for such supplies shall be further 
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reduced by 10 percent after taking into account the reduc-
tion effected under the preceding sentence. 
‘‘(B)(i) In the case of items and services described 
in paragraph (2)(D) that are included in the market pric-
ing program under section 1847C, the payment basis 
under this subsection for such items and services fur-
nished in such area shall be the payment basis determined 
under such competitive acquisition program. 
‘‘(ii) The Secretary may use information on the pay-
ment determined under such market pricing program to 
adjust the payment amount otherwise applicable under 
clause (i) for an area that is not a market pricing area 
under section 1847C, and in the case of such adjustment, 
paragraphs (8) and (9) of subsection (b) shall not be ap-
plied.’’. 
(2) TREATMENT
OF
SUPPLIERS
IN
COMPETI-
TIVE
ACQUISITION
PROGRAM
AREAS.—Section 
1847(b)(4) of the Social Security Act (42 U.S.C. 
1395w–3(b)(4)) is amended— 
(A) in subparagraph (A)— 
(i) in the first sentence, by striking 
‘‘The Secretary may limit’’ and inserting 
‘‘Until December 31, 2013, the Secretary 
may limit’’; and 
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(ii) by inserting after the first sen-
tence the following: ‘‘The preceding sen-
tence shall not apply to items and services 
furnished in an eligible auction area (with-
in the meaning of subsection (a)(4) of sec-
tion 1847C) on or after the date of the im-
plementation of the market pricing pro-
gram under such section.’’; and 
(B) by adding at the end the following new 
subparagraph: 
‘‘(C) NON-CONTRACTED
SUPPLIERS
IN 
MARKET
PRICING
PROGRAM.—The Secretary 
also shall award contracts to any supplier that 
meets eligibility requirements under this title 
for the furnishing of such items and services so 
long as the supplier accepts the price estab-
lished under such program as payment in full 
for such items and services.’’. 
(3) 
PAYMENT
FOR
OFF-THE-SHELF 
ORTHOTICS.—Section 1834(h)(1) of the Social Secu-
rity Act (42 U.S.C. 1395m(h)(1)) is amended by 
adding at the end the following new subparagraph: 
‘‘(I) APPLICATION
OF
MARKET
PRICING 
PROGRAM; LIMITATION OF INHERENT REASON-
ABLENESS
AUTHORITY.—In 
the 
case 
of 
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orthotics described in subsection (b)(1)(K) of 
section 1847C furnished on or after January 1, 
2014, in an eligible auction area, that are in-
cluded in a market pricing program under such 
section— 
‘‘(i) the payment basis under this sub-
section for such orthotics furnished in such 
area shall be the payment basis determined 
under such market pricing program; and 
‘‘(ii) the Secretary may use informa-
tion on the payment determined under 
such market pricing program to adjust the 
payment 
amount 
otherwise 
recognized 
under subparagraph (B)(ii) for an area 
that is not an eligible auction area under 
section 1847C, and in the case of such ad-
justment, paragraphs (8) and (9) of sec-
tion 1842(b) shall not be applied.’’. 
(b) POLICY AFTER IMPLEMENTATION OF THE MAR-
KET PRICING PROGRAM.— 
(1) IN GENERAL.—Section 1834(a)(1) of the 
Social Security Act (42 U.S.C. 1395m(a)(1)), as 
amended by subsection (a)(1)(B), is amended by 
adding at the end the following new subparagraph: 
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‘‘(H) APPLICATION
OF
MARKET
PRICING 
PROGRAM; LIMITATION OF INHERENT REASON-
ABLENESS AUTHORITY.— 
‘‘(i) IN
GENERAL.—In the case of 
market priced items and services described 
in section 1847C(b)(1) furnished on or 
after the date of implementation of a mar-
ket pricing program for which a price has 
been established under the program con-
ducted in an eligible auction area under 
section 1847C, the payment basis under 
this subsection— 
‘‘(I) in the eligible auction area 
shall be the amount determined under 
the auction conducted in such eligible 
auction area for such items and serv-
ices; or 
‘‘(II) in another eligible auction 
area shall be the amount determined 
under subclause (I) adjusted by the 
appropriate factor described in section 
1847C(d)(7)(B)(iv). 
‘‘(ii) NO
ADJUSTMENT
IN
PAYMENT 
AMOUNT
DURING
INITIAL
TWO-YEAR
PE-
RIOD OF PRICING PROGRAM.—During the 
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term of any contract awarded pursuant to 
section 1847C(d)(6) for an item and serv-
ice described in clause (i), the Secretary 
may not adjust the payment basis estab-
lished under such clause to take into ac-
count the effects of a later-conducted auc-
tion during that two-year contract period. 
The Secretary may, at the termination of 
a 
contract 
awarded 
under 
section 
1847C(d)(6) for such an item or service, 
adjust such payment basis to take into ac-
count the effects of a later-conducted auc-
tion. 
‘‘(iii) MARKET PRICING IN RURAL AND 
NON-COMPETITIVE AREAS.—The Secretary, 
after consultation with the auction expert 
under section 1847C, may (and, in the 
case of covered items furnished on or after 
January 1, 2016, shall) use information on 
the payment determined under such mar-
ket pricing program to adjust the payment 
amount otherwise recognized under sub-
paragraph (B)(ii) for an area in which an 
auction has not been conducted pursuant 
to section 1847C(a). 
