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On August 19, 2011, the Centers for Medicare & Medicaid Services (CMS) announced Round 2 of its DMEPOS competitive bidding program.[1]  Bidding is to begin in January 2012.  Round 2 adds more product categories for competitive bidding and expands the number of competitive bidding areas (CBAs) affected.

CMS also announced on August 19ththat it will be conducting a national mail-order competition for diabetic testing supplies, which is scheduled to commence at the same time as the Round 2 competitive bidding program.[2]  The national mail-order competition will include all parts of the United States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa.[3]

Round 2 Product Categories for Competitive Bidding

  • Oxygen, oxygen equipment and supplies
  • Standard wheelchairs (both power and manual), scooters, and related accessories
  • Enteral nutrients, equipment, and supplies
  • Continuous Positive Airway Pressure (CPAP) devices and Respiratory Assist Devices (RADS) and related supplies and accessories
  • Hospital beds and related accessories
  • Walkers and related accessories
  • Negative Pressure Wound Therapy pumps and related supplies and accessories
  • Support surfaces (Group 2 mattresses and overlays).

For a list of the specific items in each product category, visit the Competitive Bidding Implementation Contractor (CBIC) website:

Metropolitan Statistical Areas (MSAs) and Competitive Bidding Areas (CBAs) for Round 2

MSAs and CBAs comprise the major cities and surrounding areas that are subject to Round 2 of competitive bidding.  The areas are designated by the Office of Management and Budget (OMB).[4]  CBAs are designated areas within, and sometimes, across MSAs. The list of Metropolitan Statistical Areas (MSAs) can be found at$File/Rd2_Bidding_CBAs0811.pdf.  

Round 2 CBAs are defined by a specific zip code within an MSA.[5]  Only a contract supplier is allowed to furnish competitively bid items in a CBA unless the supplier comes under an exception as allowed by regulations.[6]

CMS’s Timeline

In the summer of 2011, CMS began its pre-bidding supplier awareness program.  In the fall of 2011 CMS will announce its bidding schedule, begin its bidder education program, and begin its bidder registration period to obtain user ID and passwords.  Competitive bidding will begin in the winter of 2012.[7]

DMEPOS Competitive Bidding Program History

The DMEPOS competitive bidding program was created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).[8]The MMA required the Secretary of Health and Human Services (HHS) to establish and implement programs for the competitive bidding of DMEPOS in competitive bidding areas (CBAs) within Metropolitan Statistical Areas (MSAs) throughout the United States for contract awards to furnish certain competitively priced items for which payment is made under Medicare Part B.[9]The program was created in order to hold down prices and to decrease fraud and program abuse.[10]Implementation of the DMEPOS program began in July 2008,[11]but was temporarily delayed as required by the Medicare Improvements for Patients and Providers Act (MIPPA), including required reforms to the DMEPOS program.[12] After addressing MIPPA-required reforms, the DMEPOS program began its current roll-out across 2009.[13]  For information regarding the Round 1 rebid and the CBAs involved, see our previous Alerts at:  

DMEPOS Suppliers Must Be Enrolled In PECOS

The Affordable Care Act (ACA) states that only Medicare-enrolled physicians or other “eligible professionals” can prescribe DME.[14]In addition, suppliers must comply with accreditation requirements.[15]CMS is using the Provider Enrollment Chain and Ownership System (PECOS) as the vehicle for implementing the enrollment requirement of the ACA.[16]  This enrollment system is now an internet based-only system, containing the enrollment records of all active DMEPOS suppliers, including the enrollment records for all other Medicare fee-for-service providers and suppliers.[17]

Concerns about Access to Necessary DMEPOS

Beneficiary advocates, suppliers, and policy makers have all been concerned about beneficiary access to necessary DMEPOS being frustrated by the competitive bidding program.  At this point, the beneficiary community has reported few problems with obtaining necessary items and services. At a hearing held in September 2010, these concerns were explored.[18]  The major concern voiced by beneficiaries and their advocates has been a lack of information about how the DMEPOS program is to work, including a lack of information about the geographic areas, items, and services affected.[19]  Some providers, on the other hand, have complained that the program frustrates competition and that smaller suppliers will be driven out of the market. Other providers have indicated that they are prepared to work with the DMEPOS program. Meanwhile, the Office of the Inspector General (OIG) at HHS has reported that initial problems with CMS’ bidding approaches have been resolved and that the program is relatively on track.[20]

Beneficiary Protections

Beneficiaries must obtain DMEPOS items subject to competitive bidding from contract suppliers.[21]  Payment for competitively bid items of DMEPOS is on an assignment-related basis.[22]Medicare payment is 80% of the single payment amount for the item of DMEPOS in the CBA in which the beneficiary maintains a permanent residence.[23]

If a beneficiary is outside of the CBA in which he or she maintains a permanent residence, he or she may obtain an item of DMEPOS from a contract supplier if the item is a competitively bid item in the CBA where the item is obtained;[24]or from a supplier with a valid Medicare billing number if the beneficiary obtains an item in an area that is not a CBA.[25]If the item of competitively bid DMEPOS is furnished to a beneficiary who does not maintain a permanent residence in a CBA, payment is based on the lesser of the actual charge for the item, or the applicable fee schedule.[26]  With respect to obtaining competitively bid items from a non-contract supplier, Medicare’s Advance Beneficiary Notices (ABNs) rules apply.[27]Those rules provide that if the beneficiary is not provided an ABN, the beneficiary is not responsible for payment.[28]

