CMS used payment information from the CBP to adjust payment rates for 393 Healthcare Common Procedure Coding System (HCPCS) codes (generally referred to as “items” in this report) in non-bid areas. Most of these items were included in at least one CBP round; however, some are no longer included in current CBP rounds. For example, 81 items with adjusted rates were not included in the CBP rounds that were in effect at the end of calendar year 2016. CMS grouped the 393 items with adjusted rates into 11 general product categories. See table 1 for these categories and the number of items in each category. CMS uses different methodologies to adjust FFS payment rates in non- bid areas. These adjustments are based on CBP payment information depending on the number of CBP areas in which a particular item has been competitively bid and the geographic area in which the adjusted rate is applied. For example, for an item that is competitively bid in more than 10 CBP areas and is furnished to beneficiaries residing in non-rural areas of the contiguous United States, CMS calculates a separate adjusted rate for each of eight geographic regions. In each region, the item’s average regional adjusted rate reflects the unweighted average competitively bid rate for all CBP areas located fully or partially within the region. To address concerns regarding the possible effect of adjusted rates on beneficiaries residing in rural areas, CMS may apply an additional premium to the adjusted rates for items furnished to beneficiaries residing in rural areas of the contiguous United States. Similarly, CMS may also apply a premium in non-contiguous areas of the United States—Alaska, Hawaii, and the U.S. territories—that applies to non-rural and rural areas alike. See figure 1 for a map of CBP and non-bid areas as of 2016. According to CMS, it initially used a phased-in approach to adjust FFS payment rates beginning in 2016; this allowed for a transition period in which the agency could closely monitor health outcomes and access to affected DME items prior to implementing fully adjusted rates. From January 1 through June 30 of 2016, FFS payment rates were based on a 50/50 blend of non-adjusted and adjusted rates, and from July 1 through December 31 of the same year, FFS payment rates were 100 percent adjusted based on CBP information. However, the 21st Century Cures Act required CMS to retroactively apply the 50/50 blended payment rates to claims in the second half of 2016, delaying the fully adjusted payment rates to January 1, 2017. Because the retroactively applied 50/50 blended rates were based on newly available information from the CBP round 2 recompete that went into effect on July 1, 2016, the adjusted rates for the second half of 2016 may have differed from the adjusted rates for the first half of 2016. CMS contractors retroactively adjusted claims for this period, which were processed during the second half of calendar year 2017. Because this rate change became effective mid- December 2016, most decisions by suppliers and beneficiaries during the second half of 2016 were made based on the 100 percent adjusted rates, and the retroactive adjustments affected the total allowed charges, or expenditures, that suppliers were reimbursed. The implementation of adjusted rates may also affect other populations in addition to Medicare suppliers and Medicare beneficiaries in non-bid areas, because some private and other government insurers base their payment rates on Medicare’s fee schedule. For example, the federal government’s TRICARE military health program uses Medicare’s fee schedule to help determine how much it pays for DME items. CMS has established certain requirements that all DME suppliers must meet in order to enroll in Medicare and maintain Medicare billing privileges, which include accreditation and appropriate licensure. Specifically, DME suppliers must meet Medicare enrollment and quality standards. CMS also requires all DME suppliers and each of their locations to be accredited by a CMS-approved accrediting organization. In addition, DME suppliers must meet state licensure requirements in order to furnish certain items or services. Finally, certain DME suppliers are required to post a surety bond of at least $50,000 for each business location. There are two key differences between supplier requirements in non-bid areas versus CBP areas. First, only suppliers who are awarded a contract—referred to as contract suppliers—can furnish certain DME items at competitively determined prices to Medicare beneficiaries residing in CBP areas, and they are contractually obligated to furnish items in their contract upon request. According to CMS’s competitive acquisition ombudsman, contract suppliers in CBP areas may receive more scrutiny than DME suppliers in non-bid areas because CMS can take action to ensure the suppliers are meeting their contract obligations. However, in non-bid