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‘‘(iv) CONTINUED
USE
OF
ADDI-
TIONAL INFORMATION.—In the case of cov-
ered items furnished on or after January 
1, 2016, the Secretary shall continue to 
make such adjustments described in clause 
(ii) as, under such market pricing pro-
gram, additional covered items are phased 
in or information is updated as contracts 
are renewed under such program.’’. 
(2) 
REGULATORY
AUTHORITY.—Section 
1834(a)(1)(G) of the Social Security Act (42 U.S.C. 
1395w–3(a)(1)(G)) is amended— 
(A) in the subparagraph heading, by in-
serting ‘‘OR MARKET PRICING’’ before ‘‘RATES’’; 
(B) by striking ‘‘subparagraph (F)(ii)’’ 
and inserting ‘‘subparagraph (F)(ii), subpara-
graph (H)(iii),’’; and 
(C) by inserting ‘‘or eligible auction areas 
in which an auction has been conducted, after 
June 30, 2013,’’ after ‘‘competitive acquisition 
areas’’. 
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SEC. 4. ESTABLISHMENT OF DMEPOS MARKET PRICING 
PROGRAM. 
(a) IN GENERAL.—Part B of title XVIII of the Social 
Security Act is amended by inserting after section 1847B 
(42 U.S.C. 1395w–3b) the following new section: 
‘‘DMEPOS MARKET PRICING PROGRAM 
‘‘SEC. 1847C. (a) ESTABLISHMENT.— 
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish and implement a market pricing program (in 
this section referred to as ‘market pricing program’) 
under which auctions are conducted in eligible auc-
tion areas (as defined in paragraph (4)) throughout 
the United States for the furnishing of market 
priced items and services (as defined in subsection 
(b)) for which payment is made under this part. 
‘‘(2) ROLES OF AUCTION EXPERT AND MARKET 
MONITOR.—The elements of the market pricing pro-
gram, including eligible auction areas, auction de-
sign, establishing of clearing prices, and conduct of 
auctions, shall be established and operated in con-
sultation with, and after input and review by, the 
auction expert and the market monitor under sub-
section (g). In this section, the terms ‘auction ex-
pert’ and ‘market monitor’ refer to the respective 
auction expert and market monitor contracted with 
under subsection (g)(1). 
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‘‘(3) IMPLEMENTATION.—The market pricing 
program shall be implemented in all eligible auction 
areas so that market pricing occurs nationwide in 
the first year of implementation consistent with the 
following: 
‘‘(A) FIRST YEAR OF IMPLEMENTATION.— 
In the first year of implementation— 
‘‘(i) auctions under the program shall 
be held in at least 20 percent of eligible 
auction areas; 
‘‘(ii) prices in these areas will be set 
by such auctions; 
‘‘(iii) in each eligible auction area 2 
categories of items shall be selected for 
auction; 
‘‘(iv) prices for categories not selected 
for auction in the area shall be set by ref-
erence to auctions held for those categories 
in econometrically similar areas; and 
‘‘(v) in those areas in which no auc-
tions are held, prices for all categories will 
be set by reference to auctions held for 
those categories in econometrically similar 
areas. 
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‘‘(B) SECOND
YEAR
OF
IMPLEMENTA-
TION.—In the second year of implementation— 
‘‘(i) auctions shall be held in other eli-
gible auction areas that include 10 percent 
of eligible auction areas; and 
‘‘(ii) prices in those areas in which no 
auctions are held or for categories in which 
an auction is not held, shall be set in the 
same manner as under subparagraph (A). 
‘‘(C) SUBSEQUENT YEARS.—In each subse-
quent year of implementation— 
‘‘(i) auctions shall be held in an addi-
tional 10 percent of eligible auction areas, 
selected by the Secretary annually on an 
ongoing and rotating basis, until all eligi-
ble auction areas have been covered; and 
‘‘(ii) prices in those areas in which no 
auctions are held or for categories in which 
an auction is not held, shall be set in the 
same manner as under subparagraph (A). 
‘‘(D) Once the market pricing program is 
applied throughout the United States under 
subparagraph (C), the Secretary shall conduct 
auctions for different eligible auction areas 
throughout the United States on an ongoing 
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and rotating basis covering 10 percent of eligi-
ble auction areas no later than March for each 
subsequent year. 
‘‘(E) The requirements of this section shall 
apply to each subsequent round of market- 
priced auctions in the same manner that such 
requirements apply to the initial market-priced 
auction. 
‘‘(4) ELIGIBLE AUCTION AREAS.— 
‘‘(A) IN
GENERAL.—In this section and 
section 1834, the term ‘eligible auction areas’ 
means counties, aggregations of counties, or 
parts of counties, not excluded under subpara-
graph (D), as established by the Secretary. 
‘‘(B) MARKET AREAS MUST REFLECT ECO-
NOMIC
INTERDEPENDENCY.—In 
determining 
and selecting eligible auction areas, the Sec-
retary shall choose, from among counties, ag-
gregations of counties, or parts of counties, 
auction areas that form an economically inter-
dependent area reflecting standard econometric 
market models. Nothing in this subparagraph 
shall preclude the Secretary from subdividing a 
large county to take into account population 
and geographic size in establishing auction 
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areas in order to comply with this subpara-
graph. 