Grandfathered Suppliers

One exception to the rule that all items that are competitively bid must be obtained from a contract suppler is that a grandfathered supplier may supply a grandfathered item to a beneficiary.[29]Beneficiaries may elect to receive grandfathered items from either a grandfathered supplier or a contract supplier.[30]

A grandfathered supplier is a non-contract provider of DMEPOS items and services that elects to continue to provide certain DMEPOS items to a Medicare beneficiary within a CBA after the start of the DMEPOS program.[31]Non-contract providers must provide notification to beneficiaries of their decision to become non-contract suppliers, and explain the grandfathering process as well as the beneficiary’s options.  Non- contract suppliers must also notify CMS of their decision to become non-contract suppliers.[32]

Grandfathered items are defined as all rented items within a product category now covered by the DMEPOS competitive bidding program;[33]items that are inexpensive or routinely purchased items;[34]items that require frequent and substantial servicing;[35]oxygen and oxygen equipment;[36]and other items of DME such as power-operated vehicles (POV) used as wheelchairs.[37]

In addition to the exception for grandfathered suppliers, beneficiaries may also obtain items (limited to crutches, canes, walkers, folding manual wheelchairs, blood glucose monitors, and infusion pumps that are DME) from his or her physician, treating practitioner, or hospital without them having submitted a bid and being awarded a contract.[38]Similarly, a physical therapist or occupational therapist in private practice may furnish competitively bid off-the-shelf orthotics without submitting a bid and being awarded a contract.[39]


Medicare’s DMEPOS program is a work in progress.  Beneficiaries and their advocates should be vigilant to assure that necessary DMEPOS items, services, and supplies are available and that beneficiaries are provided good information about their rights, about whether they are in CBAs, and about the importance of using certified suppliers where appropriate.


[4]42 C.F.R. §414.402 (definitions).  See also OMB’s standards for defining MSAs:
[5]A list of the Round 2 Competitive Bidding CBAs by zip code is available at:$Fi
[6]42 C.F.R.§414.402 (definitions), particularly the DMEPOS program’s “grandfathering” definitions. 
[8]See §302(b)(1) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108–173) (MMA), amending section 1847 of the Social Security Act.
[10]For a Congressional Research Service report on DMEPOS and its impact on decreasing prices and beneficiary access, see the August 2010 report, “Medicare Durable Medical Equipment: The Competitive Bidding Program:”; see also the July 2011 HHS, Office of the Inspector General (OIG) report “Most Power Wheelchairs In The Medicare Program Did Not Meet Medical Necessity Guidelines:”;
[12]See MIPPA, §154, (Delay in and reform of Medicare DMEPOS competitive acquisition program), amending §1847(a)(1) of the Social Security Act (42 U.S.C. 1395w-3(a)(1)). Regulations implementing the DMEPOS program can be found at 42 C.F.R §414.400 et seq.  See also; and see
[13]See 42 C.F.R. §414.410 (Phased-in implementation of competitive bidding programs).
[14]See the Affordable Care Act of 2010, Pub. L. 111-148, enacted March 23, 2010, §6405(a)-(c).  See also 42 C.F.R. §424.57(b)-(c).
[15]See 42 C.F.R. 424.58 (accreditation).
[16]  See See also
[21]42 C.F.R. §414.408(e).  Please review 42 C.F.R. §414.408 for detailed information with respect to payment, repair, and replacement of covered DMEPOS.
[22]42 C.F.R.§414.408(c). For items paid for on an assignment-related basis, the beneficiary is responsible for a 20% copayment amount based on the Medicare approved charge. No balance billing is allowed.  See 42 U.S.C. §1395u(b)(3).
[23]42 C.F.R. §414.408(e).
[24]42 C.F.R. §414.408(e)(2)(iii)(A)
[25]42 C.F.R. §414.408(e)(2)(iii)(B)
[26]42 C.F.R. §414.408(a)(2).
[27]42 C.F.R. §414.408(d).
[28]42 C.F.R.§414.408(e)(3)(ii).
[29]42 C.F.R. §414.408(e)(1)-(2). Please note that Medicare may make a secondary payment under its rules that apply when a non-contract supplier has a payment obligation under a private insurance policy.  See 42 C.F.R. §414.408(e)(2)(iii).
[30]42 C.F.R. §414.408(e)(2)(iv); 42 C.F.R. §414.408(j)(2)-(3).
[31]42 C.F.R.§414.402 (definitions). 
[33]42 C.F.R.§414.402 (definitions).
[34]Ibid. Inexpensive items include items that did not exceed $150 during the period July 1986 through June 1987.  See 42 C.F.R. §414.220(a)(1). Routinely purchased equipment includes equipment that was acquired by purchase on a national basis at least 75 percent of the time during the period July 1986 through June 1987. See 42 C.F.R. §414.220(a)(2).
[35]  See 42 C.F.R. §414.222.
[36]  See 42 C.F.R. §414.226.
[37]See 42 C.F.R. §414.229.
[38]42  C.F.R. §414.404(b)(1)(i); see also §404.408.
[39]42 C.F.R. §414.404(b)(2); see also §404.408.


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