areas, any Medicare-enrolled DME supplier can furnish DME items. DME suppliers do not sign contracts in non-bid areas and are not contractually obligated to furnish items upon request. Second, contract suppliers in CBP areas must accept Medicare assignment, meaning that they must accept the competitively determined Medicare payment rate in full (and may not charge beneficiaries more than any unmet deductible and 20 percent coinsurance), whereas suppliers in non- bid areas may choose not to accept assignment and there is no limit on the amount they may charge a beneficiary. CMS has implemented several activities to monitor whether beneficiary access has been affected by the implementation of adjusted rates in non- bid areas, as summarized below. Inquiries to 1-800-MEDICARE. Beneficiaries with DME questions— referred to by CMS as inquiries—are directed to call CMS’s 1-800- MEDICARE call line. Callers are assisted by customer service representatives trained to answer questions and assist beneficiaries in finding DME suppliers. One CMS official told us the agency tracks DME-related inquiries to 1-800-MEDICARE but does not track whether inquiries are received from beneficiaries in CBP areas versus non-bid areas. Health Status Monitoring Tool. CMS analyzes Medicare claims data to monitor real-time health outcomes, such as death, hospitalizations, emergency room visits, and physician visits for beneficiaries in both CBP and non-bid areas. CMS posts information on its website to show historical and regional trends in health outcomes for specific groups of beneficiaries. Monitoring Changes in the Number of Suppliers and Beneficiary Utilization Rates. CMS officials told us they closely monitor changes in the number of suppliers furnishing items subject to adjusted rates in non-bid areas as well as changes in beneficiary utilization of rate- adjusted items. Monitoring Assignment Rates. CMS monitors the percentage of claims suppliers have submitted as “assigned” in non-bid areas. According to CMS, assignment rates are a good indicator of whether FFS payment amounts are sufficient. While CMS conducted beneficiary satisfaction surveys before and after the implementation of previous CBP rounds in order to measure changes in beneficiary satisfaction in CBP areas, CMS officials reported they have not conducted similar surveys of beneficiaries residing in non-bid areas. The payment rate reductions for DME items in non-bid areas were generally significant. The average unweighted percentage reduction across the top product category items combined—measured by calculating the percentage change between the 2015 non-adjusted and the 2017 fully adjusted rates—was 46 percent. However, payment rate reductions varied by DME product category and by individual item within product categories. This is not unexpected given that the adjusted rates for each item were based on competitively determined payment rates from prior or current CBP rounds, and rate reductions for those payment rates also varied widely by product category and item. Specifically, average payment rate reductions by DME product category ranged from 18 percent to 74 percent with a midpoint of 47 percent. For example, the average payment rate reduction for the top items in the oxygen product category—the category that accounted for the highest percentage of total expenditures in 2016—was 39 percent. The range of reductions among individual items within product categories also varied. For example, payment rate reductions for the top items in the enteral nutrients product category ranged from 46 percent to 56 percent. In contrast, payment rate reductions for the three items in the negative pressure wound therapy (NPWT) product category ranged from 6 percent to 61 percent. (See table 2.) Table 3 shows 2015 non-adjusted and 2017 fully adjusted rates and the percentage reduction in these rates for the rate-adjusted item in each product category with the largest share of 2016 total expenditures. (See Appendix II for detailed information on the 2015 non-adjusted payment rates, 2016 transitional 50/50 blended adjusted rates, and 2017 fully adjusted rates for items with the highest 2016 expenditures in each product category.) The number of suppliers furnishing any of the 393 rate-adjusted items to beneficiaries in non-bid areas in 2016—the first year that CMS adjusted payment rates in non-bid areas—decreased 8 percent compared to 2015. This continued a trend of annual decreases in non-bid areas going back to at least 2011—the first year CMS began implementing the CBP in nine areas. The largest percentage decrease in suppliers, 13 percent, occurred in 2014 (the year after the CBP was expanded to an additional 100 areas), followed by 9 and 8 percent decreases in 2015 and 2016, respectively. This information is based on our review of the number of suppliers billing Medicare, so it is unclear as to how much the decreases