‘‘(C) SELECTION OF AUCTION AREAS.—In 
selecting auction areas in which an auction will 
be conducted under this section, the Secretary 
shall ensure that several auction areas of each 
econometric model are chosen. 
‘‘(D) EXCLUSION
OF
CERTAIN
AUCTION 
AREAS.—The Secretary shall not subject areas 
described 
in 
clause 
(iii) 
of 
section 
1847(a)(1)(D) to market program reimburse-
ment rates before the year specified in such 
clause. 
‘‘(5) APPLICATION OF CERTAIN POLICIES AP-
PLICABLE
TO
COMPETITIVE
ACQUISITION
PRO-
GRAMS.—The following provisions of subsection 
(a)(1) of section 1847 shall apply to the market 
pricing program in the same manner as they apply 
to competitive acquisition programs under such sec-
tion except as otherwise provided: 
‘‘(A) Subparagraph (C) (relating to waiver 
of certain provisions). 
‘‘(B) 
Subparagraph 
(E) 
(relating 
to 
verification by OIG), except that the assessment 
shall be of market pricing and subsequent pric-
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ing determinations that are the basis for auc-
tion prices and single payment amounts for 
items and services in eligible auction areas and 
shall be conducted in the first two years of the 
market pricing program and may continue in 
subsequent years of the program. 
‘‘(C) Subparagraph (F) (relating to feed-
back on missing financial documentation), ex-
cept that any reference to a round of a program 
is deemed a reference to a year of the market 
pricing program. 
‘‘(b) MARKET PRICED ITEMS AND SERVICES DE-
FINED.— 
‘‘(1) IN GENERAL.—In this section, subject to 
paragraph (2), the term ‘market priced items and 
services’ means the following: 
‘‘(A) Oxygen supplies and equipment. 
‘‘(B) Standard power wheelchairs, power 
scooters, and related accessories. 
‘‘(C) Manual wheelchairs. 
‘‘(D) Enteral nutrients, equipment, and 
supplies. 
‘‘(E) Continuous positive airway pressure 
devices, respiratory assistive devices, and re-
lated supplies. 
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‘‘(F) Hospital beds and related accessories. 
‘‘(G) Walkers and related accessories. 
‘‘(H) Support services (Group 2 mattresses 
and overlays). 
‘‘(I) Negative pressure wound therapy 
pumps and related supplies and accessories. 
‘‘(J) Diabetic supplies. 
‘‘(K) Off-the-shelf orthotics described in 
section 1847(a)(2)(C) furnished on or after 
July 1, 2013. 
‘‘(L) External infusion pumps and sup-
plies. 
‘‘(M) Other items and services (other than 
those items and services specified in paragraph 
(2)) that could have been subject to participa-
tion in competitive acquisition programs under 
section 1847(a)(1). 
‘‘(2) EXCLUDED ITEMS.—Such term does not 
include the following: 
‘‘(A) An adjustable skin protection cushion 
used in connection with a wheelchair. 
‘‘(B) A complex rehabilitative power wheel-
chair and related accessories. 
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‘‘(C) A manual wheelchair billed using cur-
rent HCPCS Codes K0005 or E1161, and re-
lated accessories for such a wheelchair. 
‘‘(D) A medical device classified in class 
III under the Federal Food, Drug, and Cos-
metic Act. 
‘‘(c) MARKET PRICING PROGRAM REQUIREMENTS.— 
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish an auction design through the process described 
in paragraph (2), that meets the requirements of 
paragraph (3), and shall ensure that the first auc-
tion will be conducted for all eligible auction areas 
no later than 14 months after the date of entering 
into the contract with the auction expert under sub-
section (g)(1). 
‘‘(2) AUCTION
PROCESS; INPUT
OF
STAKE-
HOLDERS; DESIGN.— 
‘‘(A) 
TRANSPARENT
PROCESS
RE-
QUIRED.— 
‘‘(i) IN
GENERAL.—In establishing 
such auction design, the Secretary shall 
utilize an open and transparent process 
that involves all relevant stakeholders (as 
defined in clause (ii)) in the market, in-
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cluding through the auction plan con-
ference and other outreach efforts. 
‘‘(ii) RELEVANT
STAKEHOLDERS.— 
For purposes of clause (i), the term ‘rel-
evant stakeholders’ means suppliers and 
manufacturers of market priced items and 
services 
(and 
trade 
associations 
rep-
resenting such suppliers and manufactur-
ers), physicians, and individuals entitled to 
benefits under this title (and representa-
tives of such individuals). 
‘‘(B) DRAFT AUCTION DESIGN.—Not later 
than 2 months after the date the auction expert 
first begins service under subsection (g)(1), the 
auction expert shall develop a draft auction de-
sign that shall propose auction areas nation-
wide, lead products for each product category, 
and the price index associated with each lead 
product, and proposed rules for the conduct of 
auctions. 
‘‘(C) DESIGN CONFERENCE.— 
‘‘(i) IN GENERAL.—Not later than 4 
months after the date the auction expert 
first begins service under subsection (g)(1), 
the Secretary shall convene a design con-
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ference (in this paragraph referred to as 
the ‘design conference’) for the auction 
process under this section. The auction ex-
pert shall chair the conference. 
