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To: Medicare Beneficiary Advocates

From: Mario D. Ramsey, CMA Health Policy Fellow

Subject: GAO and OIG Reports Note No Problems In Beneficiary Access to DMEPOS.  Beneficiary Advocates Disagree.

Date: July 8, 2014

Advocates' Concerns about the DMEPOS Reports

Advocates are concerned that some suppliers are not delivering and setting-up necessary items of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS).[1]  Advocates in Connecticut, for example, are reporting that some Medicare beneficiaries are unable to get Competitive Bid Program (CBP) contract winners to supply, deliver and/or set-up certain DMEPOS items and supplies as necessary.[2]

The Connecticut advocates note, for example, that some contract suppliers have failed to deliver continuous positive airway pressure (CPAP) machines, and instead, have required the beneficiary to pick the CPAP machine up or receive it in the mail.  Similarly, at a skilled nursing facility in Connecticut, it has been reported that contract suppliers have failed to deliver walkers on patient discharge, and instead have required the beneficiary to pick the walkers up.  At a community hospital in Maryland, where local suppliers were not granted competitively bid contracts, beneficiaries have had to leave the facility without needed walkers and wait for the walkers to be sent through the mail because CBP suppliers would not deliver them.

Other problems identified by advocates include an inadequate number of suppliers in specific geographic areas and the lack of a meaningful process to address issues of access to necessary DMEPOS items and services.  Similarly, the use of Medicare's 1-800-MEDICARE to report problems has not been uniformly successful.

Medicare Competitive Bidding Program for DMEPOS

To reduce both costs to Medicare and out-of-pocket costs to beneficiaries for DMEPOS items and services, Medicare has implemented the Competitive Bidding Program (CBP) through selected DMEPOS suppliers based on competitive bids. [3]   Federal regulations require CBP suppliers to deliver DMEPOS items to beneficiaries.[4]

Summary of the GAO and OIG Reports

Between March and June of 2014, the Government Accountability Office (GAO) and the Department of Health and Human Services' Office of the Inspector General (HHS OIG) issued three reports concerning the CBP's implementation. Contrary to the beneficiary complaints received by CMA, the reports find that the implementation of the CBP has been successful. Specifically, the reports find that the implementation of the program has not affected beneficiaries' access to DMEPOS and that the program has been conducted in accordance with established regulations.

The above conclusions by the GAO and OIG fly in the face of on-going complaints from beneficiaries who have failed to have DMEPOS items delivered or repaired in a timely manner   It is important that the GAO and OIG revisit its findings in light of beneficiary concerns.

1.      The GAO March 2014 Report.

On March 7, 2014, the GAO released a report to the Subcommittee on Health of the Committee on Ways and Means of the U.S. House of Representatives.[5]  The report reviewed the extent to which Medicare beneficiaries and DMEPOS suppliers have been affected by CBP's round 1 rebid.[6] According to GAO, CMS has established several procedures to insure that beneficiary access is not affected by the CBP.  They include: (a) CMS monitoring CBP-related inquiries and complaints to 1-800-MEDICARE; (b) conducting beneficiary satisfaction surveys pre- and post- implementation of round 1 rebid; (c) monitoring national Medicare claims data for beneficiary access, (d) identifying utilization trends to address irregularities in services, and target potential fraud and abuse; and (e) requiring contract suppliers to submit the specific CBP-covered DMEPOS items they plan to furnish the following quarter; and conducts secret shopping on a limited basis.[7]  

The GAO found:

  1. The number of beneficiaries furnished DMEPOS items included in the CBP generally decreased more in the CBP areas than in the comparator areas.[8] CMS has reported that the decrease may be a result of CBP curbing inappropriate distribution of DMEPOS items, as opposed to beneficiaries in CBP areas not receiving needed CBP items.[9]   
  2. In general, the top four contract suppliers for a product category accounted for a large proportion of the market in all CBP areas.[10] At the end of 2012, 27 out of 356 CBP suppliers had their contracts terminated (11) or voluntarily withdrew from the program (16).[11] These terminations and withdrawals, however, did not affect the mail-order diabetic testing supplies.[12]
  3. The total number of DMEPOS suppliers and Medicare allowed charges decreased more in the CBP areas than in the comparator areas.[13]  For example, the number of suppliers with Medicare allowed charges of $2,500 or more per quarter decreased twenty-seven percent in CBP areas and five percent in comparator areas.

The GAO also reported that among the advocacy groups, including diabetes advocacy groups, which they interviewed for their audit, no concerns were expressed about beneficiary access to DMEPOS as a result of the CBP.[14]  Moreover, only a few suppliers, overall, accounted for the majority of the market of DMEPOS items in competitive bidding areas.[15] According to the GAO report, CMS has been generally successful in implementing the CBP and ensuring that the program is properly monitored.[16] CMS comments in its response to the written draft of the GAO report indicate that the agency has continued to monitor the program.[17]

Procedures identified by GAO as sources of monitoring beneficiary access may be unreliable. For example, the GAO points to CMS's monitoring of complaints received through 1-800-MEDICARE as a source of assurance that beneficiary access has not been affected.   Advocates note, however, that beneficiaries have had difficulty in getting helpful assistance through 1-800-MEDICARE.