were attributable to suppliers closing their businesses, conducting mergers or acquisitions, no longer accepting Medicare beneficiaries, or other factors. Also, the number of suppliers furnishing non-adjusted items to beneficiaries residing in non-bid areas decreased 4 percent in 2016 compared to 2015. Similar to trends found for rate-adjusted items, this continued a trend of annual decreases since at least 2011, although these decreases were smaller. As was the case with rate-adjusted items, the largest percentage decrease in the number of suppliers occurred in 2014 and then slowed in subsequent years. (See fig. 2.) Because 2016 was the most recent year of complete Medicare claims data available at the time of our study, we could only review data for the first year that adjusted rates were in effect in non-bid areas and could not determine if these trends continued in 2017. Some DME industry trade organization representatives we interviewed reported that suppliers face an additional challenge of having to travel long distances when furnishing items to beneficiaries in rural areas, which may result in suppliers limiting their service areas. However, there was little difference between non-rural and rural non-bid areas in terms of changes in the number of suppliers between 2015 and 2016. For example, the number of suppliers furnishing rate-adjusted items to beneficiaries residing in non-rural non-bid areas decreased 7 percent between 2015 and 2016 compared with a decrease of 8 percent in rural non-bid areas. (See fig. 3.) There was also little difference between non-rural and rural areas in terms of changes in the number of suppliers who furnished non-adjusted items to beneficiaries residing in non-bid areas. For example, between 2015 and 2016 the number of suppliers furnishing non-adjusted items to beneficiaries in non-bid areas decreased 3 percent in non-rural areas and 4 percent in rural areas. We found that the number of suppliers furnishing rate-adjusted items in non-bid areas decreased between 2015 and 2016 in all product categories, though the extent of these decreases varied. For example, we found that the number of suppliers furnishing items in the infusion pumps product category decreased by 1 percent between 2015 and in 2016 while the number of suppliers furnishing general home equipment decreased by 10 percent. Trends for 2010 through 2016 were generally similar. The number of suppliers decreased in all product categories, and the extent of decreases varied. Individual suppliers may furnish items across multiple product categories. (See fig. 4.) The number of beneficiaries in non-bid areas receiving at least one rate- adjusted item in 2016—the first year that CMS implemented adjusted rates in non-bid areas—showed little change compared to 2015, decreasing by less than one-half of a percentage point. This stabilization in beneficiary utilization occurred following three years of decreases in non-bid areas with the largest decrease (4 percent) in 2014—the year following the CBP’s expansion to an additional 100 areas. In comparison, the number of beneficiaries in non-bid areas who received at least one non-adjusted item increased 3 percent in 2016. (See fig. 5.) In general, the annual trends in CBP areas paralleled those in non-bid areas. Between 2015 and 2016, there was little change in the number of beneficiaries in CBP areas who received at least one rate-adjusted item, with a decrease of less than one-half a percentage point. In non-bid areas, there was little difference between non-rural and rural areas in terms of changes in 2016 in the number of beneficiaries who received rate-adjusted items, with decreases in both of less than one-half a percentage point. There was also little difference in terms of the changes in the number of beneficiaries in non-bid areas who received non-adjusted items. The total decrease for the 2010 to 2016 period was smaller in non-rural areas than rural areas. (See fig. 6.) We found that the number of beneficiaries in non-bid areas receiving at least one rate-adjusted item decreased in 2016 for 9 of the 11 product categories. Changes ranged from a 45 percent decrease for the TENS product category to a 9 percent increase for the CPAP/RAD product category. For the 2010 through 2016 period, most product categories also had total net percentage decreases, and percentage changes varied across product categories. (See fig. 7.) Individual product category decreases were generally larger in CBP areas than in non-bid areas. For example, between 2010 and 2016, the percentage change in the number of beneficiaries who received oxygen product category items was -29 percent in CBP areas as compared to -19 percent in non-bid areas. CPAP/RAD was the one product category for which the number of beneficiaries receiving at least one item increased rather than decreased in 2016 and between 2010 and 2016 in both non-bid and CBP