‘‘(ii) 
PARTICIPANTS.—The 
partici-
pants at the design conference shall in-
clude at least the following: 
‘‘(I) MANUFACTURERS AND SUP-
PLIERS OF DMEPOS.—Representatives 
of market priced items and services. 
‘‘(II) 
BENEFICIARIES.—Rep-
resentatives of individuals entitled to 
benefits under this part. 
‘‘(III) CMS.—The Administrator 
of the Centers for Medicare & Med-
icaid Services and other appropriate 
Federal personnel. 
‘‘(IV) PROGRAM
ADVISORY
AND 
OVERSIGHT
COMMITTEE.—The mem-
bers of the committee referred to in 
paragraph (3). 
‘‘(iii) PURPOSE
OF
CONFERENCE.— 
The purpose of the design conference shall 
be to review the auction design developed 
by the auction expert under subparagraph 
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(B) for the establishment of an efficient 
auction consistent with best practices and 
actuarial science. 
‘‘(iv) ELEMENTS OF CONFERENCE.— 
With respect to the design conference— 
‘‘(I) the auction expert shall pro-
vide a demonstration of the prelimi-
nary auction design; 
‘‘(II) the auction expert shall 
lead a mock auction based upon such 
design in which the attendees will par-
ticipate and offer comments and sug-
gestions for improvement; 
‘‘(III) the auction expert may es-
tablish working committees on major 
issues; and 
‘‘(IV) the design conference shall 
be recorded and made available over 
the Internet through simultaneous 
Web cast or otherwise. 
‘‘(D) RECOMMENDATIONS.— 
‘‘(i) 
WORKING
COMMITTEES.—Not 
later than 2 months after the last day of 
the design conference, each working com-
mittee established under subparagraph 
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(C)(iv)(III) shall submit to the auction ex-
pert the committee’s recommendations on 
the final design for auctions under this 
section. 
‘‘(ii) FINAL
DESIGN
RECOMMENDA-
TION.—Not later than 3 months after the 
last day of the design conference, the auc-
tion expert shall submit to the Secretary 
final recommendations on the auction de-
sign for approval for expedited rulemaking. 
In this clause, the term ‘expedited rule-
making process’ means a process of publi-
cation of the proposed auction design and 
solicitation of public comments on such de-
sign. The provisions of section 1871(b)(1) 
shall not apply to such process. 
‘‘(3) REQUIREMENTS.—In establishing the auc-
tion design, the Secretary shall ensure that rates of 
payment developed through the auction process— 
‘‘(A) are market-based and based on bind-
ing bids and clearing prices; and 
‘‘(B) do not result in a diminution of ac-
cess to or quality of items of market priced 
items and services in the applicable market 
areas. 
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‘‘(d) CONDUCT OF AUCTION.— 
‘‘(1) INITIAL
AUCTION.—No later than 14 
months after the date a contract is first entered into 
with an auction expert under subsection (g), the 
Secretary shall conduct auctions (each in this section 
referred to as a ‘market-priced auction’) among enti-
ties supplying market priced items and services in 
eligible auction areas that are selected in the auction 
design and consistent with subsection (a)(3). Each 
auction shall conclude no later than 2 months after 
its commencement. Market-based auctions shall be 
conducted in accordance with an auction design de-
veloped under subsection (c). 
‘‘(2) ITEMS AND SERVICES SUBJECT TO AUC-
TION.— 
‘‘(A) IN GENERAL.—In each eligible auc-
tion area in which a market-priced auction is 
conducted, the Secretary shall select to be sub-
ject to auction a combination of 2 categories of 
items and services from among the market 
priced items and services. 
‘‘(B) ALL LISTED ITEMS AND SERVICES TO 
BE SUBJECT TO AUCTION.—The Secretary shall 
ensure in the market-priced auction that each 
lead product that is identified under paragraph 
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(4) from among each market priced item and 
service is subject to auction among all eligible 
auction areas. The Secretary shall ensure that 
each product category is auctioned in at least a 
sufficient number of eligible auction areas to 
produce a sample of bids based on the percent-
ages set forth in subsection (a)(3). 
‘‘(3) REQUIREMENTS TO SUBMIT BID IN AUC-
TION.— 
‘‘(A) SUBMISSION OF BIDS.—Any supplier 
that complies with the requirements of subpara-
graph (B) and that is identified by the Sec-
retary pursuant to paragraph (5)(C) as a sup-
plier of a market priced item or service that is 
the subject of a market-priced auction in an eli-
gible auction area may submit a bid at such 
auction. 
‘‘(B) FINANCIAL ASSURANCES.— 
‘‘(i) IN GENERAL.—In order to be eli-
gible to participate in a market-priced auc-
tion, a supplier must submit a cash deposit 
in an amount determined by the Secretary. 
‘‘(ii) LETTER OF CREDIT IN LIEU OF 
CASH
DEPOSIT.—The Secretary may, in 
the Secretary’s sole discretion, accept a let-
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ter of credit from a financial institution ac-
ceptable to the Secretary instead of the 
cash deposit otherwise required under 
clause (i). 