In a May 2014 report, GAO reported that CMS cut funding for 1-800-MEDICARE, the number of customer service representatives at the helpline had decreased, and the wait times for the helpline had increased.[18]  The aforementioned, coupled with the continued complaints received from beneficiaries, signal that the conclusion reached by GAO inaccurately characterizes the effect of CBP implementation on beneficiaries.

2.      The HHS OIG April 2014 report

In April 2014, the HHS OIG issued a report assessing whether CMS met the requirements for the CBP round 1 rebid.[19] The review focused on whether CMS selected DMEPOS providers and computed single payment amounts according to established program procedures and Federal regulations.[20]  The report found that while CMS followed established procedures and regulations a majority of the time, there were a few instances where established procedures and regulations were not followed. CMS, for instance, did not ensure that all winning suppliers' bids were included in the calculation of single payment amounts before offering suppliers contracts; resulting in an inaccurate single payment amount for one supplier, and the inclusion of one supplier who would not have otherwise been allowed to participate in CBP.[21]

The HHS OIG found that CMS failed to follow established procedures in 11 out of 266 cases reviewed.[22] "[N]ine winning suppliers did not meet financial statement requirements, and the other two suppliers were incorrectly used in one single payment computation."[23] The OIG found, however, that a failure to follow procedures in these instances did not affect beneficiaries' access to DMEPOS.[24]

3.      The HHS OIG June 2014 Memorandum Report

On June 13, 2014, HHS OIG issued a memorandum report relating specifically to the market shares of mail order diabetes test strips in the CBP.[25] The OIG found that two types of test strips accounted for forty-five percent of the market share, and ten types of test strips accounted for ninety percent of the market share.[26] The report points to the dominance of a few diabetic testing strip types as a potential concern due to the requirement of the Medicare Improvements for Patients and Providers Act (MIPPA) that suppliers "demonstrate that their bid covers at least fifty percent, by volume, of all types of diabetes strips."[27]  The fact that a few types of testing strips account for a majority of the market share, however, is not a determiner that CMS is not in compliance with MIPPA's requirements. The representation of a few suppliers as the majority of the market share may be a reflection of the beneficiaries' selection among diabetic testing strips and not of the amount of testing strips offered.  For example, HHS OIG found that in a three-month period, twenty-two suppliers offered at least forty-three types of mail-order diabetes testing strips.[28]


GAO and HHS OIG reports conclude that CMS has been generally successful in implementing the CBP and has established a monitoring program to ensure that the implementation of the program continues to be smooth. GAO, however, has also reported that funding for components of the CMS's monitoring program, namely 1-800-MEDICARE, has been cut. Additionally, HHS OIG has found that, while there were a few instances where CMS was found to not be in compliance with established program procedures and federal regulations, those instances were not significant enough to have an impact on beneficiary access to DMEPOS.

Despite the findings of the GAO and the HHS OIG, questions remain. While CMS may be meeting regulations and standards for selecting CBP suppliers, in many instances it has failed to ensure that beneficiaries' access to DMEPOS items and services is unhampered.  Broad sampling of beneficiaries, providers, and suppliers is the best measure of whether the DMEPOS Competitive Bidding Program is working.  To date, it does not appear that this type of sampling has been completed.  Additionally, an analysis of why beneficiaries furnished DMEPOS items included in the CBP generally decreased is an issue that needs to be fully explored before it can be said that the Competitive Bidding Program is not having a negative impact on beneficiary access to DMEPOS items and services.

Thank you to Mario Ramsey, CMA Health Policy Fellow, for his work on this memorandum.

[1] See
[2] Id.  In addition, advocates may wish to view the Center’s Weekly Alert for July 10, 2014 which examines the delivery obligations of DMEPOS suppliers based on the items and services at issue.  The Alert is available at:
[3] For information about the DMEPOS competitive bidding program, see In addition, the Center has a variety of writings about the DMEPOS.  See for example:; .
[4] See 42 C.R.R. 414.422(e)(1), 414.422(g), and 424.57(c)(12).
[5] U.S. Gov’t Accountability Office, GAO-08-751, Medicare Second Year Update for CMS’s Durable Medical Equipment Competitive Bidding Program Round 1 Rebid (2014).
[6] For more information on the Round 1 rebid, see
[7] See U.S. Gov’t Accountability Office, GAO-08-751, supra note 5, at 15.
[8] Comparator areas are control groups for the competitive bidding areas. Id. at 5  
[9] Id. at 17.
[10] Id. at 31.
[11] Id. at 48–49.
[12] Id.
[13] Id. at 51.
[14] Id. at 17.
[15] Id. at 31.
[16] Id. at 4.
[17] Id. at 58–59.
[18] U.S. Government Accountability Office, GAO-14-452, 2013 Sequestration: Selected Federal Agencies Reduced Some Services and Investments, While Taking Short-Term Actions to Mitigate Effects (2014).
[19] Department of Health and Human Services, Office of the Inspector General, CMS Generally Met Requirements in the Durable Medical Equipment Competitive Bidding Round 1 Rebid Program i (Apr. 2014).
[20] The review, however, did not explore the appropriateness of established program procedures themselves.
[21] See dept. health and human service, supra note 15, at 6.
[22] Id. at 3.
[23] Id.
[24] Id.
[25] Department of Health and Human Services, Office of the Inspector General,  Medicare Market Shares of Mail Order Diabetes Test Strips From July–September 2013 (June 13, 2014).
[26] Id.
[27] Id.
[28] Id.





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