areas. This is consistent with what we have previously reported. We could only report on utilization for one year following adjustment of rates because 2016 was the most recent year with complete data available; as such utilization trends may differ in 2017 and subsequent years. CMS has reported that data from its health status monitoring tool indicate the reduced payment rates have not resulted in changes in access to DME items or health outcomes in non-bid areas in 2016 as compared to 2015. CMS uses the health status monitoring tool to analyze Medicare claims data and track seven health outcomes—deaths, hospitalizations, emergency room visits, physician visits, admissions to skilled nursing facilities, average number of days spent hospitalized in a month, and average number of days in a skilled nursing facility in a month—for beneficiaries in both CBP and non-bid areas. The data for non-bid areas are broken out by rural and non-rural areas across eight different regions of the country and non-contiguous U.S. areas. CMS monitors these health outcomes for three Medicare FFS beneficiary groups: 1) all beneficiaries enrolled in FFS, 2) beneficiaries who are likely to use one of the rate-adjusted items on the basis of related health conditions, and 3) beneficiaries who have a claim for one of the rate-adjusted items. CMS’s tool considers historical and regional trends in health status to monitor health outcomes in all CBP and non-bid areas. CMS officials told us that staff meet bi-weekly to review monitoring tool trends as well as external complaints or stakeholder feedback to identify and investigate potential DME access issues. The officials told us these investigations have not identified any adverse health outcomes as a result of the implementation of adjusted rates. We previously conducted an analysis of CMS’s methodologies and scoring algorithm that focused on evaluating health outcome trends in CBP areas and found them to be generally sound. CMS officials told us they have not made significant revisions to the tool’s underlying methodologies but did create a separate workbook specially tailored to the implementation of the adjusted rates in non-bid areas that includes additional capabilities, such as review of assignment rates. In addition, because CMS uses a 4-month window to evaluate health outcomes of all beneficiaries that meet the criteria, for this report we also conducted our own analysis of health outcomes over a longer period of time to determine if our results for a particular set of beneficiaries were consistent with CMS’s shorter-term results. Specifically, we tracked a cohort of about 256,000 beneficiaries in both non-bid and CBP areas who began using oxygen items in the first half of 2014 and followed their utilization through the end of 2016 to determine if mortality and hospital admissions rates remained consistent before and after the implementation of adjusted rates. We found that the trends in mortality and hospital admissions rates for this cohort were generally consistent with the cumulative trends displayed in CMS’s monitoring tool. We did not find a change in health status between 2015 and 2016 related to the reduced payment rates. One way that CMS verifies that beneficiaries have access to needed items and services is by reviewing the percentage of suppliers who enroll as Medicare “participating” suppliers and the percentage of claims that suppliers have submitted as assigned. Participating suppliers must accept the FFS payment rate in full for all claims and cannot charge beneficiaries an additional amount above the 20 percent copayment. DME suppliers can also elect to be “non-participating” suppliers meaning they can choose to accept assignment on a claim-by-claim basis and there is no limit on the amount that they can charge for a DME item. Non- participating suppliers in non-bid areas are not required to accept assignment of Medicare claims. This means a non-participating supplier can decide not to accept assignment for an item and can charge beneficiaries an amount above the Medicare payment rate. CMS told us the rate of participating suppliers in 2016 was unchanged from 2015 and decreased by one percent in 2017, and the rates of assignment for rate- adjusted items remained very high (over 99 percent of all claims for rate- adjusted items in non-bid areas) in 2016 and 2017. CMS told us the nationwide number of inquiries to 1-800-MEDICARE associated with access issues did not increase after the implementation of adjusted rates. According to a CMS official, CMS uses the same process for all DME calls received, regardless of whether the caller lives in a CBP or non-bid area, so there is no way to distinguish DME-related calls in CBP areas from non-bid areas. However, the CMS official said there has been no evidence of systemic access issues in non-bid areas, such as beneficiaries reporting they were not able to find