‘‘(C) TREATMENT
OF
DEPOSITS
SUB-
MITTED BY SUPPLIERS.— 
‘‘(i) 
SUCCESSFUL
BIDDERS.—The 
Secretary shall retain as a performance 
guarantee the deposit submitted under 
subparagraph (B)(i) of a supplier that has 
submitted a winning bid at a market- 
priced auction. 
‘‘(ii) UNSUCCESSFUL BIDS.—If a sup-
plier submits a bid that is not accepted at 
the auction, any such deposit shall be re-
turned to the supplier. 
‘‘(iii) DEPOSIT
RETURN
REQUIRE-
MENTS FOR PARTIALLY SUCCESSFUL SUP-
PLIERS.—If a supplier submits a bid that 
is accepted at the auction, but the supplier 
is not awarded a contract for the full 
amount of the bid, the Secretary shall pro-
vide for a proportionate return of any such 
deposit. 
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‘‘(4) LEAD PRODUCT SELECTION FOR ESTAB-
LISHING CLEARING PRICES.— 
‘‘(A) IN GENERAL.—For each product cat-
egory of items and services specified in sub-
section (b)(1) that is the subject of a market- 
priced auction, the Secretary shall establish a 
lead product. Such lead product shall be se-
lected based upon the price and utilization of 
the product under this part. 
‘‘(B) LEAD PRODUCT CLEARING PRICE ES-
TABLISHES CLEARING PRICE FOR OTHER PROD-
UCTS.— 
‘‘(i) LEAD PRODUCT AS REFERENCE 
POINT FOR OTHER PRODUCTS.—The lead 
product selected under subparagraph (A) 
shall be used as a reference point for all 
other 
products 
(categorized 
by 
the 
healthcare common procedure coding sys-
tem code) in the same category as the lead 
product. Such lead product shall be as-
signed a weight of 100 percent. 
‘‘(ii) ADDITIONAL PRODUCTS IN EACH 
PRODUCT
CATEGORY.—Every other prod-
uct in the same product category as the 
lead product identified under subparagraph 
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(A) shall be assigned based upon each auc-
tion a weight expressed as a percentage of 
the lead product, which percentage of the 
clearing price, established by the auction 
expert in the plan design and adjusted 
after input from providers at the design 
plan conference, establishes the price of 
each item and service in the category. 
‘‘(iii) ESTABLISHING CLEARING PRICE 
FOR ITEMS AND SERVICES.—The Secretary 
shall establish the clearing price for each 
market priced item and service that is sub-
ject to the auction based upon the data 
submitted under this subparagraph. Such 
clearing price shall be equal to the highest 
cost bid that will meet capacity targets in 
the eligible auction area for such item and 
service. 
‘‘(5) CONDUCT OF AUCTION.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
conduct the market-priced auctions consistent 
with the provisions of this paragraph. 
‘‘(B) 3 MONTHS BEFORE AUCTION DATE.— 
Approximately 3 months before the scheduled 
auction date, the Secretary shall detail auction 
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rules that are consistent with the auction plan 
developed under this section. These rules shall 
include the following: 
‘‘(i) Financial and other qualification 
requirements for bidders. 
‘‘(ii) Algorithms for determining win-
ners and prices as a function of bids. 
‘‘(iii) Performance obligations of con-
tract suppliers, guarantees, and penalties 
for non-conformance. 
‘‘(iv) The product categories to be se-
lected (and their related healthcare com-
mon procedure coding system codes) from 
within the market priced items and serv-
ices. 
‘‘(v) The lead product for each prod-
uct category selected under paragraph 
(4)(A) and the price grid for such cat-
egory. 
‘‘(vi) The eligible auction areas na-
tionwide (and areas identified as having 
the same econometric model) and those eli-
gible auction areas in which a market- 
priced auction will be conducted each year. 
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‘‘(C) 30 DAYS BEFORE AUCTION DATE.— 
Thirty days before a scheduled auction date, 
the Secretary shall review all applicants and 
identify the qualified suppliers eligible to submit 
bids. In carrying out this subparagraph, the 
Secretary shall specify the following: 
‘‘(i) The historic capacity for each eli-
gible bidder for each category that will be 
subject to the auction. 
‘‘(ii) Bidder eligibility by eligible auc-
tion area. 
‘‘(iii) For each auction area, the lead 
product 
established 
under 
paragraph 
(4)(A). 
‘‘(iv) The price index (described in 
subsection (c)(2)(B)) in each auction area. 
‘‘(D) BIDDERS
CONFERENCE.—Prior to 
conducting each such auction, the auction ex-
pert shall conduct a conference of prospective 
bidders in eligible auction areas in which an 
auction will be conducted. 
‘‘(E) DURING AUCTION.—During the con-
duct of the auction, the Secretary shall an-
nounce the following: 
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‘‘(i) The time of the end of the round 
of auctioning. 
‘‘(ii) The history of prior rounds in-
cluding the aggregate supply at the end of 
the round price for each product category 
by round. 
‘‘(F) IMMEDIATELY AFTER EACH AUCTION 
ROUND.—Not later than 15 minutes after the 
end of each auction, the Secretary shall an-
nounce the following: 
‘‘(i) The aggregate supply for each 
item and service that is the subject of the 
auction at the price established during the 
auction. 
