What is competitive bidding?

On July 15, 2008, the Competitive Bidding program was delayed and significantly modified under a new law passed by Congress, The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).

The Center for Medicare and Medicaid Services (CMS) is implementing a competitive bidding acquisition program for certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) for Medicare Part B homecare patients.  This program is a result of the Medicare Modernization Act of 2003.

The objectives of competitive bidding are:

• Assure beneficiary access to quality DMEPOS as a result of the program
• Reduce the amount Medicare pays for DMEPOS and create a payment structure that is more reflective of a competitive market
• Limit the financial burden on beneficiaries by reducing their out-of-pocket expenses for DMEPOS they obtain through the program
• Contract with suppliers that conduct business in a manner that is beneficial for the program and Medicare beneficiaries

CMS’ first round of competitive bidding took place in 10 competitive bidding areas (CBAs).  Negative pressure wound therapy (NPWT) was included as a competitive bidding category in 8 of these CBAs.

Suppliers were asked to submit bids for each product category in each CBA. CMS then selected suppliers that bid the lowest prices in each category. The price that Medicare pays for products in each selected product category, including NPWT, is the median price of the bids offered by the selected suppliers. To become eligible for payment in these CBAs, which is only at the reduced price, the selected suppliers were required to sign the three-year contract with CMS and agree to all of its terms. Non-contracted suppliers are ineligible to provide covered products or services, including NPWT, to Medicare Part B patients who reside in one of the round 1 CBAs. 

CMS also announced that they will conduct a second round of competitive bidding in 70 additional CBAs.   Under The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), the second round of competitive bidding has also been delayed.