suppliers to furnish DME items with adjusted rates. We spoke with officials from three of CMS’s regional offices, who also reported there has not been an increase in the number of DME-related inquiries since adjusted rates in non-bid areas went into effect. One of the officials told us that her regional office is forwarded information about all inquiries related to Medicare Parts A and B from the other CMS regional offices. She also said the regional offices generally receive direct inquiries from a variety of sources including beneficiaries, beneficiary advocates, local partners, congressional district offices, and providers, and some are also escalated by 1-800-MEDICARE customer service representatives. According to that official, each year regional offices receive close to 40,000 inquiries nationwide regarding a wide range of DME issues, and most are related to questions about coverage and documentation requirements (such as what types of DME may require additional documentation or face-to-face visits with physicians). In addition, the official told us that regional offices capture detailed information about each inquiry. This includes contact information for the individual submitting the inquiry, the type of DME involved and whether it is included in the CBP, and the regional office’s response. Officials said they review this information to specifically look for access issues or trends by product category but have not identified any issues. One official said she had heard anecdotal reports of beneficiaries contacting regional offices claiming they had experienced access issues, but such reports did not indicate these issues were widespread or sustained. We also interviewed representatives from the State Health Insurance Assistance Program who reported there has not been an increase in requests for assistance with DME-related issues since the adjusted rates went into effect. The representatives told us State Health Insurance Assistance Program counselors log all contacts, but the data do not distinguish between non-bid and CBP areas. However, they said counselors have received about 300 to 500 DME-related contacts each quarter since 2015, and the number of requests for assistance with DME- related issues remained consistent before and after adjusted rates went into effect. State Health Insurance Assistance Program representatives said counselors attempt to resolve issues on their own, but can also contact CMS’s regional offices for assistance. We interviewed representatives from one state hospital association, three beneficiary advocacy groups, and four DME industry trade organizations who provided anecdotal examples of varying degrees of beneficiary access issues in non-bid areas. For example, representatives from the state hospital association told us some hospital case managers in non-bid areas have reported difficulty in locating suppliers to provide DME items such as wheelchairs or walkers, but these issues are not widespread. A representative from one beneficiary advocacy group told us her organization does not receive many direct inquiries from Medicare beneficiaries in regard to access issues to DME, but it has been contacted by entities such as hospital discharge planners and pharmacies regarding issues with delivery of DME items. For example, the representative said some hospital discharge planners have reported that DME suppliers are more resistant to delivering DME items, such as wheelchairs and walkers, to the hospital when the beneficiary resides in a non-bid area as opposed to a CBP area. However, the representative said such reports are anecdotal and she does not think that issues reported are widespread or have created significant hardship. She added that her organization makes webinars available on a fairly regular basis, and very few people signed up for the DME webinar, which was not the case for webinars held for other topics. In contrast, a representative of another beneficiary advocacy group that focuses on a condition in which beneficiaries would typically use oxygen items with adjusted rates told us that without a real research instrument, it is difficult to determine if the increase in complaints that her group began receiving in 2016 from beneficiaries in non-bid areas is directly related to the adjusted rates, but she said she believes they are because she had not heard certain types of complaints before the adjusted rates went into effect. For example, she said the beneficiary advocacy group has received complaints about reduced delivery services and reductions in the number of portable oxygen tanks that DME suppliers are willing to furnish in a single delivery and these complaints are more frequent from beneficiaries who live in rural areas. The representative said given that rural areas may have higher delivery costs, it is not surprising that some suppliers may have decreased the number of deliveries, but she was