‘‘(ii) For each supplier that has par-
ticipated in the auction, its own supply for 
all prices (from the initial starting price to 
the end of round price) for each item and 
service that is the subject of the auction. 
‘‘(iii) Revised schedule of rounds for 
the next bidding day. 
‘‘(G) AT CONCLUSION OF FINAL AUCTION 
ROUND.—Not later than 15 minutes after the 
end of the final auction round, the Secretary 
shall announce the following: 
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‘‘(i) A list of winning suppliers. 
‘‘(ii) The market clearing price for 
each item and service that is the subject of 
the auction. 
‘‘(H) FINAL ACTIONS.—Not later than 30 
days after the end of the final auction round, 
the Secretary shall adjust the performance 
guarantees received from each bidder to reflect 
the outcome of the auction in accordance with 
paragraph (3)(B). 
‘‘(6) CONDITIONS OF AWARDING CONTRACT.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
award a contract to any entity in an eligible 
auction area in which an auction is conducted 
and whose bid submitted pursuant to paragraph 
(3)(A) is at or below the clearing price estab-
lished pursuant to paragraph (4)(G)(ii). 
‘‘(B) TERMS OF CONTRACT.— 
‘‘(i) MANDATORY
ACCEPTANCE
OF 
CONTRACT.—A supplier that submits a bid 
at or below such clearing price shall be 
treated as having agreed to and accept the 
contract awarded pursuant to subpara-
graph (A). 
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‘‘(ii) CONTRACT TERMS.—A contract 
awarded pursuant to subparagraph (A) 
shall be valid for 2 years. 
‘‘(iii) NO REQUIREMENT TO SUPPLY 
UP TO BID AMOUNT.—Nothing in this sub-
section shall require a supplier that is 
awarded a contract pursuant to subpara-
graph (A) to supply a marked priced item 
or service that is the subject of an auction 
in the eligible auction area beyond the level 
of demand for such item or service in the 
eligible auction area, even if such level is 
below the level that the supplier assumed 
in its bid. 
‘‘(C) ENSURING ADEQUATE SELECTION OF 
CONTRACTORS.—The Secretary may not award 
a contract to any entity under the auction to 
furnish such items or services unless the Sec-
retary finds that the conditions described in 
section 1847(b)(2)(A) apply with respect to an 
entity receiving a contract under this para-
graph. 
‘‘(D) SUFFICIENT CAPACITY.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall identify the capacity of each supplier 
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other econometrically similar eligible auc-
tion area (as determined by the Secretary). 
‘‘(iii) SUPPLIER
MUST
ACCEPT
AUC-
TION PRICE.—Clause (ii) shall only apply 
to a supplier that agrees to accept the 
price determined at an auction in another 
eligible auction area for a market priced 
item or service. 
‘‘(iv) APPROPRIATE ADJUSTMENTS.— 
The Secretary shall develop an adjustment 
factor to reflect economic differences be-
tween the auction area that was the sub-
ject of the market-priced auction for the 
item or service and the auction area in 
which the supplier is located. The Sec-
retary shall use such adjustment factor to 
adjust the payment amount made to a sup-
plier pursuant to clause (iii). The Sec-
retary, auction expert, and market monitor 
shall consult with relevant stakeholders in 
developing such factors. 
‘‘(8) MONITOR ACCESS AND QUALITY.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
monitor the performance of suppliers that are 
awarded a contract pursuant to paragraph (6) 
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to ensure compliance with the requirements of 
this subsection, including the requirements and 
obligations established by the auction expert 
under paragraph (5)(B). 
‘‘(B) ENFORCEMENT.—If the Secretary, 
after consultation with the market monitor, de-
termines that there has been a material failure 
of a supplier that has been awarded a contract 
pursuant to paragraph (6) to comply with such 
requirements, the Secretary, after consultation 
with the market monitor, shall implement en-
forcement measures. Such enforcement meas-
ures may include the following: 
‘‘(i) A formal warning letter. 
‘‘(ii) Forfeiture of amounts submitted 
as a performance deposit pursuant to sub-
section (d)(3)(B). 
‘‘(iii) 
Termination 
of 
a 
contract 
awarded under paragraph (6). 
‘‘(iv) Termination of the supplier’s 
agreement to participate in the program 
under this title for up to 2 years. 
‘‘(e) APPLICATION
OF COMPETITIVE ACQUISITION 
PROGRAM PROVISIONS.—In implementing the market 
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pricing program under this section, the provisions of sec-
tion 1847(b) shall be applied as follows: 
‘‘(1) Paragraph (3) shall apply, except that, for 
purposes of contracts awarded under the market 
pricing program, subparagraph (B) of such para-
graph shall be applied by substituting ‘2 years’ for 
‘3 years’. 
‘‘(2) Subject to subsection (d)(7)(B), paragraph 
(4) shall apply. 
‘‘(3) Paragraph (5) shall apply, except that— 
‘‘(A) the reference in subparagraph (A) of 
such paragraph to subsection (a)(2) is deemed 
a reference to subsection (b)(1) of this section; 
and 
‘‘(B) the reference in subparagraph (B)(i) 
of such paragraph to subparagraph (A) is 
deemed a reference to subsection (d)(4) of this 
section. 
‘‘(4) Paragraph (7) shall not apply. 
‘‘(5) Paragraph (8) shall apply. 
‘‘(6) Paragraph (9) shall apply, except that 
such paragraph shall be applied as if a reference to 
a bidding program includes a reference to the mar-
ket pricing program. 
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‘‘(7) Paragraph (10) shall apply, except that 
such paragraph shall be applied as if a reference to 
a competitive acquisition program includes a ref-
erence to the market pricing program. 
‘‘(8) Paragraph (11) shall not apply, except 
that— 
‘‘(A) the pendency of any claim for review 
under this section shall not delay any auction 
round conducted pursuant to subsection (a)(3) 
or (d)(1); and 
‘‘(B) there shall be no administrative or ju-
dicial review of any claim to enjoin the oper-
ation of a market-priced auction conducted. 
‘‘(f) TRANSPARENCY REQUIREMENTS FOR MARKET 
PRICING PROGRAM.—In implementing the market pricing 
program, the Secretary shall provide for publication, on 
an Internet Web site operated by the Secretary, of the 
following information: 
‘‘(1) The qualifications necessary to submit a 
bid pursuant to subsection (d)(3). 
‘‘(2) The financial requirements that are appli-
cable for purposes of subsection (d)(3)(B). 
‘‘(3) The quality standards and the perform-
ance standards developed pursuant to subsection 
(c)(3)(B). 
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‘‘(4) The calculation of the total market capac-
ity of an eligible auction area for purposes of sub-
section (d)(5)(C)(i). 
‘‘(5) The methodology developed for an adjust-
ment 
factor 
applied 
pursuant 
to 
subsection 
(d)(7)(B)(iv). 
‘‘(6) The process for soliciting and accepting 
bids for purposes of paragraphs (3) and (5) of sub-
section (d). 
‘‘(7) For purposes of subsection (d)(5)— 
‘‘(A) the number of bidders at the auction; 
‘‘(B) the number of winning and losing 
bidders at the auction; and 
‘‘(C) with respect to rejected bidders, the 
specific reasons for rejections of any bid, and, 
with respect to any such rejection, a means of 
ensuring the availability of the process of review 
or appeal to a rejected bidder. 
‘‘(8) The calculation of and compliance with the 
requirement of section 1847(b)(6)(D), as made ap-
plicable to the market pricing program by subsection 
(e). 
‘‘(g) RELIANCE ON AUCTION EXPERT AND MARKET 
MONITOR IN ESTABLISHING AND OPERATING MARKET 
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PRICING PROGRAM; ADVISORY COMMITTEE REPORT AND 
MONITORING.— 
‘‘(1) AUCTION
EXPERT
AND
MARKET
MON-
ITOR.— 
‘‘(A) IN GENERAL.—The Secretary shall, 
not later than 3 months after the date of the 
enactment of this section, through the Office of 
the Assistant Secretary for Planning and Eval-
uation, enter into a contract with an individual 
to serve as the auction expert and such a con-
tract to serve as a market monitor to assist in 
the design, development, implementation and 
functioning of the auction to be conducted pur-
suant to subsection (b). The auction expert and 
market monitor shall report and be accountable 
to the Secretary. 
‘‘(B) SELECTION
OF
AUCTION
EXPERT 
AND MARKET MONITOR; TERM; ACCESS TO IN-
FORMATION.— 
‘‘(i) COMPETITIVE PROCESS.—The se-
lection of the individual to serve as the 
auction expert and as a market monitor 
under subparagraph (A) shall be under-
taken through a competitive process. 
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‘‘(ii) DISQUALIFICATIONS.—An indi-
vidual may not be selected as the auction 
expert if such individual— 
‘‘(I) is a current or former em-
ployee of the Centers for Medicare & 
Medicaid Services; 
‘‘(II) is a current or former con-
tractor for the Centers for Medicare & 
Medicaid Services that participated in 
the implementation of the competitive 
acquisition program under section 
1847(a); 
‘‘(III) does not have significant 
experience in implementing auctions 
of similar complexity in government 
programs; and 
‘‘(IV) does not have appropriate 
educational credentials. 
‘‘(iii) ACCESS TO INFORMATION.—The 
Secretary shall make available to the auc-
tion expert and the market monitor all ap-
plicable information (including confidential 
information) on the relevant markets 
throughout the duration of the market 
pricing program. 
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‘‘(iv) TERM OF CONTRACT.—The con-
tract for the auction expert and for the 
market monitor under this paragraph shall 
be for a period of 4 years. 
‘‘(2) FUNCTIONS
OF
AUCTION
EXPERT.—The 
auction expert shall conduct the activities as de-
scribed in this section, including— 
‘‘(A) development of a draft auction design 
and design conference under subparagraphs (B) 
and (C) of subsection (c)(2); 
‘‘(B) conducting bidders conferences under 
subsection (d)(5)(D); and 
‘‘(C) lead the auction, contracting, and 
other aspects of implementing the market pric-
ing program with the advice of the market mon-
itor. 
‘‘(3) FUNCTIONS OF MARKET MONITOR.— 
‘‘(A) 
PARTICIPATE
IN
DESIGN
CON-
FERENCE.—The market monitor shall partici-
pate in the design conference under subsection 
(c)(2)(C) and, at the conference, provide a pres-
entation on the responsibilities of the market 
monitor throughout the year and common on 
key aspects of the design and their purpose. 