surprised to hear they have decreased the number of portable oxygen tanks they are willing to provide. According to CMS, the agency encourages individuals to report any supplier that delivers fewer tanks of oxygen than a beneficiary needs to CMS, so this violation can be immediately addressed. Representatives from four DME industry trade organizations that we spoke with told us the implementation of adjusted rates has caused some suppliers to change their business models and practices. Specifically, individuals from all four DME industry trade organizations told us DME companies have lowered costs by reducing their number of employees, decreasing their service areas, or consolidating deliveries in specific areas to only certain days. For example, several DME suppliers told us that since the implementation of adjusted rates, they will only service beneficiaries who reside within the city limits or within a certain number of miles from their locations. Several DME suppliers told us the quality and range of items provided by DME suppliers in non-bid areas has changed since the adjusted rates went into effect. For example, several suppliers reported they provide cheaper, lower quality items and that some suppliers will no longer provide liquid oxygen to Medicare beneficiaries. In addition, individuals from all four DME industry trade organizations also told us there have been delays in hospital discharges as a result of not being able to find a DME supplier to provide needed DME. In contrast, CMS officials told us they investigated reported concerns about delayed patient discharges because of difficulties in acquiring rate-adjusted items and found there has not been a noticeable change in the average length of hospital stay before and after the implementation of adjusted rates. Specifically, CMS officials told us they measured: 1) average length of hospital stay for beneficiaries who received new rate-adjusted items shortly after their discharge, 2) whether beneficiaries were being discharged prior to receiving new rate-adjusted items, and 3) average length of stay for beneficiaries in individual access groups whether or not they received rate-adjusted items after being discharged. According to CMS, results of this analysis indicated no apparent changes in the average length of hospital stay after adjusted rates were implemented. In addition to speaking with these representatives, we also reviewed several publicly released studies that assessed the effect of the implementation of adjusted rates on beneficiaries, DME suppliers, and others. We found these studies did not provide persuasive evidence of substantial effects, primarily because of methodological issues with how the participants in the studies were recruited. Specifically, respondents were recruited on social media platforms or through targeted email notifications, raising concerns about selection bias. Although the number of DME suppliers and beneficiary utilization of DME items have decreased throughout the past several years, available evidence indicates there were not widespread beneficiary access issues in 2016. According to CMS officials, the long-term decreases in utilization do not necessarily indicate that beneficiaries did not receive needed DME, and suggested instead that these decreases are the result of a decline in unnecessary utilization. However, some stakeholders we interviewed continued to express concerns that lower FFS payment rates may have made it more difficult for some beneficiaries to receive needed DME, and one DME trade organization told us some decreases in utilization could be attributed to beneficiaries opting to pay for items outright rather than going through Medicare. Because there is only limited experience on changes in the number of DME suppliers and utilization of DME based on the first year that adjusted rates have been in effect, some effects may take longer to appear, and it is possible that trends could differ in 2017 or subsequent years. This underscores the importance of CMS’s continued monitoring activities. We provided a draft of this report to HHS for comment. HHS provided technical comments, which were incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services and appropriate congressional committees. The report will also be available at no charge on our website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or clowers@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. The Centers for Medicare & Medicaid Services (CMS) has implemented several antifraud efforts that affect durable medical equipment (DME) suppliers. Specifically, CMS began phasing in DME competitive bidding program (CBP) rounds in 2008. (See fig. 8.) In addition to the CBP, CMS has also implemented several other broader initiatives. (See fig. 9.) Table 4 includes the top five Healthcare Common Procedure Coding System (HCPCS) codes for each product category based on the