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‘‘(B) REVIEW
OF
FINAL
DESIGN.—The 
market monitor shall review the final auction 
design recommendations submitted under sub-
section (c)(2)(D) and, within one month of the 
release of such recommendations, provide public 
comment on them. 
‘‘(C) MONITORING.— 
‘‘(i) IN GENERAL.—The market mon-
itor shall provide ongoing monitoring of 
the performance of suppliers and the ef-
fects of the market pricing program to 
guard against the occurrence of any nega-
tive effects specified in subsection (d)(8). 
‘‘(ii) PROVIDE TRANSPARENCY OF IN-
FORMATION.—The 
monitoring 
under 
clause (i) shall include public availability of 
the number of suppliers providing market 
priced items and services in an eligible 
auction area during each year of the oper-
ation of the market pricing program. 
‘‘(D) 
BIANNUAL
REPORTS
TO
SEC-
RETARY.—The market monitor shall provide bi-
annual reports to the Secretary in the initial 
two years and annually thereafter on the devel-
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opment and operations of the market pricing 
program. In each report, the monitor shall— 
‘‘(i) identify potential problems with 
the program; and 
‘‘(ii) recommend solutions to problems 
so identified. 
‘‘(E) ANNUAL REPORT.—The market mon-
itor shall provide an annual report to Congress 
on the operation and functioning of the market 
pricing program. Each such report shall include 
information on— 
‘‘(i) potential problems with the pro-
gram; 
‘‘(ii) recommended solutions to prob-
lems identified pursuant to subclause (I); 
‘‘(iii) the appropriateness of HCPCS 
codes selected for auctions; 
‘‘(iv) an evaluation on the ability of 
individuals eligible for benefits under this 
part to obtain items and services subject to 
the market pricing program; 
‘‘(v) any adverse health effects result-
ing from implementation of the program; 
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‘‘(vi) any material deterioration in the 
quality of items and services provided 
under the program; 
‘‘(vii) the costs of any preventable or 
prolonged hospitalizations due to lack of 
timely access to market priced items and 
services; and 
‘‘(viii) any negative business con-
sequences to the supplier of any market 
priced items and services occurring as a re-
sult of errors made in the conduct of the 
program.’’. 
SEC. 5. APPLICATION OF EXISTING PROVISIONS. 
(a) REVISIONS TO PROGRAM ADVISORY AND OVER-
SIGHT COMMITTEE.—Section 1847(c) of the Social Secu-
rity Act (42 U.S.C. 1395w–3(c)) is amended— 
(1) in paragraph (1), by adding at the end the 
following: ‘‘The Secretary shall reconstitute the 
Committee and extend the terms of its members.’’; 
(2) in paragraph (3), by adding at the end the 
following new subparagraph: 
‘‘(C) 
ADDITIONAL
REPORT
TO
CON-
GRESS.—Not later than 1 year after the date of 
the appointment of the auction expert under 
section 1847C(g)(1), the Committee shall sub-
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mit to the Congress a report on the market 
pricing program established under section 
1847C. The report shall include information on 
the design of the market pricing program, ac-
cess to and quality of market priced items and 
services by beneficiaries under the program.’’; 
(3) by striking paragraph (4) (relating to 
FACA); and 
(4) in paragraph (5), by inserting before the pe-
riod at the end the following: ‘‘, except that the re-
constituted Committee shall terminate 2 years after 
the date of the appointment of the auction expert 
and 
the 
market 
monitor 
under 
section 
1847C(g)(1)’’. 
(b) NEGATIVE PRESSURE WOUND THERAPY STAND-
ARDS.—The Secretary of Health and Human Services, in 
consultation with relevant stakeholders (as defined in sec-
tion 1847C(c)(2)(A)(ii) of the Social Security Act, as 
added by section 4), shall develop standards for coverage 
and quality of negative pressure wound therapy items and 
services 
(within 
the 
meaning 
of 
section 
1847(a)(1)(D)(i)(IV) of such Act, 42 U.S.C. 1395w– 
3(a)(1)(D)(i)(IV)). 
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SEC. 6. ADDITIONAL BUDGETARY OFFSET. 
(a) IN GENERAL.—In addition to the payment reduc-
tions specified in the amendments made by section 
3(a)(1), unobligated balances of all discretionary appro-
priations for each fiscal year (beginning with fiscal year 
2013) are hereby rescinded in an amount equal to the 
amount necessary to make this Act budget neutral for 
such fiscal year. 
(b) IMPLEMENTATION.—The Director of the Office of 
Management and Budget shall determine and identify 
each account, program, project, and activity to which the 
rescission under subsection (a) shall apply and the amount 
of such rescission that shall apply to each such account, 
program, project and activity. Not later than 60 days after 
the date of the enactment of this Act, the Director of the 
Office of Management and Budget shall submit a report 
to the Secretary of the Treasury and to Congress of the 
accounts, programs, projects, activities, and amounts de-
termined and identified for rescission under the preceding 
sentence. 
(c) EXCEPTION.—This section shall not apply to ac-
counts, programs, projects and activities operated by the 
Department of Defense or the Department of Veteran’s 
Affairs. 
Æ 
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