percentage of 2016 total expenditures for items included in the competitive bidding program (CBP) and subject to adjusted rates in non- bid areas. Combined, these items account for 80 percent of 2016 total expenditures across all 393 rate-adjusted items. A. Nicole Clowers, (202) 512-7114 or clowersa@gao.gov. In addition to the contact named above, Kathleen M. King, Director; Martin T. Gahart, Assistant Director; Michelle Paluga, Analyst-in-Charge; Sam Amrhein; Todd Anderson; Barbara Hansen; and Emily Wilson made key contributions to this report. Medicare: CMS’s Round 2 Durable Medical Equipment and National Mail- order Diabetes Testing Supplies Competitive Bidding Programs. GAO-16-570. Washington, D.C.: September 15, 2016. Medicare: Utilization and Expenditures for Complex Wheelchair Accessories. GAO-16-640R. Washington, D.C.: June 1, 2016. Medicare: Bidding Results from CMS’s Durable Medical Equipment Competitive Bidding Program. GAO-15-63. Washington, D.C.: November 7, 2014. Medicare: Second Year Update for CMS’s Durable Medical Equipment Competitive Bidding Program Round 1 Rebid. GAO-14-156. Washington, D.C.: March 7, 2014 Medicare: Review of the First Year of CMS’s Durable Medical Equipment Competitive Bidding Program’s Round 1 Rebid. GAO-12-693. Washington, D.C.: May 9, 2012. Medicare: The First Year of the Durable Medical Equipment Competitive Bidding Program Round 1 Rebid. GAO-12-733T. Washington, D.C.: May 9, 2012. 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 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.

Summary: To achieve Medicare DME savings, Congress required CMS to implement a CBP in certain geographic areas for certain DME items. Beginning in 2011, CMS began implementing the CBP in several phases. The agency estimates that the CBP will save the Medicare program $19.7 billion between 2013 and 2022.The Patient Protection and Affordable Care Act required CMS to use CBP information to adjust fee-for-service payment rates for certain DME items in non-bid areas. On January 1, 2016, adjusted rates for 393 items went into effect in non-bid areas. CMS estimated these adjustments will save the Medicare program about $3.6 billion between fiscal years 2016 and 2020. GAO was asked to review the potential effects of reduced payment rates for DME in non-bid areas. In this report, GAO examines (1) payment rate reductions and any changes in the number of suppliers; (2) any changes in the utilization of rate-adjusted items; and (3) available evidence related to potential changes in beneficiaries' access to rate-adjusted items. GAO compared non-adjusted 2015 fee-for-service payment rates to adjusted 2016 and 2017 rates and reviewed Medicare claims data from 2010 through 2016. GAO also reviewed CMS's monitoring activities and interviewed CMS officials. In addition, GAO interviewed select beneficiary advocacy groups and DME industry trade organizations. The Centers for Medicare & Medicaid Services (CMS) implemented a competitive bidding program (CBP) for certain durable medical equipment (DME), such as wheelchairs and oxygen, in 2011 that is currently operating in 130 designated U.S. areas. On January 1, 2016, CMS used information from the CBP to start adjusting Medicare fee-for-service payment rates for certain DME throughout the country in areas that had previously not been subject to the CBP (known as non-bid areas). For the first year adjusted rates were in effect in non-bid areas, GAO found: Reductions in payment rates were generally significant but varied by category of DME item. The unweighted average reduction in payment rates for the five rate-adjusted DME items with the highest expenditures in 2016 within each DME category was 46 percent. Changes in the number of suppliers furnishing rate-adjusted items were generally consistent with the years before adjusted rates went into effect. GAO found that the number of suppliers furnishing rate-adjusted items in non-bid areas in 2016 decreased 8 percent compared to 2015. GAO's review of Medicare claims data found that beneficiary utilization of rate-adjusted items in non-bid areas in 2016 showed little change compared to 2015. GAO also found that CMS's activities to monitor beneficiary access, including changes in health outcomes, showed little change between 2015 and 2016. GAO interviewed several stakeholder groups that reported anecdotal examples of specific beneficiary access concerns they attributed to the rate adjustments, but stakeholders could not provide evidence to substantiate that the access issues were widespread. GAO's findings are consistent with CMS's monitoring results, which indicate that there were no widespread effects on beneficiary access in the year after the adjusted rates went into effect. However, some effects may take longer to appear, underscoring the importance of CMS's continued monitoring activities. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate.