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entitled 'Medicare: Bidding Results from CMS's Durable Medical 
Equipment Competitive Bidding Program' which was released on 
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United States Government Accountability Office: 
GAO: 

Report to the Subcommittee on Health, Committee on Ways and Means, 
House of Representatives: 

November 2014: 

Medicare: 

Bidding Results from CMS's Durable Medical Equipment Competitive 
Bidding Program: 

GAO-15-63: 

GAO Highlights: 

Highlights of GAO-15-63, a report to the Subcommittee on Health, 
Committee on Ways and Means, House of Representatives. 

Why GAO Did This Study: 

To achieve Medicare savings for DME, the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 required that CMS implement 
the CBP for certain DME. The first completed CBP round-—the round 1 
rebid—-operated in nine competitive bidding areas. CMS reported total 
savings of more than $580 million at the end of the round 1 rebid’s 3-
year term due to lower payments and decreased utilization. GAO 
previously reported on the implementation of the CBP round 1 rebid 
(GAO-12-693). 

GAO was asked to continue to monitor the CBP as it expands to 
subsequent rounds. In this report, GAO examines (1) bidding process 
results for the round 1 recompete, round 2, and national mail-order 
program, and how they compare to the concluded round 1 rebid results, 
and (2) how SPAs for selected HCPCS codes common to the round 1 rebid, 
round 1 recompete, round 2, and national mail-order program compare. 

To examine bidding process results, GAO analyzed data from CMS and its 
CBP contractor related to bidding suppliers, contract awards, and the 
post-bid review process. To assess how SPAs for 28 HCPCS codes common 
to all CBP rounds (using selected high-cost, high-utilization codes 
identified by CMS) and all 8 HCPCS codes common to the round 1 rebid 
and national mail-order program compare, GAO identified, averaged, and 
compared these codes to one another and to the average 2010 Medicare 
fee-for-service payment amounts for the same codes. 

What GAO Found: 

The Medicare competitive bidding program (CBP) for durable medical 
equipment (DME) is administered by the Centers for Medicare & Medicaid 
Services (CMS) within the Department of Health and Human Services 
(HHS). Under the CBP, only competitively selected contract suppliers 
can furnish certain DME items (such as oxygen supplies and hospital 
beds) at competitively determined prices to Medicare beneficiaries in 
designated competitive bidding areas. Contracts awarded in CBP’s round 
1 rebid were effective on January 1, 2011, and ended on December 31, 
2013. The CBP is currently operating as the round 1 recompete in the 
same nine competitive bidding areas as the round 1 rebid (with 
contracts awarded effective January 1, 2014, through December 31, 
2016), as round 2 in an additional 100 competitive bidding areas (with 
contracts awarded effective July 1, 2013, through June 30, 2016), and 
as the national mail-order program for diabetic testing supplies 
(competed at the same time as the round 2 contracts, with the same 
effective contract dates). 

GAO found that a similar percentage of bidding suppliers—-between 30 
and 43 percent-—were awarded contracts in the round 1 rebid, round 1 
recompete, and round 2. Fewer bidding suppliers—-7 percent-—were 
awarded a contract in the national mail-order program. Although the 
percentages of bids submitted that resulted in contracts varied by 
round, the reasons for bid disqualification—such as unacceptable 
financial documentation or failure to meet all state licensure 
requirements—were generally similar across CBP rounds. Many bidding 
suppliers benefited from submitting their paperwork by a certain date—-
known as the covered document review date—-after which CMS informed 
them of any missing financial documentation and allowed them the 
opportunity to provide it. CMS identified suppliers during its post-
bid review process that were disqualified incorrectly, and some 
suppliers with initially disqualified bids were ultimately offered a 
contract. In each round, no more than 3 percent of contract suppliers 
were new to both a product category and a competitive bidding area.
GAO found that the single payment amounts (SPA) for 28 selected 
Healthcare Common Procedure Coding System (HCPCS) codes common to the 
round 1 rebid, round 1 recompete, and round 2 generally decreased 
through all CBP rounds as compared to the average Medicare 2010 fee-
for-service payment for the same codes. For a majority of the codes, 
the largest overall decreases occurred in round 1 rebid average SPAs 
compared to the average Medicare 2010 fee-for-service payments for the 
same codes, with relatively smaller SPA decreases in subsequent 
rounds. The extent to which average SPAs changed varied by type of 
HCPCS code. For example, average SPAs decreased in each CBP round for 
three selected hospital bed HCPCS codes, but average SPAs 
significantly varied from one round to the next for three selected 
standard power wheelchair HCPCS codes. Average SPAs for the 8 HCPCS 
codes included in the national mail-order program also decreased or 
remained steady compared to those in the round 1 rebid. For example, 
SPAs for two codes associated with glucose monitoring test strips and 
lancets decreased by at least 50 percent from the round 1 rebid 
average SPA to the national mail-order program SPA. 

In commenting on a draft of this report, HHS stated that it 
anticipates CBP will provide substantial savings for the Medicare 
Trust Fund and beneficiaries. 

View [hyperlink, http://www.gao.gov/products/GAO-15-63]. For more 
information, contact Kathleen King at (202) 512-7114 or KingK@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

CBP Bidding Process Results for the Round 1 Recompete, Round 2, and 
National Mail-Order Program Are Generally Similar to Round 1 Rebid 
Results: 

Most Average SPAs for Common HCPCS Codes Decreased through CBP Rounds: 

Agency Comments: 

Appendix I: The 100 Competitive Bidding Areas Included in the CMS 
Competitive Bidding Program Round 2: 

Appendix II: Suppliers with Disqualified Bids in Currently Operating 
CMS Competitive Bidding Program Rounds: 

Appendix III: High-Cost and High-Utilization CMS Competitive Bidding 
Program HCPCS Codes and Single Payment Amounts: 

Appendix IV: Comments from the Department of Health and Human Services: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: CMS Durable Medical Equipment (DME) Competitive Bidding 
Program (CBP) Contract Awards by Bidding Supplier Size for the Round 1 
Rebid, Round 1 Recompete, Round 2, and National Mail-Order Program: 

Table 2: CMS Durable Medical Equipment (DME) Competitive Bidding 
Program (CBP) Bid Counts by Process Step for the Round 1 Recompete, 
Round 2, and National Mail-Order Program: 

Table 3: Financial Document Covered Review Date Results for CMS 
Durable Medical Equipment (DME) Competitive Bidding Program (CBP) 
Round 1 Recompete, Round 2, and National Mail-Order Program: 

Table 4: Results of CMS Post-Bid Review Process for the Durable 
Medical Equipment (DME) Competitive Bidding Program (CBP) Round 1 
Rebid, Round 1 Recompete, Round 2, and the National Mail-Order Program: 

Table 5: Contract Suppliers with No Previous Experience in a 
Competitive Bidding Area, Product Category, or Both, for the CMS 
Durable Medical Equipment (DME) Competitive Bidding Program (CBP) 
Round 1 Rebid, Round 1 Recompete, Round 2, and National Mail-Order 
Program: 

Table 6: Healthcare Common Procedure Coding System (HCPCS) Codes and 
Descriptions for Mail-Order Diabetic Testing Supply Codes Common to 
the CMS Competitive Bidding Program (CBP) Round 1 Rebid and the 
National Mail-Order Program: 

Table 7: Number of Suppliers with CMS Durable Medical Equipment (DME) 
Competitive Bidding Program (CBP) Round 1 Recompete Disqualified Bids, 
by Reason for Disqualification as of October 31, 2013: 

Table 8: Number of Suppliers with CMS Durable Medical Equipment (DME) 
Competitive Bidding Program (CBP) Round 2 Disqualified Bids, by Reason 
for Disqualification as of April 9, 2013: 

Table 9: Number of Suppliers with CMS Durable Medical Equipment (DME) 
National Mail-Order Program Disqualified Bids, by Reason for 
Disqualification, as of April 9, 2013: 

Table 10: High-Cost, High-Utilization Healthcare Common Procedure 
Coding System (HCPCS) Codes Common to CMS Durable Medical Equipment 
Competitive Bidding Program Rounds, by Product Category: 

Table 11: Medicare Average 2010 Fee-for-Service Payment and Average 
Single Payment Amounts (SPA) for CMS Durable Medical Equipment 
Competitive Bidding Program Rounds for Selected Healthcare Common 
Procedure Coding System (HCPCS) Codes: 

Table 12: Medicare Average 2010 Fee-for-Service Payment and Average 
Single Payment Amounts (SPA) for CMS Durable Medical Equipment 
Competitive Bidding Program Rounds for Selected Diabetic Testing 
Supply Healthcare Common Procedure Coding System (HCPCS) Codes: 

Figures: 

Figure 1: Timeline for CMS Implementation of the Competitive Bidding 
Program (CBP) for Durable Medical Equipment (DME), 1997-2016: 

Figure 2: CMS Durable Medical Equipment Product Categories by 
Competitive Bidding Program Round: 

Figure 3: Comparison of Average Medicare 2010 Fee-for-Service Payments 
with CMS Competitive Bidding Program Rounds' Average Single Payment 
Amounts (SPA) for Selected Continuous Positive Airway Pressure Devices 
(CPAP), Respiratory Assist Devices (RAD), and Related Supplies and 
Accessories Codes: 

Figure 4: Comparison of Average Medicare 2010 Fee-for-Service Payments 
with CMS Competitive Bidding Program Rounds' Average Single Payment 
Amounts (SPA) for Selected Hospital Bed Codes: 

Figure 5: Comparison of Average Medicare 2010 Fee-for-Service Payments 
with CMS Competitive Bidding Program Rounds' Average Single Payment 
Amounts (SPA) for Selected Standard Power Wheelchair Codes: 

Figure 6: Comparison of Average Medicare 2010 Mail-Order Fee-for-
Service Payments with CMS Competitive Bidding Program Rounds' Average 
Single Payment Amounts (SPA) for Diabetic Testing Supply Codes: 

Abbreviations: 

CBP: competitive bidding program: 

CMS: Centers for Medicare & Medicaid Services: 

CPAP: continuous positive airway pressure devices: 

DME: durable medical equipment: 

DMEPOS: durable medical equipment, prosthetics, orthotics, and related 
supplies: 

HCPCS: Healthcare Common Procedure Coding System: 

HHS: Department of Health and Human Services: 

NSC: National Supplier Clearinghouse: 

RAD: respiratory assist devices: 

SPA: single payment amount: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

November 7, 2014: 

The Honorable Kevin Brady: 
Chairman: 
The Honorable Jim McDermott: 
Ranking Member: 
Subcommittee on Health Committee on Ways and Means: 
House of Representatives: 

In 2013, Medicare--a federal health insurance program--spent an 
estimated $11 billion in fee-for-service payments for durable medical 
equipment (DME), prosthetics, orthotics, and related supplies for 
beneficiaries.[Footnote 1] The Medicare program is administered by the 
Centers for Medicare & Medicaid Services (CMS) within the Department 
of Health and Human Services (HHS). Most Medicare beneficiaries enroll 
in Medicare Part B,[Footnote 2] which helps pay for DME items and 
supplies, such as oxygen, wheelchairs, hospital beds, walkers, 
orthotics, prosthetics, and supplies if they are medically necessary 
and prescribed by a physician. Medicare beneficiaries typically obtain 
these items from suppliers, which submit claims for payment to 
Medicare on behalf of beneficiaries. Historically, Medicare has paid 
eligible claims from all enrolled DME suppliers based on a fee 
schedule amount for each type of item.[Footnote 3] 

To achieve savings in the Medicare program's DMEPOS spending and to 
address DMEPOS fraud concerns, Congress, through the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003, 
required CMS to phase in a competitive bidding program (CBP) for DME 
and other items.[Footnote 4] Under CBP, DME suppliers that are 
competitively selected and awarded contracts can furnish certain DME 
items to Medicare beneficiaries in designated competitive bidding 
areas.[Footnote 5] The competition process also determines the 
payments--referred to as the single payment amounts (SPA)--for each 
DME item included in the CBP. Each DME item is identified by a 
Healthcare Common Procedure Coding System (HCPCS) code.[Footnote 6] 

CBP has been implemented through several rounds, each operating in 
particular areas and for particular time frames. CBP's first 3-year 
competition round--the round 1 rebid--awarded contracts to suppliers 
in nine competitive bidding areas that were effective from January 1, 
2011, through December 31, 2013.[Footnote 7] In anticipation of the 
expiration of the round 1 rebid contracts, in 2012 CMS held a new 
competition for CBP contracts for the same nine competitive bidding 
areas as the round 1 rebid, referred to as the round 1 recompete. The 
round 1 recompete contracts became effective on January 1, 2014. CBP 
round 2 contracts became effective on July 1, 2013, in 100 competitive 
bidding areas that were not included in the round 1 recompete. CBP 
contracts for the national mail-order program for diabetic testing 
supplies were competed at the same time as the round 2 contracts, and 
also became effective on July 1, 2013.[Footnote 8] 

CMS reported total savings of more than $580 million at the end of the 
round 1 rebid's 3-year term due to lower payments and decreased 
utilization. In 2012 we reported that the round 1 rebid was generally 
implemented successfully.[Footnote 9] You asked us to continue to 
monitor the CBP as it expands to subsequent rounds. For this 
engagement, we continue our monitoring of CBP bidding results by 
reporting (1) bidding process results for the ongoing round 1 
recompete, round 2, and national mail-order program, and comparing 
them, to the extent possible, to round 1 rebid results; and (2) how 
SPAs for selected HCPCS codes common to the round 1 rebid, round 1 
recompete, round 2, and national mail-order program compare. 

To review bidding results for the round 1 recompete, round 2, and 
national mail-order program, we analyzed data from CMS concerning the 
number of suppliers that bid and won in each round and the results of 
CMS's post-bid review process. We also reviewed feedback that CMS 
provided to bidding suppliers to explain reasons for bid 
disqualifications. To the extent possible, we compared these results 
to the round 1 rebid bidding results that we reported in 2012 to 
determine similarities and differences between the results of the 
completed round 1 rebid and the ongoing round 1 recompete, round 2, 
and national mail-order program. 

To determine how SPAs for selected HCPCS codes compare among the 
rounds, we compared average Medicare 2010 fee-for-service payments and 
average SPAs for certain HCPCS codes common to the concluded round 1 
rebid and the ongoing round 1 recompete and round 2.[Footnote 10] We 
also compared average Medicare 2010 fee-for-service payments to 
average SPAs for eight HCPCS codes included in the national mail-order 
program and the round 1 rebid.[Footnote 11] We selected the 2010 
Medicare national fee-for-service payment schedule because 2010 was 
the year prior to the start of the CBP round 1 rebid contracts on 
January 1, 2011. For the round 1 rebid, CMS determined there were 34 
HCPCS codes that represented the top 80 percent of the Medicare DMEPOS 
HCPCS codes that were high cost, high utilization, or both.[Footnote 
12] Of these 34 items, 28 are common to the CBP round 1 rebid, round 1 
recompete, and round 2, and 3 are diabetic testing supply codes common 
to both the round 1 rebid and the national mail-order program. 
[Footnote 13] Our analysis compared the average Medicare 2010 fee-for-
service payments to the average SPAs using the appropriate CBP code 
modifiers for each of the HCPCS codes.[Footnote 14] We calculated 
average Medicare 2010 fee-for-service payment amounts for the 28 HCPCS 
codes common to CBP rounds as well as the 8 mail-order diabetic 
testing supply codes common to the round 1 rebid and national mail-
order program by obtaining each HCPCS code's individual Medicare 2010 
fee-for-service payment amount in each of the 48 continental states 
and the District of Columbia and averaging those equally weighted 
payment amounts into one average Medicare 2010 fee-for-service payment 
amount for each code. We used payments only within the continental 
states and the District of Columbia because Alaska and Hawaii are not 
subject to Medicare's fee-for-service payment amount ceiling and floor 
limits. For the four HCPCS codes for enteral nutrients--to provide 
feeding through a tube into the stomach or small intestine--included 
in our analysis, no Medicare payment averaging was necessary, as 
Medicare sets national payment amounts for enteral nutrition items and 
services. To calculate an average CBP SPA for each HCPCS code included 
in our analysis, we averaged the reported SPAs across all competitive 
bidding areas included in each CBP round. We used the average SPAs 
because a HCPCS code's SPA is determined for each competitive bidding 
area; therefore, the SPA for the same item in the same round may 
differ among competitive bidding areas. For the 28 common HCPCS codes, 
we compared the average SPAs for the round 1 rebid, round 1 recompete, 
and round 2 to each other and to the average 2010 Medicare fee-for-
service payment for the same codes. For the eight diabetic testing 
supply HCPCS codes, we compared the average SPAs for mail-order 
diabetic testing supplies in the round 1 rebid to SPAs for the 
national mail-order program, and to the 2010 average Medicare fee-for-
service payments for the same mail-order codes.[Footnote 15] 

To assess the reliability of the data we received from CMS, we 
identified and reviewed outliers in the data and followed up with CMS 
officials to clarify and resolve any discrepancies. We also reviewed 
publicly available SPAs and compared them to the average SPAs we 
calculated. We determined that these data were sufficiently reliable 
for the purposes of this report. 

We conducted this performance audit from May 2014 through November 
2014 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings 
based on our audit objectives. 

Background: 

CBP Contract Supplier Eligibility and Bidding Process: 

CMS and its CBP implementation contractor--Palmetto GBA--administer 
and implement the CBP and its bidding rounds.[Footnote 16] In each CBP 
round, suppliers can bid for one or more included product categories 
in multiple competitive bidding areas.[Footnote 17] To be eligible to 
submit bids in a CBP round, suppliers must be eligible to bill 
Medicare for DME,[Footnote 18] must have met Medicare enrollment and 
quality standards,[Footnote 19] must have a surety bond,[Footnote 20] 
and must be accredited and licensed. 

After a round's bidding period closes, Palmetto GBA reviews the bids 
to determine whether each supplier's bid submission is complete and 
complies with the bidding requirements and whether each supplier's 
financial score meets the CBP minimum financial standard threshold for 
financial viability to be eligible to compete on price. If a 
supplier's bid meets all these requirements, it is considered a 
qualified bid and can then compete on price. Before comparing bid 
prices, Palmetto GBA reviews each qualified bid's estimated capacity 
projections--a supplier's anticipated ability to provide the volume of 
items claimed in the bid in light of that supplier's historical 
capacity, expansion plans, and financial score. Palmetto GBA then 
takes several steps to compare prices and identify the winning bids. 

* The DME bid item prices submitted by suppliers with qualified bids 
are reviewed using a methodology to calculate a composite bid for each 
product category to allow for a comparison of prices among the 
qualified bids.[Footnote 21] 

* Once the composite bid prices have been calculated, the bids are 
ordered by the lowest to the highest composite bid price in each 
product category in each competitive bidding area. 

* After the composite bid prices are ordered, Palmetto GBA calculates 
the cumulative projected capacity of the competing bids--which 
indicates the capacity that each supplier projects it could furnish 
for the product category throughout an entire competitive bidding area 
each year. 

* Beginning with the lowest composite price, Palmetto GBA moves up the 
ordered bid list to identify the bid where the suppliers' cumulative 
projected capacity meets or exceeds CMS's estimated beneficiary 
demand; this bid is referred to as the pivotal bid. 

* Qualified bids with composite prices that are equal to or less than 
the pivotal bid are determined to be winning suppliers and are used to 
establish the CBP round's SPAs for each item in a product category in 
a competitive bidding area. Specifically, for each item, the winning 
bids' price offers are ordered from lowest to highest, and the median 
price offered by these suppliers for that item becomes the item's SPA. 
The CBP SPAs are required to be less than or equal to the Medicare fee-
for-service payments for the same items. 

CMS takes steps to ensure beneficiary access and choice. CMS tries to 
award at least five contracts in each product category in each 
competitive bidding area.[Footnote 22] To help meet this goal, CMS 
caps the estimated projected capacity of any single supplier to 20 
percent of the total projected beneficiary demand for each product 
category, in each competitive bidding area, regardless of the capacity 
estimated by the supplier in its bid.[Footnote 23] CMS also takes 
steps to ensure that small suppliers are awarded CBP contracts by 
having a target that 30 percent of the qualified suppliers in each 
product category in each competitive bidding area are small suppliers 
as defined for CBP.[Footnote 24] In instances when the small supplier 
target is not initially met, CMS may award contracts to additional 
small suppliers after the agency has determined the number of 
suppliers needed to meet or exceed CMS's estimated beneficiary demand. 

CMS offers the winning suppliers CBP contracts that the suppliers may 
accept or reject. A CBP contract includes all the product category and 
competitive bidding area combinations that a supplier has won for the 
round. If the supplier accepts its contract offer, it must agree to 
accept Medicare assignment--to be paid 80 percent of the relevant CBP 
SPA--for the CBP-covered items included in its contract.[Footnote 25] 
Generally, CBP's contracts are for a 3-year period. 

CBP Rounds and Product Categories: 

CMS is required by law to recompete the CBP contracts at least once 
every 3 years. Before a round's contracts expire, CMS conducts another 
bidding process for the new round. (See figure 1 for CBP's legislative 
and program implementation timeline.) 

Figure 1: Timeline for CMS Implementation of the Competitive Bidding 
Program (CBP) for Durable Medical Equipment (DME), 1997-2016: 

[Refer to PDF for image: timeline] 

1997: 
Balanced Budget Act of 1997 required CMS to test competitive bidding 
as a way to set payments for certain Medicare Part B services and 
supplies selected by CMS.[A] 

1992-2002: 
CMS conducted 3 DME competitive bidding demonstration projects. 

2003: 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
required CMS to implement competitive bidding for DME and certain 
other items.[B] 

2008: 
CBP Round 1 (July 1, 2008 - July 15, 2008): 
* May 19: 329 contract suppliers announced for 10 product categories 
and 10 competitive bidding areas; 
* July 1: Contracts and single payment amounts became effective. 
* July 15: Medicare Improvements for Patients and Providers Act of 2008 
enacted;[C] round 1 stopped and contracts and single payment amounts 
were terminated; round 1 rebid postponed until 2009. 

2010: 
CBP Round 1 Rebid (January 1, 2011 - December 31, 2013): 
* November 3: 356 contract suppliers announced for 9 product 
categories and 9 competitive bidding areas; 
* January 1, 2011: Contracts and single payment amounts became 
effective; 
* December 31, 2013: Round 1 rebid contracts expired. 

2013: 
CBP Round 2 and the National Mail-Order Program (July 1, 2013 - June 
30, 2016): 
* April 9: 799 round 2 contract suppliers announced for 8 product 
categories and 100 competitive bidding areas. 18 national mail-order 
program contract suppliers announced for all parts of the United 
States, including all 50 states, the District of Columbia, Puerto 
Rico, the U.S. Virgin Islands, Guam, and American Samoa; 
* July 1: Contracts and single payment amounts became effective; 
* June 30, 2016: Round 2 and national mail-order program contracts 
expire. 

2014: 
CBP Round 1 Recompete (January 1, 2014 - December 31, 2016): 
* October 31, 2013: 282 contract suppliers announced for 6 product 
categories and 9 competitive bidding areas; 
* January 1: Contracts and single payment amounts became effective; 
* December 31, 2016: Round 1 recompete contracts expire. 

Source: GAO analysis of CMS data. GAO-15-63. 

[A] Pub. L. No. 105-33, § 4319(a), 111 Stat. 251, 392-4 (1997) 
(codified, as amended, at 42 U.S.C. § 1395w-3). 

[B] Pub. L. No. 108-173, § (302)(b), 117 Stat. 2066, 2224-30 (2003) 
(codified, as amended, at 42 U.S.C. § 1395w-3). Items and services 
covered by the competition were DME and related supplies, off-the-
shelf orthotics, and enteral nutrients and related equipment and 
supplies). 

[C] Pub. L. No. 110-275, § 154(a)(2), 122 Stat. 2494, 2560-3 (2008) 
(codified, as amended, at 42 U.S.C. § 1395w-3). 

[End of figure] 

Several product categories remained the same since the CBP round 1 
rebid was implemented, but CMS also made some changes for the round 1 
recompete and round 2. (See figure 2.) The round 1 rebid contracts and 
SPAs were effective January 1, 2011, through December 31, 2013. 
[Footnote 26] The rebid operated in nine competitive bidding areas and 
included nine DME product categories. 

Figure 2: CMS Durable Medical Equipment Product Categories by 
Competitive Bidding Program Round: 

[Refer to PDF for image: illustration] 

Round 1 Rebid: 
* CPAP/RAD and related supplies and accessories; 
* Enteral nutrients, equipment and supplies; 
* Hospital beds and related accessories; 
* Oxygen supplies and equipment; 
* Standard power wheelchairs, scooters, and related accessories; 
* Support surfaces[A]; 
* Walkers and related accessories; 
* Complex rehabilitative power wheelchairs and related accessories[B]; 
* Mail-order diabetic supplies. 

Round 1 Recompete: 
* Respiratory equipment and related supplies and accessories[C]; 
* Enteral nutrients, equipment and supplies; 
* General home equipment and related supplies and accessories[D]; 
* Standard mobility equipment and related accessories[E]; 
* Negative pressure wound therapy pumps and related supplies and 
accessories[F]; 
* External infusion pumps and supplies. 

Round 2: 
* CPAP/RAD and related supplies and accessories; 
* Enteral nutrients, equipment and supplies; 
* Hospital beds and related accessories; 
* Oxygen supplies and equipment; 
* Standard power and manual wheelchairs, scooters, and related 
accessories; 
* Support surfaces[A]; 
* Walkers and related accessories; 
* Negative pressure wound therapy pumps and related supplies and 
accessories[F]. 

National Mail-Order Program: 
* Mail-order diabetic testing supplies. 

Source: GAO analysis of CMS data. GAO-15-63. 

[A] Support surfaces are pressure-reducing support surfaces for 
persons with or at high risk for pressure sores. The support surfaces 
product category includes group 2 mattresses and overlays, and for the 
round 1 rebid was only included in the Miami competitive bidding area. 

[B] The complex rehabilitative power wheelchairs and related 
accessories product category was limited to group 2 power wheelchairs 
with power options. 

[C] The respiratory equipment and related supplies and accessories 
product category includes oxygen; oxygen equipment and supplies; 
continuous positive airway pressure devices (CPAP), respiratory assist 
devices (RAD), and related supplies and accessories; and standard 
nebulizers. 

[D] The general home equipment and related supplies and accessories 
product category includes hospital beds and related accessories, group 
1 and 2 support surfaces, transcutaneous electrical nerve stimulation 
devices, commode chairs, patient lifts, and seat lifts. 

[E] Standard mobility equipment and related accessories includes 
walkers, standard power and manual wheelchairs, scooters, and related 
accessories. 

[F] Negative pressure wound therapy uses pumps that apply controlled 
negative or subatmospheric pressure to care for ulcers or wounds that 
have not responded to traditional wound treatment methods. 

[End of figure] 

The round 1 recompete contracts and SPAs were effective January 1, 
2014, and will expire on December 31, 2016. The recompete operates in 
the same nine competitive bidding areas as the concluded round 1 
rebid,[Footnote 27] but the product categories differ. The round 1 
recompete does not have the round 1 rebid's complex rehabilitative 
power wheelchairs or the mail-order diabetic supplies program 
categories, and has some new categories the rebid did not. 

The round 2 contracts and SPAs were effective July 1, 2013, and will 
expire on June 30, 2016. This round operates in 100 competitive 
bidding areas and includes eight DME product categories. (See appendix 
I for the 100 competitive bidding areas of round 2.) 

The national mail-order program contracts and SPAs were effective July 
1, 2013, and will expire June 30, 2016. The program operates in the 50 
states, the District of Columbia, American Samoa, Puerto Rico, and the 
U.S. Virgin Islands, and includes the same eight mail-order diabetic 
testing supply HCPCS codes as the round 1 rebid. Unlike the round 1 
rebid, a supplier's diabetic testing supply bid must demonstrate that 
the supplier would cover at least 50 percent, by sales volume, of all 
types of diabetic test strips on the market. Additionally, suppliers 
must be paid the national mail-order program SPA for diabetic testing 
supply items regardless of whether they are furnished by mail or non-
mail order.[Footnote 28] 

CBP Bidding Process Results for the Round 1 Recompete, Round 2, and 
National Mail-Order Program Are Generally Similar to Round 1 Rebid 
Results: 

We found that a similar percentage of bidding suppliers were awarded 
contracts in the round 1 rebid, round 1 recompete, and round 2, but 
not in the national mail-order program. The percentages of all bids 
reviewed that resulted in CBP contracts varied across CBP rounds, and 
the reasons that bids were disqualified were generally similar across 
CBP rounds. Many suppliers benefited from CMS's review of their 
financial documentation by submitting their paperwork by a certain 
date before the bid window closed--known as the covered document 
review date--which gave suppliers a chance to receive CMS feedback on 
whether they were missing any financial documentation, and the 
opportunity to provide any missing documentation. CMS identified 
suppliers that were disqualified incorrectly during its post-bid 
review process, and some suppliers with disqualified bids were 
ultimately offered a contract. In each round, few suppliers were new 
to both a product category and a competitive bidding area. 

The Percentage of Bidding Suppliers Awarded a Contract Was Similar in 
All Rounds Except for the National Mail-Order Program: 

In all CBP rounds except the national mail-order program, the 
percentage of all bidding contract suppliers that were awarded a 
contract was between 30 and 43 percent.[Footnote 29] Specifically, in 
the round 1 rebid, 35 percent of the 1,011 bidding suppliers were 
awarded a contract; in the round 1 recompete, 43 percent of the 660 
bidding suppliers were awarded a contract. Sixty percent of the 
suppliers awarded a round 1 recompete contract had previously been 
awarded at least one contract in the round 1 rebid. In round 2, 30 
percent of the 2,641 bidding suppliers were awarded a contract. Fewer 
suppliers--7 percent of the 245 bidding suppliers--were awarded a 
contract in the national mail-order program. (See table 1.) 

Table 1: CMS Durable Medical Equipment (DME) Competitive Bidding 
Program (CBP) Contract Awards by Bidding Supplier Size for the Round 1 
Rebid, Round 1 Recompete, Round 2, and National Mail-Order Program: 

Round 1 rebid[A]: 

Small suppliers: 
Number of bidding suppliers: 619; 
Percentage of bidding suppliers: 61%; 
Number of suppliers awarded contracts: 219; 
Percentage of suppliers awarded contracts by supplier size: 62%. 

Large suppliers: 
Number of bidding suppliers: 340; 
Percentage of bidding suppliers: 34%; 
Number of suppliers awarded contracts: 137; 
Percentage of suppliers awarded contracts by supplier size: 38%. 

Unknown: 
Number of bidding suppliers: 52; 
Percentage of bidding suppliers: 5%; 
Number of suppliers awarded contracts: 0; 
Percentage of suppliers awarded contracts by supplier size: 0. 

Total: 
Number of bidding suppliers: 1,011; 
Percentage of bidding suppliers: 100%; 
Number of suppliers awarded contracts: 356; 
Percentage of suppliers awarded contracts by supplier size: 100%. 

Round 1 recompete[B]: 

Small suppliers: 
Number of bidding suppliers: 381; 
Percentage of bidding suppliers: 58%; 
Number of suppliers awarded contracts: 163; 
Percentage of suppliers awarded contracts by supplier size: 58%. 

Large suppliers: 
Number of bidding suppliers: 258; 
Percentage of bidding suppliers: 39%; 
Number of suppliers awarded contracts: 119; 
Percentage of suppliers awarded contracts by supplier size: 42%. 

Unknown: 
Number of bidding suppliers: 21; 
Percentage of bidding suppliers: 3%; 
Number of suppliers awarded contracts: 0; 
Percentage of suppliers awarded contracts by supplier size: 0. 

Total: 
Number of bidding suppliers: 660; 
Percentage of bidding suppliers: 100%; 
Number of suppliers awarded contracts: 282; 
Percentage of suppliers awarded contracts by supplier size: 100%. 

Round 2[C]: 

Small suppliers: 
Number of bidding suppliers: 1,653; 
Percentage of bidding suppliers: 63%; 
Number of suppliers awarded contracts: 504; 
Percentage of suppliers awarded contracts by supplier size: 63%. 

Large suppliers: 
Number of bidding suppliers: 850; 
Percentage of bidding suppliers: 32%; 
Number of suppliers awarded contracts: 296; 
Percentage of suppliers awarded contracts by supplier size: 37%. 

Unknown: 
Number of bidding suppliers: 138; 
Percentage of bidding suppliers: 5%; 
Number of suppliers awarded contracts: 0; 
Percentage of suppliers awarded contracts by supplier size: 0. 

Total: 
Number of bidding suppliers: 2,641; 
Percentage of bidding suppliers: 100%; 
Number of suppliers awarded contracts: 799; 
Percentage of suppliers awarded contracts by supplier size: 100%. 

National mail-order program[C]: 

Small suppliers: 
Number of bidding suppliers: 121; 
Percentage of bidding suppliers: 49%; 
Number of suppliers awarded contracts: 6; 
Percentage of suppliers awarded contracts by supplier size: 33%. 

Large suppliers: 
Number of bidding suppliers: 113; 
Percentage of bidding suppliers: 46%; 
Number of suppliers awarded contracts: 12; 
Percentage of suppliers awarded contracts by supplier size: 67%. 

Unknown: 
Number of bidding suppliers: 11; 
Percentage of bidding suppliers: 5%; 
Number of suppliers awarded contracts: 0; 
Percentage of suppliers awarded contracts by supplier size: 0%. 

Total: 
Number of bidding suppliers: 245; 
Percentage of bidding suppliers: 100%; 
Number of suppliers awarded contracts: 18; 
Percentage of suppliers awarded contracts by supplier size: 100%. 

Source: CMS data. GAO-15-63. 

Notes: CMS has a target that 30 percent of the qualified suppliers in 
each product category in each competitive bidding area are small 
suppliers, as defined for CBP. Categories characterizing size are 
based on revenue reported on suppliers' financial documents. Small 
suppliers reported gross revenues of $3.5 million or less in both 
Medicare and non-Medicare revenues, and large suppliers reported more 
than $3.5 million in both Medicare and non-Medicare revenues. Bidders 
that did not report this information or submitted bid packages with 
missing financial documents are categorized as unknown. 

[A] The number of CBP round 1 rebid contracts that were awarded as of 
November 3, 2010--the date that CMS announced contract winners. 

[B] The number of round 1 recompete contracts that were awarded as of 
October 31, 2013--the date that CMS announced contract winners. 

[C] The number of round 2 contracts and national mail-order program 
contracts that were awarded as of April 9, 2013--the date that CMS 
announced contract winners. 

[End of table] 

As in the round 1 rebid, CMS met its 30 percent target for small 
supplier participation in subsequent CBP rounds. Specifically, 58 
percent of the suppliers awarded a contract in the CBP round 1 
recompete were small, as were 63 percent of the suppliers awarded a 
contract in round 2 and 33 percent of the suppliers awarded a contract 
in the national mail-order program. 

Percentages of Bids That Resulted in Contracts Varied across Rounds, 
but Reasons for Bid Disqualifications Were Generally Similar: 

The percentages of total bids submitted that resulted in contracts 
between CMS and suppliers were very similar in the round 1 recompete 
and round 2--29 percent and 28 percent, respectively. These 
percentages were higher than the round 1 rebid, at 20 percent, and 
significantly higher than the national mail-order program, at 7 
percent. 

Ten percent or less of the contract offers CMS made to bidding 
suppliers in the round 1 recompete, round 2, and national mail-order 
program were rejected by suppliers. Specifically, for the round 1 
recompete, 111, or 10 percent, of the 1,108 bids that resulted in 
contract offers made to suppliers as of October 31, 2013--the date 
that CMS announced contract winners--were rejected. For round 2, 
1,232, or 8 percent, of the 14,740 bids that resulted in offers made 
to suppliers as of April 9, 2013--the date that CMS announced contract 
winners--were rejected. For the national mail-order program, 1 bid, or 
5 percent, of the 19 bids that resulted in offers made to suppliers as 
of April 9, 2013--the date that CMS announced contract winners--was 
rejected. (See table 2.) 

Table 2: CMS Durable Medical Equipment (DME) Competitive Bidding 
Program (CBP) Bid Counts by Process Step for the Round 1 Recompete, 
Round 2, and National Mail-Order Program: 

1. Bid review: 

Bids reviewed; 
Round 1 recompete[A]: 
Number of bids: 3,438; 
Percentage of total bids reviewed: 100%; 
Round 2[B]: 
Number of bids: 48,424; 
Percentage of total bids reviewed: 100%; 
National mail-order program[B]: 
Number of bids: 245; 
Percentage of total bids reviewed: 100%. 

Bids disqualified on initial review[C]; 
Round 1 recompete[A]: 
Number of bids: (1,817); 
Percentage of total bids reviewed: 52.9%; 
Round 2[B]: 
Number of bids: (15,130); 
Percentage of total bids reviewed: 31.2%; 
National mail-order program[B]: 
Number of bids: (117); 
Percentage of total bids reviewed: 47.8%. 

2. Winner selection: 

Qualified bids used to determine pivotal bids; 
Round 1 recompete[A]: 
Number of bids: 1,621; 
Percentage of total bids reviewed: 47.1%; 
Round 2[B]: 
Number of bids: 33,294; 
Percentage of total bids reviewed: 68.8%; 
National mail-order program[B]: 
Number of bids: 128; 
Percentage of total bids reviewed: 52.2%. 

Bids that lost only on price; 
Round 1 recompete[A]: 
Number of bids: (513); 
Percentage of total bids reviewed: 14.9%; 
Round 2[B]: 
Number of bids: (18,451); 
Percentage of total bids reviewed: 38.1%; 
National mail-order program[B]: 
Number of bids: (109); 
Percentage of total bids reviewed: 44.5%. 

Bids that won on price, bids from small suppliers added to meet the 30 
percent target, or both; 
Round 1 recompete[A]: 
Number of bids: 1,108; 
Percentage of total bids reviewed: 32.2%; 
Round 2[B]: 
Number of bids: 14,843; 
Percentage of total bids reviewed: 30.7%; 
National mail-order program[B]: 
Number of bids: 19; 
Percentage of total bids reviewed: 7.8%. 

3. Contract offers: 

Initial round of contract offers; 
Round 1 recompete[A]: 
Number of bids: 1,100; 
Percentage of total bids reviewed: 32.0%; 
Round 2[B]: 
Number of bids: 14,654; 
Percentage of total bids reviewed: 30.3%; 
National mail-order program[B]: 
Number of bids: 15; 
Percentage of total bids reviewed: 6.1%. 

Contract offers rescinded by CMS after initial round[D]; 
Round 1 recompete[A]: 
Number of bids: (0); 
Percentage of total bids reviewed: 0.0; 
Round 2[B]: 
Number of bids: (103); 
Percentage of total bids reviewed: 0.2%; 
National mail-order program[B]: 
Number of bids: (0); 
Percentage of total bids reviewed: 0.0. 

Additional contract offers extended[E]; 
Round 1 recompete[A]: 
Number of bids: 8; 
Percentage of total bids reviewed: 0.2%; 
Round 2[B]: 
Number of bids: 189; 
Percentage of total bids reviewed: 0.4%; 
National mail-order program[B]: 
Number of bids: 4; 
Percentage of total bids reviewed: 1.6%. 

4. Contract outcomes: 

Total contract offers made; 
Round 1 recompete[A]: 
Number of bids: 1,108; 
Percentage of total bids reviewed: 32.2%; 
Round 2[B]: 
Number of bids: 14,740; 
Percentage of total bids reviewed: 30.4%; 
National mail-order program[B]: 
Number of bids: 19; 
Percentage of total bids reviewed: 7.8%. 

Contract offers rejected by suppliers[F]; 
Round 1 recompete[A]: 
Number of bids: (111); 
Percentage of total bids reviewed: 3.2%; 
Round 2[B]: 
Number of bids: (1,232); 
Percentage of total bids reviewed: 2.5%; 
National mail-order program[B]: 
Number of bids: (1); 
Percentage of total bids reviewed: 0.4%. 

Bids resulting in contract awards; 
Round 1 recompete[A]: 
Number of bids: 997; 
Percentage of total bids reviewed: 29.0%; 
Round 2[B]: 
Number of bids: 13,508; 
Percentage of total bids reviewed: 27.9%; 
National mail-order program[B]: 
Number of bids: 18; 
Percentage of total bids reviewed: 7.3%. 

Source: GAO analysis of CMS data. GAO-15-63. 

Notes: Numbers in parentheses are decreases. The number of bids 
submitted is higher than the number of bidding suppliers because 
suppliers could submit bids in multiple product categories and 
multiple competitive bidding areas. 

[A] These bid counts by process step were current as of October 31, 
2013--the date that CMS announced contract winners. 

[B] These bid counts by process step were current as of April 9, 2013--
the date that CMS announced contract winners. 

[C] Some of the bids that were disqualified during the initial bid 
review would have lost on price had they not been disqualified for at 
least one other reason. Some bids that were disqualified during the 
initial bid reviews for the round 1 recompete, round 2, and national 
mail-order program were later found to have been disqualified 
incorrectly. 

[D] CMS rescinded 103 round 2 contract offers because the suppliers 
were excluded based on their National Supplier Clearinghouse status. 

[E] CMS extended additional contract offers to suppliers in specific 
product categories and competitive bidding areas. To meet capacity, 
CMS extended an additional 8 contract offers to suppliers for the 
round 1 recompete, 105 for round 2, and 4 for the national mail-order 
program. To meet its 30 percent target for small supplier 
participation, CMS extended an additional 83 contract offers for round 
2. CMS also extended 1 additional contract offer for round 2 as a 
result of an accreditation override. 

[F] CMS extended these contract offers, but the bidding suppliers did 
not accept them. 

[End of table] 

The percentage of bids that were disqualified in the initial bid 
review, and therefore not eligible to compete on price, was about the 
same in round 2 as in the round 1 rebid, but significantly higher in 
the round 1 recompete and the national mail-order program. In both the 
round 2 and the round 1 rebid, about 30 percent of bids submitted were 
disqualified in the initial bid review for at least one or more 
reasons. Therefore, about 70 percent of all bids submitted were 
qualified and used to determine pivotal bids, which were then used to 
establish SPAs for each item that was included in the CBP round 2 and 
round 1 rebid.[Footnote 30] In both the round 1 recompete and the 
national mail-order program, about 50 percent of all bids submitted 
were qualified and used to determine pivotal bids, which were then 
used to establish SPAs for each item that was included in the round 1 
recompete and national mail-order program. (See appendix II for 
additional information regarding bid disqualifications for the round 1 
recompete, round 2, and the national mail-order program.) 

During the round 1 recompete, bids were disqualified, and thus not 
eligible to compete on price, for a number of reasons.[Footnote 31] 
The highest percentage of bids disqualified during the round 1 
recompete initial bid review, 32 percent, was related to unacceptable 
financial documentation--131 bidding suppliers submitted 584 
incomplete or inaccurate bids. The second highest percentage of bids 
disqualified during the round 1 recompete, 28 percent, was related to 
state licensure requirements--185 bidding suppliers submitted 499 bids 
that did not meet all state licensure requirements. 

As in the round 1 recompete, the highest percentage of bids 
disqualified during the round 2 initial bid review, 51 percent, was 
related to unacceptable financial documentation--524 bidding suppliers 
submitted 7,768 incomplete or inaccurate bids. The second highest 
percentage of bids disqualified during the round 2, 21 percent, 
occurred because 167 bidding suppliers submitted 3,149 bids that did 
not meet supplier financial standards.[Footnote 32] In addition, 1,804 
round 2 bids were disqualified because 254 bidding suppliers did not 
meet all state licensure requirements.[Footnote 33] 

Reasons for bid disqualifications in the national mail-order program 
were also similar to reasons in other CBP rounds. The highest 
percentage of bids disqualified during the national mail-order 
program, 70 percent, was related to 82 bids from 82 bidding suppliers 
that did not meet all state licensure requirements. The second highest 
percentage of bids disqualified, 30 percent, was related to 35 bids 
from 35 bidding suppliers with unacceptable financial documentation. 
The third highest percentage of bids disqualified, 15 percent, was due 
to 18 bids that did not comply with the diabetic test strips 50 
percent compliance rule, which helps to ensure that Medicare 
beneficiaries have access to a wide variety of mail-order diabetic 
supplies.[Footnote 34] 

Many Bidding Suppliers Benefited from Submitting Documents before the 
Covered Document Review Date: 

As they did in the CBP round 1 rebid, bidding suppliers in the round 1 
recompete, round 2, and the national mail-order program continued to 
benefit from a provision in the Medicare Improvements for Patients and 
Providers Act of 2008. It requires that, for bidding suppliers that 
submit their financial documentation by a certain date--known as the 
covered document review date--CMS provide feedback about missing 
financial documentation.[Footnote 35] (See table 3.) 

Table 3: Financial Document Covered Review Date Results for CMS 
Durable Medical Equipment (DME) Competitive Bidding Program (CBP) 
Round 1 Recompete, Round 2, and National Mail-Order Program: 

Covered document review: Total number of bidding suppliers notified 
that financial documentation was missing from their submission; 
Round 1 recompete: 72[A]; 
Round 2: 407; 
National mail-order program: 39. 

Covered document review: Number of notified bidding suppliers that 
subsequently submitted correct documentation; 
Round 1 recompete: 66; 
Round 2: 370; 
National mail-order program: 35. 

Covered document review: Number of notified bidding suppliers that did 
not provide the missing documentation; 
Round 1 recompete: 6; 
Round 2: 37; 
National mail-order program: 4. 

Covered document review: Number of notified bidding suppliers that 
resubmitted their documentation, but were ultimately disqualified for 
unacceptable (such as incomplete or inaccurate) documents; 
Round 1 recompete: 23; 
Round 2: 117; 
National mail-order program: 8. 

Covered document review: Number of bidding suppliers initially notified 
that they had missing financial documentation that were ultimately 
awarded a contract; 
Round 1 recompete: 22; 
Round 2: 106; 
National mail-order program: 10. 

Source: GAO analysis of CMS data. GAO-15-63. 

[A] Some of the bidding suppliers in each round that were notified of 
missing financial documentation were small suppliers as defined by 
CMS--specifically, 42 bidding suppliers in the CBP round 1 recompete, 
256 bidding suppliers in round 2, and 19 bidding suppliers in the 
national mail-order program. 

[End of table] 

For each currently operating CBP round, at least 69 percent of bidding 
suppliers submitted their financial documentation by the covered 
document review date. Specifically, 69 percent of bidding suppliers 
submitted their financial documentation by the covered document review 
date for the round 1 recompete, 70 percent for round 2, and 78 percent 
for the national mail-order program. In each round, between 16 and 22 
percent of bidding suppliers that submitted their financial 
documentation by the covered document review date were notified that 
they were missing financial documentation. At least 90 percent of the 
bidding suppliers notified that they were missing financial 
documentation in the round 1 recompete, round 2, and national mail-
order program submitted the correct documentation. Of those that 
submitted the correct documentation, between 29 and 33 percent of 
bidding suppliers in each round were ultimately awarded a contract. 

The statement of cash flow was the most common reason that bidding 
suppliers were notified that their bids were missing financial 
documentation for the round 1 rebid.[Footnote 36] This continued to be 
the most common reason for notification of missing financial 
documentation in subsequent CBP rounds. Specifically, of all suppliers 
that were notified of missing financial documentation, 60 percent of 
round 1 recompete, 51 percent of round 2, and 59 percent of national 
mail-order program bidding suppliers were missing a statement of cash 
flow. 

CMS's Post-Bid Review Process Identified Bidding Suppliers That Were 
Disqualified Incorrectly: 

In each CBP round, CMS determined that some bidding suppliers that did 
not initially receive contract offers, but then requested a review of 
their bids, had been disqualified incorrectly.[Footnote 37] Some 
bidding suppliers that requested a review were found to have 
incorrectly disqualified bids in all rounds for a variety of reasons. 
For example, a bidding supplier could have been disqualified 
incorrectly for issues regarding unacceptable hardcopy financial 
documentation, because it was thought not to have the required license 
in the state or product category(ies) in which bids were submitted, or 
because its bid was deemed not bona fide.[Footnote 38] 

In the round 1 recompete, 36 of the 151 bidding suppliers that 
requested a review were found to have had bids disqualified 
incorrectly (24 percent). According to CMS, some of these suppliers 
were disqualified incorrectly because one accreditation organization 
erroneously reported them as not being accredited. Specifically, 73 
bidding suppliers requested a review of 191 bids because they were 
notified that they had been disqualified for failing accreditation, 
and 23 bidding suppliers with 71 bids were found to have been 
disqualified incorrectly. Of those, 14 bidding suppliers were 
subsequently offered a contract because they were disqualified 
incorrectly for failing accreditation, and 9 additional suppliers were 
offered a contract because they were disqualified incorrectly for 
other reasons. 

In round 2, 187 of the 2,641 total bidding suppliers requested a 
review, and 17 bidding suppliers (9 percent) were found to have had 
bids disqualified incorrectly. Of those, 13 bidding suppliers had 310 
bids that were at or below the pivotal bid or were needed to meet 
CMS's target for small supplier participation, and were offered a 
contract. In the national mail-order program, 19 of 245 total bidding 
suppliers requested a review. Of those, 1 bidding supplier (1 percent) 
was found to have been disqualified incorrectly, because it had been 
erroneously shown as revoked or inactive by the NSC, and was 
subsequently offered a contract. (See table 4.) 

Table 4: Results of CMS Post-Bid Review Process for the Durable 
Medical Equipment (DME) Competitive Bidding Program (CBP) Round 1 
Rebid, Round 1 Recompete, Round 2, and the National Mail-Order Program: 

Post-bid review: Total number of bids submitted; 
Round 1 rebid: 6,215; 
Round 1 recompete: 3,438; 
Round 2: 48,424; 
National mail-order program: 245. 

Post-bid review: Total number of bidding suppliers; 
Round 1 rebid: 1,011; 
Round 1 recompete: 660; 
Round 2: 2,641; 
National mail-order program: 245. 

Post-bid review: Total number of bidding suppliers that requested a 
review; 
Round 1 rebid: 99; 
Round 1 recompete: 151; 
Round 2: 187; 
National mail-order program: 19. 

Post-bid review: Total number of bidding suppliers found to have had 
bids disqualified incorrectly; 
Round 1 rebid: 7; 
Round 1 recompete: 36; 
Round 2: 17; 
National mail-order program: 1. 

Post-bid review: Percentage of bidding suppliers that requested a 
review that were found to have had bids disqualified incorrectly; 
Round 1 rebid: 7%; 
Round 1 recompete: 24%; 
Round 2: 9%; 
National mail-order program: 1%. 

Post-bid review: Number of bidding suppliers offered a contract as a 
result of the post-bid review[A]; 
Round 1 rebid: 7; 
Round 1 recompete: 23; 
Round 2: 13; 
National mail-order program: 1. 

Source: GAO analysis of CMS data. GAO-15-63. 

[A] Only suppliers that had bids equal to or less than the pivotal 
bids or were needed to meet the Centers for Medicare & Medicaid 
Services' target for small supplier participation were offered a 
contract. 

[End of table] 

Few Contract Suppliers Were New to Both a Product Category and a 
Competitive Bidding Area Prior to Being Awarded a Contract: 

Although some distinct suppliers were new to at least one product 
category or new to at least one competitive bidding area--that is, did 
not provide products or services in the area--few suppliers that were 
awarded CBP round 1 recompete, round 2, or national mail-order program 
contracts were new to both a product category and a competitive 
bidding area.[Footnote 39] In both the round 1 recompete and the 
national mail-order program, about 1 percent of contract suppliers 
were new to both the product category and the competitive bidding 
area. In round 2, 12 distinct contract suppliers of the original 799 
contract suppliers--about 2 percent--were new to both a product 
category and a competitive bidding area. This number and percentage 
were similar to those in the round 1 rebid, where 9 distinct contract 
suppliers of the original 356--about 3 percent--were new to both a 
product category and a competitive bidding area. (See table 5.) 

Table 95: Contract Suppliers with No Previous Experience in a 
Competitive Bidding Area, Product Category, or Both, for the CMS 
Durable Medical Equipment (DME) Competitive Bidding Program (CBP) 
Round 1 Rebid, Round 1 Recompete, Round 2, and National Mail-Order 
Program: 

New to at least one product category: 
Round 1 rebid: 43; 
Round 1 recompete: 40; 
Round 2: 159; 
National mail-order program: 2. 

New to at least one competitive bidding area: 
Round 1 rebid: 44; 
Round 1 recompete: 60; 
Round 2: 258; 
National mail-order program: 1[A]. 

New to both a product category and a competitive bidding area: 
Round 1 rebid: 9; 
Round 1 recompete: 3; 
Round 2: 12; 
National mail-order program: 1[A]. 

Total contract suppliers per round: 
Round 1 rebid: 356; 
Round 1 recompete: 282; 
Round 2: 799; 
National mail-order program: 18. 

Source: GAO analysis of CMS data. GAO-15-63. 

Note: As a contract supplier can be new to a product category and a 
competitive bidding area, some suppliers are counted more than once 
across rows. 

[A] There is one competitive bidding area and product category for the 
national mail-order program. 

[End of table] 

Most Average SPAs for Common HCPCS Codes Decreased through CBP Rounds: 

Most of the average SPAs for high-cost, high-utilization HCPCS codes 
common to the round 1 rebid, round 1 recompete, and round 2 decreased 
through the CBP rounds. Average SPAs for the eight HCPCS codes 
included in the national mail-order program also decreased or remained 
steady compared to those in the round 1 rebid. 

Average SPAs Decreased through CBP Rounds for Most of the 28 Selected 
HCPCS Codes Common to the Round 1 Rebid, Round 1 Recompete, and Round 
2: 

Average SPAs for the 28 high-cost, high-utilization HCPCS codes common 
to the round 1 rebid, round 1 recompete, and round 2 generally 
decreased through CBP rounds,[Footnote 40] compared to the average 
Medicare 2010 fee-for-service payments for the same codes.[Footnote 
41] The 28 codes were among the 34 high-cost and high-utilization DME 
HCPCS codes CMS identified and we discussed in our 2012 report. 
[Footnote 42] (Appendix III, table 11, presents a full list of the 28 
codes with descriptions as well as SPAs for all codes for each round 
and the corresponding average Medicare 2010 fee-for-service payment 
amounts.) Although average SPAs continued to decrease from one round 
to the next for a majority of the codes, the largest overall decreases 
across all rounds occurred in round 1 rebid average SPAs compared to 
the average Medicare 2010 fee-for-service payments for the same codes. 

The extent to which average SPAs changed varied by type of HCPCS code. 
For example, SPAs for six selected HCPCS codes associated with 
continuous positive airway pressure devices (CPAP), respiratory assist 
devices (RAD), and related supplies and accessories decreased in each 
CBP round. (See figure 3.) 

Figure 3: Comparison of Average Medicare 2010 Fee-for-Service Payments 
with CMS Competitive Bidding Program Rounds' Average Single Payment 
Amounts (SPA) for Selected Continuous Positive Airway Pressure Devices 
(CPAP), Respiratory Assist Devices (RAD), and Related Supplies and 
Accessories Codes: 

[Refer to PDF for image: vertical bar graph] 

HCPCS code: A7030; 
Average Medicare 2010 fee-for-service payment[A]: $170.72; 
Round 1 rebid average SPA[B]: $122.01; 
Round 1 recompete average SPA: $111.52; 
Round 2 average SPA: $101.08. 

HCPCS code: A7034; 
Average Medicare 2010 fee-for-service payment[A]: $106.46; 
Round 1 rebid average SPA[B]: $73.28; 
Round 1 recompete average SPA: $66.47; 
Round 2 average SPA: $62.45. 

HCPCS code: A7037; 
Average Medicare 2010 fee-for-service payment[A]: $36.68; 
Round 1 rebid average SPA[B]: $20.49; 
Round 1 recompete average SPA: $17.72; 
Round 2 average SPA: $14.32. 

HCPCS code: E0470; 
Average Medicare 2010 fee-for-service payment[A]: $220.85; 
Round 1 rebid average SPA[B]: $138.54; 
Round 1 recompete average SPA: $130.40; 
Round 2 average SPA: $115.75. 

HCPCS code: E0562; 
Average Medicare 2010 fee-for-service payment[A]: $272.6; 
Round 1 rebid average SPA[B]: $179.73; 
Round 1 recompete average SPA: $163.31; 
Round 2 average SPA: $145.50. 

HCPCS code: E0601; 
Average Medicare 2010 fee-for-service payment[A]: $96.43; 
Round 1 rebid average SPA[B]: $58.23; 
Round 1 recompete average SPA: $51.86; 
Round 2 average SPA: $46.60. 

Source: GAO analysis of CMS data. GAO-15-63. 

Notes: A7030 is a full face mask used with positive airway pressure 
device (each). A7034 is a nasal interface (mask or cannula type) used 
with positive airway pressure device, with or without head strap. 
A7037 is tubing used with positive airway pressure device. E0470 is a 
RAD, bi-level pressure capability, without backup rate feature, used 
with noninvasive interface, e.g., nasal or facial mask (intermittent 
assist device with continuous positive airway pressure device). E0562 
is a humidifier, heated, used with positive airway pressure device. 
E0601 is a CPAP. 

[A] The 2010 Medicare fee-for-service payment amount was used as a 
comparison point for this analysis because 2010 was the year that 
preceded the round 1 rebid, which resulted in contracts that were 
effective from January 1, 2011, through December 31, 2013. CBP SPAs 
are required to be less than or equal to the Medicare fee-for-service 
payment amount for the same item. We averaged Medicare fee-for-service 
payments for 2010 using payments within the continental states and the 
District of Columbia only, because Alaska and Hawaii are not subject 
to Medicare's fee-for-service payment amount ceiling and floor limits. 

[B] SPAs are determined by arraying the price offers in winning bids 
from lowest to highest and selecting the median price offered by the 
suppliers for an item. The median price becomes the SPA. SPAs can vary 
by competitive bidding area. To calculate an average SPA for each 
Healthcare Common Procedure Coding System (HCPCS) code, we averaged 
the SPAs across all competitive bidding areas included in each round. 
For example, SPAs in round 2 for HCPCS code E0470 ranged from a low of 
$106.90 in the Northern New Jersey Metro competitive bidding area to a 
high of $138.85 in the Worchester, Massachusetts, competitive bidding 
area, and the average SPA was $115.75. 

[End of figure] 

Similar to the pattern for the six selected CPAP and RAD HCPCS codes, 
the average SPAs also decreased in each CBP round for three selected 
hospital bed HCPCS codes. (See figure 4.) 

Figure 4: Comparison of Average Medicare 2010 Fee-for-Service Payments 
with CMS Competitive Bidding Program Rounds' Average Single Payment 
Amounts (SPA) for Selected Hospital Bed Codes: 

[Refer to PDF for image: vertical bar graph] 

HCPCS code: E0260; 
Average Medicare 2010 fee-for-service payment[A]: $127.12; 
Round 1 rebid average SPA[B]: $80.35; 
Round 1 recompete average SPA: $73.86; 
Round 2 average SPA: $70.31. 

HCPCS code: E0261; 
Average Medicare 2010 fee-for-service payment[A]: $116.05; 
Round 1 rebid average SPA[B]: $73.72; 
Round 1 recompete average SPA: $69.81; 
Round 2 average SPA: $67.04. 

HCPCS code: E0303; 
Average Medicare 2010 fee-for-service payment[A]: $267.38; 
Round 1 rebid average SPA[B]: $188.11; 
Round 1 recompete average SPA: $180.74; 
Round 2 average SPA: $177.17. 

Source: GAO analysis of CMS data. GAO-15-63. 

Notes: E0260 is a hospital bed, semi-electric (head and foot 
adjustment), with any type side rails, with mattress. E0261 is a 
hospital bed, semi-electric (head and foot adjustment), with any type 
side rails, without mattress. E0303 is a hospital bed, heavy duty, 
extra wide, with weight capacity greater than 350 pounds, but less 
than or equal to 600 pounds, with any type side rails, with mattress. 

[A] The 2010 Medicare fee-for-service payment amount was used as a 
comparison point for this analysis because 2010 was the year that 
preceded the round 1 rebid, which resulted in contracts that were 
effective from January 1, 2011, through December 31, 2013. CBP SPAs 
are required to be less than or equal to the Medicare fee-for-service 
payment amount for the same item. We averaged Medicare fee-for-service 
payments for 2010 using payments within the continental states and the 
District of Columbia only, because Alaska and Hawaii are not subject 
to Medicare's fee-for-service payment amount ceiling and floor limits. 

[B] SPAs are determined by arraying the price offers in winning bids 
from lowest to highest and selecting the median price offered by the 
suppliers for an item. The median price becomes the SPA. SPAs can vary 
by competitive bidding area. To calculate an average SPA for each 
Healthcare Common Procedure Coding System (HCPCS) code, we averaged 
the SPAs across all competitive bidding areas included in each round. 
For example, SPAs for round 2 for HCPCS code E0261 ranged from a low 
of $58.67 in the Cape Coral-Fort Myers, Florida, competitive bidding 
area to a high of $91.62 in the Honolulu, Hawaii, competitive bidding 
area, and the average SPA was $67.04. 

[End of figure] 

However, average SPAs for the three selected standard power wheelchair 
HCPCS codes had a different pattern. Average round 1 rebid SPAs for 
these HCPCS codes decreased an average of 29 percent from the average 
Medicare 2010 fee-for-service payment amounts. Average SPAs for the 
same HCPCS codes then increased by an average of 35 percent from the 
round 1 rebid to the round 1 recompete, but decreased by an average of 
9 percent from the round 1 recompete to round 2. (See figure 5.) Round 
2 average SPAs for selected standard power wheelchair HCPCS codes, 
while higher than the round 1 rebid amounts, remained 12 percent 
lower, on average, than the average Medicare 2010 fee-for-service 
payments for the same codes. 

Figure 5: Comparison of Average Medicare 2010 Fee-for-Service Payments 
with CMS Competitive Bidding Program Rounds' Average Single Payment 
Amounts (SPA) for Selected Standard Power Wheelchair Codes: 

[Refer to PDF for image: vertical bar graph] 

HCPCS code: K0822; 
Average Medicare 2010 fee-for-service payment[B]: $361.77; 
Round 1 rebid average SPA[C]: $249.64; 
Round 1 recompete average SPA: $344.44; 
Round 2 average SPA: $324.53. 

HCPCS code: K0823; 
Average Medicare 2010 fee-for-service payment[B]: $364.14; 
Round 1 rebid average SPA[C]: $255.42; 
Round 1 recompete average SPA: $328.39; 
Round 2 average SPA: $283.42. 

HCPCS code: K0825[A]; 
Average Medicare 2010 fee-for-service payment[B]: $401.20; 
Round 1 rebid average SPA[C]: $295.14; 
Round 1 recompete average SPA: $412.62; 
Round 2 average SPA: $383.28. 

Source: GAO analysis of CMS data. GAO-15-63. 

Notes: K0822 is a power wheelchair, group 2 standard, sling/solid 
seat/back, patient weight capacity up to and including 300 pounds. 
K0823 is a power wheelchair, group 2 standard, captains chair, patient 
weight capacity up to and including 300 pounds. K0825 is a power 
wheelchair, group 2 heavy duty, captains chair, patient weight 
capacity 301 to 450 pounds. 

[A] The average SPA for K0825 in the round 1 recompete ($412.62) was 
higher than the average Medicare 2010 fee-for-service payment listed 
($401.20), but it was not higher than the 2013 average Medicare fee-
for-service payment amount ($620.59) for that item. CMS used the 2013 
Medicare fee-for-service payments as a comparison point for 
determining whether SPAs in the round 1 recompete were less than or 
equal to Medicare fee-for-service payments for the same items. 

[B] The 2010 Medicare fee-for-service payment amount was used as a 
comparison point for this analysis because 2010 was the year that 
preceded the round 1 rebid, which resulted in contracts that were 
effective from January 1, 2011, through December 31, 2013. CBP SPAs 
are required to be less than or equal to the Medicare fee-for-service 
payment amount for the same item. We averaged Medicare fee-for-service 
payments for 2010 using payments within the continental states and the 
District of Columbia only, because Alaska and Hawaii are not subject 
to Medicare's fee-for-service payment amount ceiling and floor limits. 

[C] SPAs are determined by arraying the price offers in winning bids 
from lowest to highest and selecting the median price offered by the 
suppliers for an item. The median price becomes the SPA. SPAs can vary 
by competitive bidding area. To calculate an average SPA for each 
Healthcare Common Procedure Coding System (HCPCS) code, we averaged 
the SPAs across all competitive bidding areas included in each round. 
For example, SPAs in round 2 for HCPCS code K0822 ranged from a low of 
$285.49 in the Austin-Round Rock-San Marcos, Texas, competitive 
bidding area to a high of $388.59 in the Honolulu, Hawaii, competitive 
bidding area, and the average SPA was $324.53. 

[End of figure] 

Average SPAs for Diabetic Testing Supply HCPCS Codes Decreased or 
Remained Steady from the Round 1 Rebid to the National Mail-Order 
Program: 

Eight diabetic testing supply HCPCS codes were common to the CBP round 
1 rebid and the national mail-order program.[Footnote 43] (See table 
6.) Three of these codes were also included in the original 34 codes 
CMS determined to be high-cost, high-utilization HCPCS codes for the 
round 1 rebid.[Footnote 44] 

Table 6: Healthcare Common Procedure Coding System (HCPCS) Codes and 
Descriptions for Mail-Order Diabetic Testing Supply Codes Common to 
the CMS Competitive Bidding Program (CBP) Round 1 Rebid and the 
National Mail-Order Program: 

HCPCS code[A]: A4233; 
Description: Replacement battery, alkaline (other than J cell), for 
use with medically necessary home blood glucose monitor owned by 
patient, each. 

HCPCS code[A]: A4234; 
Description: Replacement battery, alkaline, J cell, for use with 
medically necessary home blood glucose monitor owned by patient, each. 

HCPCS code[A]: A4235; 
Description: Replacement battery, lithium, for use with medically 
necessary home blood glucose monitor owned by patient, each. 

HCPCS code[A]: A4236; 
Description: Replacement battery, silver oxide, for use with medically 
necessary home blood glucose monitor owned by patient, each. 

HCPCS code[A]: A4253[B]; 
Description: Blood glucose test or reagent strips for home blood 
glucose monitor, per 50 strips. 

HCPCS code[A]: A4256[B]; 
Description: Normal, low, and high calibrator solution/chips. 

HCPCS code[A]: A4258; 
Description: Spring-powered device for lancet, each. 

HCPCS code[A]: A4259[B]; 
Description: Lancets, per box of 100. 

Source: GAO analysis of CMS data. GAO-15-63. 

[A] HCPCS codes under the diabetic testing supplies product category 
must also include the modifier "KL" at the end to indicate that these 
supplies were furnished by mail-order. 

[B] These three codes were also part of the original 34 codes that CMS 
determined as representing the top 80 percent high-cost and high-
utilization codes for the round 1 rebid. 

[End of table] 

Average SPAs for the eight common mail-order diabetic testing supply 
HCPCS codes decreased from the average 2010 Medicare mail-order fee-
for-service payment amount to the round 1 rebid,[Footnote 45] and 
decreased or remained steady from the round 1 rebid to the national 
mail-order program.[Footnote 46] (See figure 6.) 

Figure 6: Comparison of Average Medicare 2010 Mail-Order Fee-for-
Service Payments with CMS Competitive Bidding Program Rounds' Average 
Single Payment Amounts (SPA) for Diabetic Testing Supply Codes: 

[Refer to PDF for image: vertical bar graph] 

HCPCS code: A4233; 
Average Medicare 2010 fee-for-service payment[A]: $0.72; 
Round 1 rebid average SPA[B]: $0.58; 
National DTS program SPA: $0.58. 

HCPCS code: A4234; 
Average Medicare 2010 fee-for-service payment[A]: $3.29; 
Round 1 rebid average SPA[B]: $2.24; 
National DTS program SPA: $2.50. 

HCPCS code: A4235; 
Average Medicare 2010 fee-for-service payment[A]: $2.12; 
Round 1 rebid average SPA[B]: $1.26; 
National DTS program SPA: $1.06. 

HCPCS code: A4236; 
Average Medicare 2010 fee-for-service payment[A]: $1.52; 
Round 1 rebid average SPA[B]: $1.25; 
National DTS program SPA: $1.19. 

HCPCS code: A4253; 
Average Medicare 2010 fee-for-service payment[A]: $32.46; 
Round 1 rebid average SPA[B]: $14.62; 
National DTS program SPA: $10.41. 

HCPCS code: A4256; 
Average Medicare 2010 fee-for-service payment[A]: $9.82; 
Round 1 rebid average SPA[B]: $4.96; 
National DTS program SPA: $4.00. 

HCPCS code: A4258; 
Average Medicare 2010 fee-for-service payment[A]: $16.26; 
Round 1 rebid average SPA[B]: $5.94; 
National DTS program SPA: $2.52. 

HCPCS code: A4259; 
Average Medicare 2010 fee-for-service payment[A]: $10.53; 
Round 1 rebid average SPA[B]: $4.19; 
National DTS program SPA: $1.65. 

Source: GAO analysis of CMS data. GAO-15-63. 

Notes: Healthcare Common Procedure Coding System (HCPCS) codes for 
mail-order diabetic testing supplies must include the modifier "KL" at 
the end to indicate that these supplies were furnished by mail-order. 
A4233 is a replacement battery, alkaline (other than J cell), for use 
with medically necessary home blood glucose monitor owned by patient, 
each. A4234 is a replacement battery, alkaline, J cell, for use with 
medically necessary home blood glucose monitor owned by patient, each. 
A4235 is a replacement battery, lithium, for use with medically 
necessary home blood glucose monitor owned by patient, each. A4236 is 
a replacement battery, silver oxide, for use with medically necessary 
home blood glucose monitor owned by patient, each. A4253 is blood 
glucose test or reagent strips for home blood glucose monitor, per 50 
strips. A4256 is normal, low, and high calibrator solution/chips. 
A4258 is a spring-powered device for lancet, each. A4259 is lancets, 
per box of 100. 

[A] The 2010 Medicare mail-order fee-for-service payment amount was 
used as a comparison point for this analysis because 2010 was the year 
that preceded the round 1 rebid, which resulted in contracts that were 
effective from January 1, 2011, through December 31, 2013. CBP SPAs 
are required to be less than or equal to the Medicare fee-for-service 
payment amount for the same item. We averaged Medicare mail-order fee-
for-service payments for 2010 using payments within the continental 
states and the District of Columbia only, because Alaska and Hawaii 
are not subject to Medicare's fee-for-service payment amount ceiling 
and floor limits. 

[B] SPAs are determined by arraying the price offers in winning bids 
from lowest to highest and selecting the median price offered by the 
suppliers for an item. The median price becomes the SPA. SPAs can vary 
by competitive bidding area. To calculate an average SPA for each 
code, we averaged the SPAs across all competitive bidding areas 
included in the round 1 rebid. For example, SPAs for the round 1 rebid 
for HCPCS code A4253 KL ranged from a low of $13.88 in the Riverside-
San Bernadino-Ontario, California, competitive bidding area to a high 
of $15.62 in the Cleveland-Elyria-Mentor, Ohio, competitive bidding 
area, and the average SPA was $14.62. For the national mail-order 
program, CMS determined one SPA for each HCPCS code, so no averaging 
was necessary. 

[End of figure] 

The extent of decrease in national mail-order program SPAs varied 
across HCPCS codes. (See appendix III, table 12, for a list of all 
eight HCPCS codes with their corresponding average 2010 Medicare and 
CBP SPA amounts.) For example, average SPAs for three HCPCS codes 
associated with glucose monitoring test strips and lancets (A4253, 
A4258, and A4259)[Footnote 47] decreased by more than 50 percent from 
the average Medicare 2010 mail-order fee-for-service payment to the 
round 1 rebid average SPA. Payments for two of these codes (A4258 and 
A4259) further decreased by 50 percent or more from the round 1 rebid 
average SPA to the national mail-order program SPA. However, average 
SPAs for two codes associated with replacement batteries for blood 
glucose monitors (A4233 and A4236)[Footnote 48] decreased by less than 
20 percent from the average Medicare 2010 mail-order fee-for-service 
payment to the round 1 rebid average SPA. Payments for these codes 
were steady in the national mail-order program compared to the round 1 
rebid, with minimal or no decrease in SPAs. 

Agency Comments: 

HHS reviewed a draft of this report and provided written comments, 
which are reprinted in appendix IV. HHS also provided technical 
comments, which we incorporated as appropriate. In its general 
comments, HHS stated that it anticipates CBP will provide substantial 
savings for both the Medicare Part B Trust Fund and Medicare 
beneficiaries. 

As agreed with your office, 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 [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or kingk@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 V. 

Signed by: 

Kathleen M. King: 
Director, Health Care: 

[End of section] 

Appendix I: The 100 Competitive Bidding Areas Included in the CMS 
Competitive Bidding Program Round 2: 

Region: Midwest; 

Competitive bidding area: Akron, OH; 
State: Ohio. 

Competitive bidding area: Central-Chicago Metro area; 
State: Illinois. 

Competitive bidding area: Columbus, OH; 
State: Ohio. 

Competitive bidding area: Dayton, OH; 
State: Ohio. 

Competitive bidding area: Detroit-Warren-Livonia, MI; 
State: Michigan. 

Competitive bidding area: Flint, MI; 
State: Michigan. 

Competitive bidding area: Grand Rapids-Wyoming, MI; 
State: Michigan. 

Competitive bidding area: Huntington-Ashland, WV-KY-OH; 
State: Kentucky. 

Competitive bidding area: Indiana-Chicago Metro area; 
State: Indiana. 

Competitive bidding area: Indianapolis-Carmel, IN; 
State: Indiana. 

Competitive bidding area: Milwaukee-Waukesha-West Allis, WI; 
State: Wisconsin. 

Competitive bidding area: Minneapolis-St. Paul-Bloomington, 
MN-WI; 
State: Minnesota. 

Competitive bidding area: Northern-Chicago Metro area; 
State: Illinois. 

Competitive bidding area: Omaha-Council Bluffs, NE-IA; 
State: Iowa. 

Competitive bidding area: South-West-Chicago-Metro area; 
State: Illinois. 

Competitive bidding area: St. Louis, MO-IL; 
State: Illinois. 

Competitive bidding area: Toledo, OH; 
State: Ohio. 

Competitive bidding area: Wichita, KS; 
State: Kansas. 

Competitive bidding area: Youngstown-Warren-Boardman, OH-PA; 
State: Ohio. 

Region: Northeast; 

Competitive bidding area: Albany-Schenectady-Troy, NY; 
State: New York. 

Competitive bidding area: Allentown-Bethlehem-Easton, PA-NJ; 
State: New Jersey. 

Competitive bidding area: Boston-Cambridge-Quincy, MA-NH; 
State: Massachusetts. 

Competitive bidding area: Bridgeport-Stamford-Norwalk, CT; 
State: Connecticut. 

Competitive bidding area: Bronx-Manhattan NY; 
State: New York. 

Competitive bidding area: Buffalo-Niagara Falls, NY; 
State: New York. 

Competitive bidding area: Hartford-West Hartford-East Hartford, CT; 
State: Connecticut. 

Competitive bidding area: New Haven-Milford, CT; 
State: Connecticut. 

Competitive bidding area: Nassau-Brooklyn-Queens-Richmond County Metro 
area; 
State: New York. 

Competitive bidding area: North East NY Metro area; 
State: New York. 

Competitive bidding area: Northern NJ Metro area; 
State: New Jersey. 

Competitive bidding area: Philadelphia-Camden-Wilmington, 
PA-NJ-DE-MD; 
State: Delaware. 

Competitive bidding area: Poughkeepsie-Newburgh-Middletown, NY; 
State: New York. 

Competitive bidding area: Providence-New Bedford-Fall River, RI-MA; 
State: Massachusetts. 

Competitive bidding area: Rochester, NY; 
State: New York. 

Competitive bidding area: Scranton--Wilkes-Barre, PA; 
State: Pennsylvania. 

Competitive bidding area: Southern NY Metro area; 
State: New Jersey. 

Competitive bidding area: Springfield, MA; 
State: Massachusetts. 

Competitive bidding area: Suffolk County; 
State: New York. 

Competitive bidding area: Syracuse, NY; 
State: New York. 

Competitive bidding area: Worcester, MA; 
State: Massachusetts. 

Region: South; 

Competitive bidding area: Asheville, NC; 
State: North Carolina. 

Competitive bidding area: Atlanta-Sandy Springs-Marietta, GA; 
State: Georgia. 

Competitive bidding area: Augusta-Richmond County, GA-SC; 
State: Georgia. 

Competitive bidding area: Austin-Round Rock-San Marcos, TX; 
State: Texas. 

Competitive bidding area: Baltimore-Towson, MD; 
State: Maryland. 

Competitive bidding area: Baton Rouge, LA; 
State: Louisiana. 

Competitive bidding area: Beaumont-Port Arthur, TX; 
State: Texas. 

Competitive bidding area: Birmingham-Hoover, AL; 
State: Alabama. 

Competitive bidding area: Cape Coral-Fort Myers, FL; 
State: Florida. 

Competitive bidding area: Charleston-North Charleston-Summerville, SC; 
State: South Carolina. 

Competitive bidding area: Chattanooga, TN-GA; 
State: Georgia. 

Competitive bidding area: Columbia, SC; 
State: South Carolina. 

Competitive bidding area: Deltona-Daytona Beach-Ormond Beach, FL; 
State: Florida. 

Competitive bidding area: El Paso, TX; 
State: Texas. 

Competitive bidding area: Greensboro-High Point, NC; 
State: North Carolina. 

Competitive bidding area: Greenville-Mauldin-Easley, SC; 
State: South Carolina. 

Competitive bidding area: Houston-Sugar Land-Baytown, TX; 
State: Texas. 

Competitive bidding area: Jackson, MS; 
State: Mississippi. 

Competitive bidding area: Jacksonville, FL; 
State: Florida. 

Competitive bidding area: Knoxville, TN; 
State: Tennessee. 

Competitive bidding area: Lakeland-Winter Haven, FL; 
State: Florida. 

Competitive bidding area: Little Rock-North Little Rock-Conway, AR; 
State: Arkansas. 

Competitive bidding area: Louisville/Jefferson County, KY-IN; 
State: Indiana. 

Competitive bidding area: McAllen-Edinburg-Mission, TX; 
State: Texas. 

Competitive bidding area: Memphis, TN-MS-AR; 
State: Arkansas. 

Competitive bidding area: Nashville-Davidson--Murfreesboro--Franklin, 
TN; 
State: Tennessee. 

Competitive bidding area: New Orleans-Metairie-Kenner, LA; 
State: Louisiana. 

Competitive bidding area: North Port-Bradenton-Sarasota, FL; 
State: Florida. 

Competitive bidding area: Ocala, FL; 
State: Florida. 

Competitive bidding area: Oklahoma City, OK; 
State: Oklahoma. 

Competitive bidding area: Palm Bay-Melbourne-Titusville, FL; 
State: Florida. 

Competitive bidding area: Raleigh-Cary, NC; 
State: North Carolina. 

Competitive bidding area: Richmond, VA; 
State: Virginia. 

Competitive bidding area: San Antonio-New Braunfels, TX; 
State: Texas. 

Competitive bidding area: Tampa-St. Petersburg-Clearwater, FL; 
State: Florida. 

Competitive bidding area: Tulsa, OK; 
State: Oklahoma. 

Competitive bidding area: Virginia Beach-Norfolk-Newport News, VA-NC; 
State: North Carolina. 

Competitive bidding area: Washington-Arlington-Alexandria, DC-VA-MD-WV; 
State: District of Columbia. 

Region: West; 

Competitive bidding area: Albuquerque, NM; 
State: New Mexico. 

Competitive bidding area: Bakersfield-Delano, CA; 
State: California. 

Competitive bidding area: Boise City-Nampa, ID; 
State: Idaho. 

Competitive bidding area: Colorado Springs, CO; 
State: Colorado. 

Competitive bidding area: Denver-Aurora-Broomfield, CO; 
State: Colorado. 

Competitive bidding area: Fresno, CA; 
State: California. 

Competitive bidding area: Honolulu, HI; 
State: Hawaii. 

Competitive bidding area: Las Vegas-Paradise, NV; 
State: Nevada. 

Competitive bidding area: Los Angeles County; 
State: California. 

Competitive bidding area: Orange County; 
State: California. 

Competitive bidding area: Oxnard-Thousand Oaks-Ventura, CA; 
State: California. 

Competitive bidding area: Phoenix-Mesa-Glendale, AZ; 
State: Arizona. 

Competitive bidding area: Portland-Vancouver-Hillsboro, OR-WA; 
State: Oregon. 

Competitive bidding area: Sacramento--Arden-Arcade--Roseville, CA; 
State: California. 

Competitive bidding area: Salt Lake City, UT; 
State: Utah. 

Competitive bidding area: San Diego-Carlsbad-San Marcos, CA; 
State: California. 

Competitive bidding area: San Francisco-Oakland-Fremont, CA; 
State: California. 

Competitive bidding area: San Jose-Sunnyvale-Santa Clara, CA; 
State: California. 

Competitive bidding area: Seattle-Tacoma-Bellevue, WA; 
State: Washington. 

Competitive bidding area: Stockton, CA; 
State: California. 

Competitive bidding area: Tucson, AZ; 
State: Arizona. 

Competitive bidding area: Visalia-Porterville, CA; 
State: California. 

Competitive bidding area: Total; 
State: 100. 

Source: GAO analysis of CMS data. GAO-15-63. 

Note: Regions listed above are determined by the corresponding 
metropolitan statistical area. These are areas designated by the 
Office of Management and Budget that include major cities and the 
suburban areas surrounding them. By law, round 2 was required to be 
conducted in designated metropolitan statistical areas. On January 8, 
2008, CMS announced 70 metropolitan statistical areas for round 2. 
Under the Patient Protection and Affordable Care Act, CMS was required 
to designate an additional 21 areas for round 2, resulting in a total 
of 91 areas. 42 U.S.C. § 1395w-3(a)(1)(D)(ii). The round 2 competitive 
bidding areas are defined by specific ZIP codes related to a 
metropolitan statistical area, and may be the same size as, larger 
than, or smaller than the related metropolitan statistical area, 
depending on a variety of considerations. The competitive bidding area 
is the area wherein only contract suppliers may furnish competitively 
bid items to beneficiaries unless an exception is permitted by law. 
Metropolitan statistical areas with populations over 8 million may be 
subdivided into multiple competitive bidding areas. Most round 2 
metropolitan statistical areas have only one competitive bidding area. 
However, the three largest metropolitan statistical areas (Chicago, 
Los Angeles, and New York) are subdivided into multiple competitive 
bidding areas, so there are a total of 100 competitive bidding areas. 

[End of table] 

[End of section] 

Appendix II: Suppliers with Disqualified Bids in Currently Operating 
CMS Competitive Bidding Program Rounds: 

Bidding suppliers in the CBP round 1 recompete, round 2, and the 
national mail-order program had bids disqualified for a number of 
reasons. (See table 7, table 8, and table 9, respectively.) 

Table 7: Number of Suppliers with CMS Durable Medical Equipment (DME) 
Competitive Bidding Program (CBP) Round 1 Recompete Disqualified Bids, 
by Reason for Disqualification as of October 31, 2013: 

Reason for bid disqualification: Unacceptable (incomplete or 
inaccurate) financial documentation[B]; 
Bids disqualified during initial bid review: 584; 
Percentage of bids disqualified[A]: 32.1%; 
Number of suppliers with a bid that was disqualified, for each reason: 
131. 

Reason for bid disqualification: Did not meet all state licensure 
requirements[C]; 
Bids disqualified during initial bid review: 499; 
Percentage of bids disqualified[A]: 27.5%; 
Number of suppliers with a bid that was disqualified, for each reason: 
185. 

Reason for bid disqualification: Did not meet supplier financial 
standards[D]; 
Bids disqualified during initial bid review: 189; 
Percentage of bids disqualified[A]: 10.4%; 
Number of suppliers with a bid that was disqualified, for each reason: 
32. 

Reason for bid disqualification: Missing required hardcopy 
documentation[E]; 
Bids disqualified during initial bid review: 116; 
Percentage of bids disqualified[A]: 6.4%; 
Number of suppliers with a bid that was disqualified, for each reason: 
21. 

Reason for bid disqualification: Bid price for one or more product 
category items was deemed not bona fide[F]; 
Bids disqualified during initial bid review: 266; 
Percentage of bids disqualified[A]: 14.6%; 
Number of suppliers with a bid that was disqualified, for each reason: 
111. 

Reason for bid disqualification: Did not meet Medicare accreditation 
requirements[G]; 
Bids disqualified during initial bid review: 502; 
Percentage of bids disqualified[A]: 27.6%; 
Number of suppliers with a bid that was disqualified, for each reason: 
222. 

Reason for bid disqualification: National Supplier Clearinghouse (NSC) 
number was revoked or inactive[H]; 
Bids disqualified during initial bid review: 61; 
Percentage of bids disqualified[A]: 3.4%; 
Number of suppliers with a bid that was disqualified, for each reason: 
14. 

Reason for bid disqualification: Did not meet common ownership 
rules[I]; 
Bids disqualified during initial bid review: 6; 
Percentage of bids disqualified[A]: 0.3%; 
Number of suppliers with a bid that was disqualified, for each reason: 
2. 

Reason for bid disqualification: Did not meet network criteria[J]; 
Bids disqualified during initial bid review: 0; 
Percentage of bids disqualified[A]: 0.0; 
Number of suppliers with a bid that was disqualified, for each reason: 
0. 

Reason for bid disqualification: Did not meet eligibility requirements 
to bid as a specialty supplier[K]; 
Bids disqualified during initial bid review: 0; 
Percentage of bids disqualified[A]: 0.0; 
Number of suppliers with a bid that was disqualified, for each reason: 
0. 

Reason for bid disqualification: Invalid bid[L]; 
Bids disqualified during initial bid review: 18; 
Percentage of bids disqualified[A]: 1.0%; 
Number of suppliers with a bid that was disqualified, for each reason: 
1. 

Source: CMS data as of October 31, 2013. GAO-15-63. 

Notes: October 31, 2013, is the date that the Centers for Medicare & 
Medicaid Services (CMS) announced contract winners. Suppliers that 
were disqualified for more than one reason are counted in each reason 
code. Therefore, the number of bids disqualified and the number of 
suppliers disqualified may appear in multiple categories. In addition 
to the reasons for bid disqualifications above, CMS also established a 
"lost on price" category. According to CMS, 740 of the 1,817 total 
bids disqualified--41 percent--would also have lost on price had the 
bids not been disqualified for at least one other reason. 

[A] Percentages add to more than 100 because a bid could have been 
disqualified for more than one reason. 

[B] Suppliers failed to submit complete or accurate hardcopy financial 
documentation as required. 

[C] Suppliers were responsible for meeting all applicable state 
licensure requirements for the product category for every state 
included in the competitive bidding area in which they submitted a bid. 

[D] Supplier financial standards indicated that CMS believed that the 
supplier was unlikely for financial reasons to be able to fulfill its 
contract obligations. 

[E] Suppliers failed to submit financial documentation in hardcopy as 
required. 

[F] All bid prices could not be higher than the Medicare fee schedule 
but not lower than the cost to the supplier. 

[G] Suppliers must have been accredited by a CMS-approved 
accreditation organization for the product categories in which they 
submitted bids. 

[H] Suppliers must have had an active NSC number to be eligible to 
bill Medicare for DME. 

[I] Commonly owned or controlled suppliers were required to submit a 
single bid to furnish a product category in a competitive bidding area. 

[J] A network is a group of 2 to 20 small suppliers that collectively 
submit a bid as a single entity and must meet certain criteria. 

[K] A specialty supplier is a skilled nursing facility or nursing 
facility that is awarded a competitive bidding contract to furnish 
competitively bid items only to its own residents to whom it would 
otherwise furnish Medicare Part B services. 

[L] This category indicates a loss of eligibility prior to the 
arraying of bids because the supplier's Provider Transaction Account 
Number was either inactivated or revoked. 

[End of table] 

Table 8: Number of Suppliers with CMS Durable Medical Equipment (DME) 
Competitive Bidding Program (CBP) Round 2 Disqualified Bids, by Reason 
for Disqualification as of April 9, 2013: 

Reason for bid disqualification: Unacceptable (incomplete or 
inaccurate) financial documentation[B]; 
Bids disqualified during initial bid review: 7,768; 
Percentage of bids disqualified[A]: 51.3%; 
Number of suppliers with a bid that was disqualified, for each reason: 
524. 

Reason for bid disqualification: Did not meet all state licensure 
requirements[C]; 
Bids disqualified during initial bid review: 1,804; 
Percentage of bids disqualified[A]: 11.9%; 
Number of suppliers with a bid that was disqualified, for each reason: 
254. 

Reason for bid disqualification: Did not meet supplier financial 
standards[D]; 
Bids disqualified during initial bid review: 3,149; 
Percentage of bids disqualified[A]: 20.8%; 
Number of suppliers with a bid that was disqualified, for each reason: 
167. 

Reason for bid disqualification: Missing required hardcopy 
documentation[E]; 
Bids disqualified during initial bid review: 1,217; 
Percentage of bids disqualified[A]: 8.0%; 
Number of suppliers with a bid that was disqualified, for each reason: 
138. 

Reason for bid disqualification: Bid price for one or more product 
category items was deemed not bona fide[F]; 
Bids disqualified during initial bid review: 915; 
Percentage of bids disqualified[A]: 6.0%; 
Number of suppliers with a bid that was disqualified, for each reason: 
165. 

Reason for bid disqualification: Did not meet Medicare accreditation 
requirements[G]; 
Bids disqualified during initial bid review: 166; 
Percentage of bids disqualified[A]: 1.1%; 
Number of suppliers with a bid that was disqualified, for each reason: 
67. 

Reason for bid disqualification: National Supplier Clearinghouse (NSC) 
number was revoked or inactive[H]; 
Bids disqualified during initial bid review: 766; 
Percentage of bids disqualified[A]: 5.1%; 
Number of suppliers with a bid that was disqualified, for each reason: 
30. 

Reason for bid disqualification: Did not meet common ownership 
rules[I]; 
Bids disqualified during initial bid review: 30; 
Percentage of bids disqualified[A]: 0.2%; 
Number of suppliers with a bid that was disqualified, for each reason: 
8. 

Reason for bid disqualification: Did not meet network criteria[J]; 
Bids 
disqualified during initial bid review: 0; 
Percentage of bids disqualified[A]: 0.0; 
Number of suppliers with a bid that was disqualified, for each reason: 
0. 

Reason for bid disqualification: Did not meet eligibility requirements 
to bid as a specialty supplier[K]; 
Bids disqualified during initial bid review: 0; 
Percentage of bids disqualified[A]: 0.0; 
Number of suppliers with a bid that was disqualified, for each reason: 
0. 

Reason for bid disqualification: Withdrew bid[L]; 
Bids disqualified during initial bid review: 100; 
Percentage of bids disqualified[A]: 0.7%; 
Number of suppliers with a bid that was disqualified, for each reason: 
1. 

Source: CMS data as of April 9, 2013. GAO-15-63. 

Notes: April 9, 2013, is the date that the Centers for Medicare & 
Medicaid Services (CMS) announced contract winners. Suppliers that 
were disqualified for more than one reason are counted in each reason 
code. Therefore, the number of bids disqualified and the number of 
suppliers disqualified may appear in multiple categories. In addition 
to the reasons for bid disqualifications above, CMS also established a 
"lost on price" category. According to CMS, 10,057 of the 15,130 total 
bids disqualified--66 percent--would also have lost on price had the 
bids not been disqualified for at least one other reason. 

[A] Percentages add to more than 100 because a bid could have been 
disqualified for more than one reason. 

[B] Suppliers failed to submit complete or accurate hardcopy financial 
documentation as required. 

[C] Suppliers were responsible for meeting all applicable state 
licensure requirements for the product category for every state 
included in the competitive bidding area in which they submitted a bid. 

[D] Supplier financial standards indicated that CMS believed that the 
supplier was unlikely for financial reasons to be able to fulfill its 
contract obligations. 

[E] Suppliers failed to submit financial documentation in hardcopy as 
required. 

[F] All bid prices could not be higher than the Medicare fee schedule 
but not lower than the cost to the supplier. 

[G] Suppliers must have been accredited by a CMS-approved 
accreditation organization for the product categories in which they 
submitted bids. 

[H] Suppliers must have had an active NSC number to be eligible to 
bill Medicare for DME. 

[I] Commonly owned or controlled suppliers were required to submit a 
single bid to furnish a product category in a competitive bidding area. 

[J] A network is a group of 2 to 20 small suppliers that collectively 
submit a bid as a single entity and must meet certain criteria. 

[K] A specialty supplier is a skilled nursing facility or nursing 
facility that is awarded a competitive bidding contract to furnish 
competitively bid items only to its own residents to whom it would 
otherwise furnish Medicare Part B services. 

[L] The supplier retracted the bids, and the bids were disqualified. 

[End of table] 

Table 9: Number of Suppliers with CMS Durable Medical Equipment (DME) 
National Mail-Order Program Disqualified Bids, by Reason for 
Disqualification, as of April 9, 2013: 

Reason for bid disqualification: Unacceptable (incomplete or 
inaccurate) financial documentation[B]; 
Bids disqualified during initial bid review: 35; 
Percentage of bids disqualified[A]: 29.9%; 
Number of suppliers with a bid that was disqualified, for each reason: 
35. 

Reason for bid disqualification: Did not meet all state licensure 
requirements[C]; 
Bids disqualified during initial bid review: 82; 
Percentage of bids disqualified[A]: 70.1%; 
Number of suppliers with a bid that was disqualified, for each reason: 
82. 

Reason for bid disqualification: Did not meet supplier financial 
standards[D]; 
Bids disqualified during initial bid review: 11; 
Percentage of bids disqualified[A]: 9.4%; 
Number of suppliers with a bid that was disqualified, for each reason: 
11. 

Reason for bid disqualification: Missing required hardcopy 
documentation[E]; 
Bids disqualified during initial bid review: 11; 
Percentage of bids disqualified[A]: 9.4%; 
Number of suppliers with a bid that was disqualified, for each reason: 
11. 

Reason for bid disqualification: Bid price for one or more product 
category items was deemed not bona fide[F]; 
Bids disqualified during initial bid review: 0; 
Percentage of bids disqualified[A]: 0.0; 
Number of suppliers with a bid that was disqualified, for each reason: 
0. 

Reason for bid disqualification: Did not meet Medicare accreditation 
requirements[G]; 
Bids disqualified during initial bid review: 0; 
Percentage of bids disqualified[A]: 0.0; 
Number of suppliers with a bid that was disqualified, for each reason: 
0. 

Reason for bid disqualification: National Supplier Clearinghouse (NSC) 
number was revoked or inactive[H]; 
Bids disqualified during initial bid review: 3; 
Percentage of bids disqualified[A]: 2.6%; 
Number of suppliers with a bid that was disqualified, for each reason: 
3. 

Reason for bid disqualification: Did not meet common ownership 
rules[I]; 
Bids disqualified during initial bid review: 2; 
Percentage of bids disqualified[A]: 1.7%; 
Number of suppliers with a bid that was disqualified, for each reason: 
2. 

Reason for bid disqualification: Did not meet network criteria[J]; 
Bids disqualified during initial bid review: 0; 
Percentage of bids disqualified[A]: 0.0; 
Number of suppliers with a bid that was disqualified, for each reason: 
0. 

Reason for bid disqualification: Did not meet eligibility requirements 
to bid as a specialty supplier[K]; 
Bids disqualified during initial bid review: 0; 
Percentage of bids disqualified[A]: 0.0; 
Number of suppliers with a bid that was disqualified, for each reason: 
0. 

Reason for bid disqualification: Test Strips 50 Percent Compliance 
Rule[L]; 
Bids disqualified during initial bid review: 18; 
Percentage of bids disqualified[A]: 15.4%; 
Number of suppliers with a bid that was disqualified, for each reason: 
18. 

Source: CMS data as of April 9, 2013. GAO-15-63. 

Notes: April 9, 2013, is the date that the Centers for Medicare & 
Medicaid Services (CMS) announced contract winners. Suppliers that 
were disqualified for more than one reason are counted in each reason 
code. Therefore, the number of bids disqualified and the number of 
suppliers disqualified may appear in multiple categories. In addition 
to the reasons for bid disqualifications above, CMS also established a 
"lost on price" category. According to CMS, 112 of the 117 total bids 
disqualified--96 percent--would also have lost on price had the bids 
not been disqualified for at least one other reason. 

[A] Percentages add to more than 100 because a bid could have been 
disqualified for more than one reason. 

[B] Suppliers failed to submit complete or accurate hardcopy financial 
documentation as required. 

[C] Suppliers were responsible for meeting all applicable state 
licensure requirements for the product category for every state 
included in the competitive bidding area in which they submitted a bid. 

[D] Supplier financial standards indicated that CMS believed that the 
supplier was unlikely for financial reasons to be able to fulfill its 
contract obligations. 

[E] Suppliers failed to submit financial documentation in hardcopy as 
required. 

[F] All bid prices could not be higher than the Medicare fee schedule 
but not lower than the cost to the supplier. 

[G] Suppliers must have been accredited by a CMS-approved 
accreditation organization for the product categories in which they 
submitted bids. 

[H] Suppliers must have had an active NSC number to be eligible to 
bill Medicare for DME. 

[I] Commonly owned or controlled suppliers were required to submit a 
single bid to furnish a product category in a competitive bidding area. 

[J] A network is a group of 2 to 20 small suppliers that collectively 
submit a bid as a single entity and must meet certain criteria. 

[K] A specialty supplier is a skilled nursing facility or nursing 
facility that is awarded a competitive bidding contract to furnish 
competitively bid items only to its own residents to whom it would 
otherwise furnish Medicare Part B services. 

[L] The supplier did not submit form or failed to meet the test strips 
50 percent compliance rule. 

[End of table] 

[End of section] 

Appendix III: High-Cost and High-Utilization CMS Competitive Bidding 
Program HCPCS Codes and Single Payment Amounts: 

In our 2012 report, we reported on the 34 HCPCS codes that CMS 
determined represented the top 80 percent of costs and utilization for 
the CBP round 1 rebid.[Footnote 49] We determined that 28 of these 
codes were common to the round 1 rebid, round 1 recompete, and round 
2.[Footnote 50] (See table 10.) 

Table 10: High-Cost, High-Utilization Healthcare Common Procedure 
Coding System (HCPCS) Codes Common to CMS Durable Medical Equipment 
Competitive Bidding Program Rounds, by Product Category: 

Product category: Continuous positive airway pressure devices, 
respiratory assist devices, and related supplies and accessories (CPAP/
RAD); 

HCPCS code: A7030; 
Description: Full face mask used with positive airway pressure device 
(each). 

HCPCS code: A7034; 
Description: Nasal interface (mask or cannula type) used with positive 
airway pressure device, with or without head strap. 

HCPCS code: A7037; 
Description: Tubing used with positive airway pressure device. 

HCPCS code: E0470; 
Description: Respiratory assist device, bi-level pressure capability, 
without backup rate feature, used with noninvasive interface, e.g., 
nasal or facial mask (intermittent assist device with continuous 
positive airway pressure device). 

HCPCS code: E0562; 
Description: Humidifier, heated, used with positive airway pressure 
device. 

HCPCS code: E0601; 
Description: Continuous airway pressure (CPAP) device. 

Product category: Enteral nutrients, equipment, and supplies; 

HCPCS code: B4035; 
Description: Enteral feeding supply kit; pump fed, per day; includes 
but not limited to feeding/flushing syringe, administration set 
tubing, dressings, tape. 

HCPCS code: B4150; 
Description: Enteral formula, nutritionally complete with intact 
nutrients, includes proteins, fats, carbohydrates, vitamins and 
minerals, may include fiber, administered through an enteral feeding 
tube, 100 calories = 1 unit. 

HCPCS code: B4152; 
Description: Enteral formula, nutritionally complete, calorically 
dense (equal to or greater than 1.5 kcal/ml) with intact nutrients, 
includes proteins, fats, carbohydrates, vitamins and minerals, may 
include fiber, administered through an enteral feeding tube, 100 
calories = 1 unit. 

Product category: Hospital beds and related accessories; 

HCPCS code: E0260; 
Description: Hospital bed, semi-electric (head and foot adjustment), 
with any type side rails, with mattress. 

HCPCS code: E0261; 
Description: Hospital bed, semi-electric (head and foot adjustment), 
with any type side rails, without mattress. 

HCPCS code: E0303; 
Description: Hospital bed, heavy duty, extra wide, with weight 
capacity greater than 350 pounds, but less than or equal to 600 
pounds, with any type side rails, with mattress. 

Product category: Oxygen supplies and equipment; 

HCPCS code: E0424; 
Description: Stationary compressed gaseous oxygen system, rental; 
includes container, contents, regulator, flowmeter, humidifier, 
nebulizer, cannula or mask, and tubing. 

HCPCS code: E0439; 
Description: Stationary liquid oxygen system, rental; includes 
container, contents, regulator, flowmeter, humidifier, nebulizer, 
cannula or mask, and tubing. 

HCPCS code: E1390; 
Description: Oxygen concentrator, single delivery port, capable of 
delivering 85 percent or greater oxygen concentration at the 
prescribed flow rate. 

HCPCS code: E1391; 
Description: Oxygen concentrator, dual delivery port, capable of 
delivering 85 percent or greater oxygen concentration at the 
prescribed flow rate (each). 

HCPCS code: E0431; 
Description: Portable gaseous oxygen system, rental; includes portable 
container, regulator, flowmeter, humidifier, cannula or mask, and 
tubing. 

HCPCS code: E0434; 
Description: Portable liquid oxygen system, rental; includes portable 
container, supply reservoir, humidifier, flowmeter, refill adaptor, 
contents gauge, cannula or mask, and tubing. 

Product category: Standard power wheelchairs, scooters, and related 
accessories; 

HCPCS code: K0823; 
Description: Power wheelchair, group 2 standard, captains chair, 
patient weight capacity up to and including 300 pounds. 

HCPCS code: K0822; 
Description: Power wheelchair, group 2 standard, sling/solid 
seat/back, patient weight capacity up to and including 300 pounds. 

HCPCS code: K0825; 
Description: Power wheelchair, group 2 heavy duty, captains chair, 
patient weight capacity 301 to 450 pounds. 

Product category: Support surfaces (group 2 mattresses and overlays); 

HCPCS code: E0277; 
Description: Powered pressure reducing air mattress. 

HCPCS code: E0372; 
Description: Powered air overlay for mattress, standard mattress 
length and width. 

HCPCS code: E0373; 
Description: Non-powered advanced pressure reducing mattress. 

Product category: Walkers and related accessories; 

HCPCS code: E0135; 
Description: Walker, folding (pickup), adjustable or fixed height. 

HCPCS code: E0143; 
Description: Walker, folding, wheeled, adjustable or fixed height. 

HCPCS code: E0156; 
Description: Seat attachment, walker. 

Source: GAO analysis of CMS data. GAO-15-63. 

[End of table] 

For these 28 HCPCS codes, we determined the average single payment 
amount (SPA) for the round 1 rebid, round 1 recompete, and round 2, as 
well as the average Medicare 2010 fee-for-service payment amount. 
[Footnote 51] (See table 11.) We also determined the average SPAs for 
diabetic testing supply codes included in the round 1 rebid and the 
national SPAs for the same codes in the national mail-order program, 
as well as the average Medicare 2010 mail-order fee-for-service 
payment amounts for these same codes. (See table 12.) 

Table 12: Medicare Average 2010 Fee-for-Service Payment and Average 
Single Payment Amounts (SPA) for CMS Durable Medical Equipment 
Competitive Bidding Program Rounds for Selected Healthcare Common 
Procedure Coding System (HCPCS) Codes: 

Product category: Continuous positive airway pressure devices, 
respiratory assist devices, and related supplies and accessories 
(CPAP/RAD); 

Short HCPCS description: CPAP full face mask; 

HCPCS code: A7030; 
Medicare average 2010 fee-for-service payment[B]: $170.72; 
Average SPA[A]: 
Round 1 rebid: $122.01; 
Round 1 recompete: $111.52; 
Round 2: $101.08. 

Short HCPCS description: Nasal application device; 
HCPCS code: A7034; 
Medicare average 2010 fee-for-service payment[B]: $106.46; 
Average SPA[A]: 
Round 1 rebid: $73.28; 
Round 1 recompete: $66.47; 
Round 2: $62.45. 

Short HCPCS description: Pos airway pressure tubing; 
HCPCS code: A7037; 
Medicare average 2010 fee-for-service payment[B]: $36.68; 
Average SPA[A]: 
Round 1 rebid: $20.49; 
Round 1 recompete: $17.72; 
Round 2: $14.32. 

Short HCPCS description: RAD w/o backup non-inv intfc; 
HCPCS code: E0470; 
Medicare average 2010 fee-for-service payment[B]: $220.85; 
Average SPA[A]: 
Round 1 rebid: $138.54; 
Round 1 recompete: $130.40; 
Round 2: $115.75. 

Short HCPCS description: Humidifier heated used w/pap; 
HCPCS code: E0562; 
Medicare average 2010 fee-for-service payment[B]: $272.60; 
Average SPA[A]: 
Round 1 rebid: $179.73; 
Round 1 recompete: $163.31; 
Round 2: $145.50. 

Short HCPCS description: CPAP device; 
HCPCS code: E0601; 
Medicare average 2010 fee-for-service payment[B]: $96.43; 
Average SPA[A]: 
Round 1 rebid: $58.23; 
Round 1 recompete: $51.86; 
Round 2: $46.60. 

Product category: Enteral nutrients, equipment, and supplies; 

Short HCPCS description: Enteral feed supp pump per d; 
HCPCS code: B4035; 
Medicare average 2010 fee-for-service payment[B]: $11.30; 
Average SPA[A]: 
Round 1 rebid: $7.50; 
Round 1 recompete: $5.79; 
Round 2: $5.98. 

Short HCPCS description: Enteral formula (EF) complet w/intact 
nutrient; 
HCPCS code: B4150; 
Medicare average 2010 fee-for-service payment[B]: $0.65; 
Average SPA[A]: 
Round 1 rebid: $0.46; 
Round 1 recompete: $0.40; 
Round 2: $0.40. 

Short HCPCS description: EF calorie dense >/= 1.5kcal; 
HCPCS code: B4152; 
Medicare average 2010 fee-for-service payment[B]: $0.54; 
Average SPA[A]: 
Round 1 rebid: $0.40; 
Round 1 recompete: $0.33; 
Round 2: $0.33. 

Short HCPCS description: EFspec metabolic noninherit; 
HCPCS code: B4154; 
Medicare average 2010 fee-for-service payment[B]: $1.18; 
Average SPA[A]: 
Round 1 rebid: $0.83; 
Round 1 recompete: $0.72; 
Round 2: $0.73. 

Product category: Hospital beds and related accessories; 

Short HCPCS description: Hosp bed semi-electr w/matt; 
HCPCS code: E0260; 
Medicare average 2010 fee-for-service payment[B]: $127.12; 
Average SPA[A]: 
Round 1 rebid: $80.35; 
Round 1 recompete: $73.86; 
Round 2: $70.31. 

Short HCPCS description: Hosp bed semi-electr w/o matt; 
HCPCS code: E0261; 
Medicare average 2010 fee-for-service payment[B]: $116.05; 
Average SPA[A]: 
Round 1 rebid: $73.72; 
Round 1 recompete: $69.81; 
Round 2: $67.04. 

Short HCPCS description: Hosp bed hvy dty xtra wide; 
HCPCS code: E0303; 
Medicare average 2010 fee-for-service payment[B]: $267.38; 
Average SPA[A]: 
Round 1 rebid: $188.11; 
Round 1 recompete: $180.74; 
Round 2: $177.17. 

Product category: Oxygen supplies and equipment; 

Short HCPCS description: Stationary compressed gas O2; 
HCPCS code: E0424; 
Medicare average 2010 fee-for-service payment[B]: $173.17; 
Average SPA[A]: 
Round 1 rebid: $116.16; 
Round 1 recompete: $95.74; 
Round 2: $93.07. 

Short HCPCS description: Portable gaseous O2; 
HCPCS code: E0431; 
Medicare average 2010 fee-for-service payment[B]: $28.77; 
Average SPA[A]: 
Round 1 rebid: $20.82; 
Round 1 recompete: $18.99; 
Round 2: $19.42. 

Short HCPCS description: Portable liquid O2; 
HCPCS code: E0434; 
Medicare average 2010 fee-for-service payment[B]: $28.77; 
Average SPA[A]: 
Round 1 rebid: $20.82; 
Round 1 recompete: $18.99; 
Round 2: $19.42. 

Short HCPCS description: Stationary liquid O2; 
HCPCS code: E0439; 
Medicare average 2010 fee-for-service payment[B]: $173.17; 
Average SPA[A]: 
Round 1 rebid: $116.16; 
Round 1 recompete: $95.74; 
Round 2: $93.07. 

Short HCPCS description: Oxygen concentrator; 
HCPCS code: E1390; 
Medicare average 2010 fee-for-service payment[B]: $173.17; 
Average SPA[A]: 
Round 1 rebid: $116.16; 
Round 1 recompete: $95.74; 
Round 2: $93.07. 

Short HCPCS description: Oxygen concentrator, dual; 
HCPCS code: E1391; 
Medicare average 2010 fee-for-service payment[B]: $173.17; 
Average SPA[A]: 
Round 1 rebid: $116.16; 
Round 1 recompete: $95.74; 
Round 2: $93.07. 

Product category: Standard power wheelchairs, scooters, and related 
accessories; 

Short HCPCS description: Pwc gp 2 std seat/back; 
HCPCS code: K0822; 
Medicare average 2010 fee-for-service payment[B]: $361.77; 
Average SPA[A]: 
Round 1 rebid: $249.64; 
Round 1 recompete: $344.44; 
Round 2: $324.53. 

Short HCPCS description: Pwc gp 2 std cap chair; 
HCPCS code: K0823; 
Medicare average 2010 fee-for-service payment[B]: $364.14; 
Average SPA[A]: 
Round 1 rebid: $255.42; 
Round 1 recompete: $328.39; 
Round 2: $283.42. 

Short HCPCS description: Pwc gp 2 hd cap chair; 
HCPCS code: K0825; 
Medicare average 2010 fee-for-service payment[B]: $401.20; 
Average SPA[A]: 
Round 1 rebid: $295.14; 
Round 1 recompete: $412.62; 
Round 2: $383.28. 

Product category: Support surfaces (group 2 mattresses and overlays); 

Short HCPCS description: Powered pres-redu air mattress; 
HCPCS code: E0277; 
Medicare average 2010 fee-for-service payment[B]: $626.65; 
Average SPA[A]: 
Round 1 rebid: $319.75; 
Round 1 recompete: $285.51; 
Round 2: $235.18. 

Short HCPCS description: Powered air mattress overlay; 
HCPCS code: E0372; 
Medicare average 2010 fee-for-service payment[B]: $474.37; 
Average SPA[A]: 
Round 1 rebid: $224.95; 
Round 1 recompete: $277.79; 
Round 2: $226.92. 

Short HCPCS description: Non-powered pressure mattress; 
HCPCS code: E0373; 
Medicare average 2010 fee-for-service payment[B]: $541.80; 
Average SPA[A]: 
Round 1 rebid: $291.18; 
Round 1 recompete: $338.74; 
Round 2: $311.18. 

Product category: Walkers and related accessories; 

Short HCPCS description: Walker folding adjust/fixed; 
HCPCS code: E0135; 
Medicare average 2010 fee-for-service payment[B]: $73.39; 
Average SPA[A]: 
Round 1 rebid: $49.84; 
Round 1 recompete: $48.08; 
Round 2: $42.82. 

Short HCPCS description: Walker folding wheeled w/o s; 
HCPCS code: E0143; 
Medicare average 2010 fee-for-service payment[B]: $104.93; 
Average SPA[A]: 
Round 1 rebid: $66.13; 
Round 1 recompete: $58.79; 
Round 2: $53.22. 

Short HCPCS description: Walker seat attachment; 
HCPCS code: E0156; 
Medicare average 2010 fee-for-service payment[B]: $22.63; 
Average SPA[A]: 
Round 1 rebid: $14.84; 
Round 1 recompete: $15.11; 
Round 2: $14.66. 

Source: GAO analysis of CMS data. GAO-15-63. 

Note: The HCPCS code descriptions listed are the short descriptions 
published by the Centers for Medicare & Medicaid Services. For full 
descriptions of each HCPCS code used in our analysis, see table 10 in 
this appendix. 

[A] SPAs are determined by arraying the price offers in winning bids 
from lowest to highest and selecting the median price offered by the 
suppliers for an item. The median price becomes the SPA. SPAs can vary 
by competitive bidding area. To calculate an average SPA for each 
HCPCS code, we averaged the SPAs across all competitive bidding areas 
included in each round. For example, SPAs in round 2 for HCPCS code 
E0470 ranged from a low of $105.90 in the Northern New Jersey Metro 
competitive bidding area to a high of $138.85 in the Worchester, 
Massachusetts, competitive bidding area, and the average SPA was 
$115.75. 

[B] The 2010 Medicare fee-for-service payment amount was used as a 
comparison point for this analysis because 2010 was the year that 
preceded the round 1 rebid, which resulted in contracts that were 
effective from January 1, 2011, through December 31, 2013. CBP SPAs 
are required to be less than or equal to the Medicare fee-for-service 
payment amount for the same item. We averaged Medicare fee-for-service 
payments for 2010 using payments within the continental states and the 
District of Columbia only, because Alaska and Hawaii are not subject 
to Medicare's fee-for-service payment amount ceiling and floor limits. 

[End of table] 

Table 12: Medicare Average 2010 Fee-for-Service Payment and Average 
Single Payment Amounts (SPA) for CMS Durable Medical Equipment 
Competitive Bidding Program Rounds for Selected Diabetic Testing 
Supply Healthcare Common Procedure Coding System (HCPCS) Codes: 

Diabetic testing supply HCPCS code description: Replacement battery, 
alkaline (other than J cell), for use with medically necessary home 
blood glucose monitor owned by patients, each; 
HCPCS code[A]: A4233; 
Medicare average 2010 fee-for-service payment[B]: $0.72; 
Round 1 rebid average SPA[C]: $0.58; 
National mail-order program SPA[D]: $0.58. 

Diabetic testing supply HCPCS code description: Replacement battery, 
alkaline, J cell, for use with medically necessary home blood glucose 
monitor owned by patients, each; 
HCPCS code[A]: $A4234; 
Medicare average 2010 fee-for-service payment[B]: $3.29; 
Round 1 rebid average SPA[C]: $2.24; 
National mail-order program SPA[D]: $2.50. 

Diabetic testing supply HCPCS code description: Replacement battery, 
lithium, for use with medically necessary home blood glucose monitor 
owned by patients, each; 
HCPCS code[A]: $A4235; 
Medicare average 2010 fee-for-service payment[B]: $2.12; 
Round 1 rebid average SPA[C]: $1.26; 
National mail-order program SPA[D]: $1.06. 

Diabetic testing supply HCPCS code description: Replacement battery, 
silver oxide, for use with medically necessary home blood glucose 
monitor owned by patients, each; 
HCPCS code[A]: $A4236; 
Medicare average 2010 fee-for-service payment[B]: $1.52; 
Round 1 rebid average SPA[C]: $1.25; 
National mail-order program SPA[D]: $1.19. 

Diabetic testing supply HCPCS code description: Blood glucose test or 
reagent strips for home blood glucose monitor per 50 strips; 
HCPCS code[A]: $A4253[E]; 
Medicare average 2010 fee-for-service payment[B]: $32.46; 
Round 1 rebid average SPA[C]: $14.62; 
National mail-order program SPA[D]: $10.41. 

Diabetic testing supply HCPCS code description: Normal, low, and high 
calibrator solution/chips; 
HCPCS code[A]: $A4256[E]; 
Medicare average 2010 fee-for-service payment[B]: $9.82; 
Round 1 rebid average SPA[C]: $4.96; 
National mail-order program SPA[D]: $4.00. 

Diabetic testing supply HCPCS code description: Spring-powered device 
for lancet, each; 
HCPCS code[A]: $A4258; 
Medicare average 2010 fee-for-service payment[B]: $16.26; 
Round 1 rebid average SPA[C]: $5.94; 
National mail-order program SPA[D]: $2.52. 

Diabetic testing supply HCPCS code description: Lancets, per box of 
100; 
HCPCS code[A]: $A4259[E]; 
Medicare average 2010 fee-for-service payment[B]: $10.53; 
Round 1 rebid average SPA[C]: $4.19; 
National mail-order program SPA[D]: $1.65. 

Source: GAO analysis of CMS data. GAO-15-63. 

Notes: Mail-order diabetic testing supplies were not included in the 
round 1 recompete because CBP's national mail-order program was 
implemented before the recomplete. The national mail-order program 
competition took place at the same time as the round 2 competition. 

[A] HCPCS codes under the diabetic testing supplies product category 
must also include the modifier "KL" at the end to indicate that these 
supplies were furnished by mail-order. 

[B] The 2010 Medicare fee-for-service payment amount was used as a 
comparison point for this analysis because 2010 was the year that 
preceded the round 1 rebid, which resulted in contracts effective from 
January 1, 2011, through December 31, 2013. CBP SPAs are required to 
be less than or equal to the Medicare fee-for-service payment amount 
for the same item. We averaged Medicare fee-for-service payments for 
2010 using payments within the continental states and the District of 
Columbia only, because Alaska and Hawaii are not subject to Medicare's 
fee-for-service payment amount ceiling and floor limits. 

[C] SPAs are determined by arraying the price offers in winning bids 
from lowest to highest and selecting the median price offered by the 
suppliers for an item. The median price becomes the SPA. SPAs can vary 
by competitive bidding area. To calculate an average SPA for each 
HCPCS code, we averaged the SPAs across all competitive bidding areas 
included in the round 1 rebid. For example, SPAs for the round 1 rebid 
for HCPCS code A4253 KL ranged from a low of $13.88 in the Riverside-
San Bernadino-Ontario, California, competitive bidding area to a high 
of $15.62 in the Cleveland-Elyria-Mentor, Ohio, competitive bidding 
area, and the average SPA was $14.62. 

[D] For the national mail-order program, CMS determined one SPA for 
each HCPCS code, so no averaging was necessary. 

[E] These codes were also part of the original 34 codes that CMS 
determined were the top 80 percent highest cost and utilization for 
the round 1 rebid. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Department of Health and Human Services: 

Department of Health & Human Services: 
Office of The Secretary:
Assistant Secretary for Legislation: 
Washington, DC 20201: 

October 29, 2014: 

Kathleen M. King: 
Director, Health Care: 
U.S. Government Accountability Office 
441 G Street NW:
Washington, DC 20548: 

Dear Ms. King: 

Attached are comments on the U.S. Government Accountability Office's 
(GAO) report entitled, "Medicare: Bidding Results from CMS's Durable 
Medical Equipment Competitive Bidding Program" (GAO-15-63). 

The Department appreciates the opportunity to review this report prior 
to publication. 

Sincerely, 

Signed by: 

Jim R. Esquea: 
Assistant Secretary for Legislation: 

Attachment: 

General Comments Of The Department Of Health And Human Services (HHS) 
On The Government Accountability Office's (GAO) Draft Report Entitled: 
Medicare: Bidding Results From CMS'S Durable Medical Equipment 
Competitive Bidding Program (GAO-15-63): 

The Department of Health and Human Services (HHS) appreciates the 
opportunity to review and comment on this draft report. HHS is 
committed to the continued success of the competitive bidding program 
(CBP) for durable medical equipment (DME). 

The CBP uses market forces to help Medicare pay appropriately and 
lower beneficiary out-of-pocket expenses for DME items, while ensuring 
beneficiary access to quality items and services. In 2011, FIRS 
successfully implemented the Round I Rebid of the CBP in nine 
metropolitan areas after making a number of improvements, including 
adopting new requirements from Congress, and after working closely 
with stakeholders. In July 2013, Round 2 of the CBP expanded to 91 
additional areas, and we implemented a national mail-order program for 
diabetic testing supplies. 

The program saved more than $580 million for beneficiaries and 
taxpayers in its first two years of operation, and is projected to 
save the Medicare Part B Trust Fund $25.8 billion and beneficiaries 
$17.2 billion over ten years. The program has also maintained 
beneficiary access to quality products from licensed and accredited 
suppliers. Monitoring data have shown a successful implementation with 
very few complaints and no negative impact on beneficiary health 
status. 

As noted in the report, the Single Payment Amounts (SPAs) for 28 high-
cost, high-utilization billing codes decreased significantly as 
compared to the average Medicare 2010 durable medical equipment, 
prosthetics, orthotics, and supplies (DMEPOS) fee schedule amount for 
the same codes. In some cases, SPAs for these items have decreased by 
over 50 percent from the Medicare 2010 DMEPOS fee schedule amounts.
This reduction in payment amounts reduces suppliers' incentive to 
fraudulently bill Medicare for DMEPOS and makes competitively bid 
items less attractive targets for fraud and abuse, In addition, all 
suppliers in the program must meet applicable licensure requirements, 
meet strict quality and financial standards, and be accredited by a 
national accreditation organization. 

HHS expects that Medicare beneficiaries across the country will 
continue to benefit from this important program as it expands further. 
We thank GAO for their efforts on this issue and look forward to 
working with GAO on this and other issues in the future. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Kathleen M. King, (202) 512-7114 or kingk@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, key contributors to this 
report were Martin T. Gahart, Assistant Director; Yesook Merrill, 
Assistant Director; Zhi Boon; Michelle Paluga; Roseanne Price; Hemi 
Tewarson; Opal Winebrenner; and Malissa G. Winograd. 

[End of section] 

Related GAO Products: 

Medicare: Second Year Update for CMS's Durable Medical Equipment 
Competitive Bidding Program Round 1 Rebid. [hyperlink, 
http://www.gao.gov/products/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. [hyperlink, 
http://www.gao.gov/products/GAO-12-693]. Washington, D.C.: May 9, 2012. 

Medicare: The First Year of the Durable Medical Equipment Competitive 
Bidding Program Round 1 Rebid. [hyperlink, 
http://www.gao.gov/products/GAO-12-733T]. Washington, D.C.: May 9, 
2012. 

Medicare: Issues for Manufacturer-level Competitive Bidding for 
Durable Medical Equipment. [hyperlink, 
http://www.gao.gov/products/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. [hyperlink, http://www.gao.gov/products/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. [hyperlink, 
http://www.gao.gov/products/GAO-10-27]. Washington, D.C.: November 6, 
2009. 

Medicare: Covert Testing Exposes Weaknesses in the Durable Medical 
Equipment Supplier Screening Process. [hyperlink, 
http://www.gao.gov/products/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. 
[hyperlink, http://www.gao.gov/products/GAO-08-767T]. Washington, 
D.C.: May 6, 2008. 

Medicare: Improvements Needed to Address Improper Payments for Medical 
Equipment and Supplies. [hyperlink, 
http://www.gao.gov/products/GAO-07-59]. Washington, D.C.: January 31, 
2007. 

Medicare Payment: CMS Methodology Adequate to Estimate National Error 
Rate. [hyperlink, http://www.gao.gov/products/GAO-06-300]. Washington, 
D.C.: March 24, 2006. 

Medicare Durable Medical Equipment: Class III Devices Do Not Warrant a 
Distinct Annual Payment Update. [hyperlink, 
http://www.gao.gov/products/GAO-06-62]. Washington, D.C.: March 1, 
2006. 

Medicare: More Effective Screening and Stronger Enrollment Standards 
Needed for Medical Equipment Suppliers. [hyperlink, 
http://www.gao.gov/products/GAO-05-656]. Washington, D.C.: September 
22, 2005. 

Medicare: CMS's Program Safeguards Did Not Deter Growth in Spending 
for Power Wheelchairs. [hyperlink, 
http://www.gao.gov/products/GAO-05-43]. Washington, D.C.: November 17, 
2004. 

Medicare: Past Experience Can Guide Future Competitive Bidding for 
Medical Equipment and Supplies. [hyperlink, 
http://www.gao.gov/products/GAO-04-765]. Washington, D.C.: September 
7, 2004. 

Medicare: CMS Did Not Control Rising Power Wheelchair Spending. 
[hyperlink, http://www.gao.gov/products/GAO-04-716T]. Washington, 
D.C.: April 28, 2004. 

[End of section] 

Footnotes: 

[1] Individuals may qualify for Medicare if they are aged 65 and 
older, are under 65 and disabled, or have been diagnosed with certain 
conditions such as end-stage renal disease and amyotrophic lateral 
sclerosis (also known as Lou Gehrig's disease). Collectively, DME, 
prosthetics, orthotics, and related supplies are referred to as 
DMEPOS. DME is equipment that serves a medical purpose, can withstand 
repeated use, is generally not useful in the absence of an illness or 
injury, and is appropriate for use in the home, including, for 
example, wheelchairs and hospital beds. Prosthetic devices (other than 
dental) are needed to replace body parts or functions, such as 
artificial limbs and cardiac pacemakers. Orthotic devices provide 
rigid or semi-rigid support for weak or deformed body parts or 
restrict or eliminate motion in a diseased or injured part of the 
body, such as leg, arm, back, and neck braces. Medicare-reimbursed 
supplies are items that are used and consumed with DME, such as drugs 
used for inhalation therapy, or that need to be replaced frequently 
(usually daily), such as surgical dressings. For this report, the term 
DME refers to the DMEPOS items included in the Medicare DME 
competitive bidding program. 

[2] Medicare Part B helps pay for certain physician, outpatient 
hospital, laboratory, and other services, and medical equipment and 
supplies. Medicare beneficiaries are required to pay a monthly premium 
for Part B coverage and an annual deductible. In general, 
beneficiaries also pay 20 percent--the coinsurance--of the Medicare 
fee schedule payment rate after reaching their annual Medicare Part B 
deductible. 

[3] Medicare fee schedules are adjusted for each state, reflecting the 
geographic price differences that are subject to national floor and 
ceiling payment limits. 

[4] Pub. L. No. 108-173, § 302(b), 117 Stat. 2066, 2224-30 (2003) 
(codified, as amended, at 42 U.S.C. § 1395w-3). 

[5] A competitive bidding area is either a metropolitan statistical 
area or a part thereof. Metropolitan statistical areas are designated 
by the Office of Management and Budget and include major cities and 
the suburban areas surrounding them. 

[6] HCPCS codes are used by suppliers to submit claims for Medicare 
payments. The codes identify a category of DME items, for example, 
walkers, but can encompass a broad range of items that serve the same 
general purpose but vary in price and characteristics. 

[7] Beginning in 2007, CMS conducted the first CBP competition--
referred to as round 1--and awarded contracts effective July 1, 2008, 
to suppliers. The Medicare Improvements for Patients and Providers Act 
of 2008, however, terminated the round 1 contracts on July 15, 2008, 
and required CMS to repeat the competition in 2009--referred to as the 
round 1 rebid. Pub. L. No. 110-275, § 154(a), 122 Stat. 2494, 2560-3 
(2008) (codified, as amended, at 42. U.S.C. § 1395w-3). In 2009, CMS 
began the CBP round 1 rebid bidding process and awarded contracts in 
nine competitive bidding areas that were effective from January 1, 
2011, through December 31, 2013. 

[8] During the round 1 rebid, CMS awarded 2-year contracts to mail-
order diabetic testing supplies suppliers, which expired December 31, 
2012. CMS expanded the mail-order competition nationally, as permitted 
under federal law. 

[9] See GAO, Medicare: Review of the First Year of CMS's Durable 
Medical Equipment Competitive Bidding Program's Round 1 Rebid, 
[hyperlink, http://www.gao.gov/products/GAO-12-693] (Washington, D.C.: 
May 9, 2012). For a list of other reports we have issued on Medicare 
DME, see the Related GAO Products page later in this publication. 

[10] CBP SPAs are required to be less than or equal to the Medicare 
fee-for-service payment amount for the same item. 

[11] Mail-order diabetic testing supply codes were not included in the 
round 1 recompete and round 2; therefore these rounds were not 
included in our analysis of these codes. 

[12] See [hyperlink, http://www.gao.gov/products/GAO-12-693] for the 
full list of the 34 HCPCS codes. 

[13] The CBP round 1 rebid's complex rehabilitative power wheelchairs 
product category was excluded from the subsequent CBP round 1 
recompete and round 2, so the 3 complex rehabilitative power 
wheelchair HCPCS codes that were included in the top 80 percent list 
were excluded from our analysis. 

[14] HCPCS code modifiers for the CBP items include NU for a new item, 
RR for a rental item, UE for a used item, and KL for a mail-order 
diabetic testing supply item. 

[15] Because the national mail-order program sets nationwide SPAs, no 
averaging was necessary to determine SPAs for this program. 

[16] Palmetto GBA is also referred to as the competitive bidding 
implementation contractor. 

[17] For the CBP, CMS chose certain DME items in product categories--
generally high-cost and high-volume items and services--that were most 
likely to result in Medicare savings if competitively acquired. 

[18] To be eligible to bill Medicare for DME, suppliers must have an 
active National Supplier Clearinghouse (NSC) number. The NSC is the 
CMS contractor responsible for processing Medicare enrollment 
applications for DMEPOS suppliers. 

[19] For all DMEPOS suppliers, the Medicare enrollment standards are 
listed at 42 C.F.R. § 424.57(c), and the Medicare quality standards 
are listed at [hyperlink, 
https://www.cms.gov/medicareprovidersupenroll/10_DMEPOSsupplierstandards
.asp] (accessed on Sept. 23, 2014). 

[20] Certain DMEPOS suppliers are required to post a $50,000 surety 
bond for each business location. Surety bonds are designed to reduce 
the amount of money lost due to fraudulent or abusive billing schemes 
by suppliers. 

[21] A composite bid is determined by summing all of the weights 
assigned to each item in a product category--with each item weight 
calculated using national beneficiary utilization data for that item 
compared to the other items within that product category. 

[22] If there are five suppliers with qualified bids, CMS will award 
at least five contracts in each product category in each competitive 
bidding area. If there are fewer than five suppliers with qualified 
bids, CMS must award contracts to at least two suppliers if the 
suppliers have sufficient capacity to satisfy beneficiary demand in 
the product category in the competitive bidding area. 

[23] Capping a supplier's estimated projected capacity to 20 percent 
does not limit the number of items a supplier can furnish, if awarded 
a CBP contract, and suppliers may be able to furnish more than 20 
percent of the beneficiary demand in a product category in a 
competitive bidding area. 

[24] For CBP, CMS defined a small supplier as one that generates gross 
revenue of $3.5 million or less in annual receipts, including both 
Medicare and non-Medicare revenue. A qualified supplier is a bidder 
that has met certain requirements, including having been found 
financially sound and having its bids used to determine a round's SPAs 
and to select the contract suppliers. 

[25] If a supplier agrees to assignment, then Medicare generally pays 
80 percent of the amount to the supplier and the beneficiary is 
responsible for paying the supplier the remaining 20 percent, or the 
coinsurance payment, once the beneficiary's annual Medicare deductible 
is met. Under CBP, contract suppliers must agree to assignment, 
meaning that they will be paid 80 percent of the CBP SPA for the item 
involved. The CBP SPA that a contract supplier receives is determined 
by the Medicare beneficiary's residence, not the supplier's business 
location. 

[26] The CBP round 1 rebid contracts for the mail-order diabetic 
testing supplies product category ended December 31, 2012. 

[27] The round 1 rebid's nine competitive bidding areas were (1) 
Charlotte (Charlotte-Gastonia-Concord, North Carolina and South 
Carolina); (2) Cincinnati (Cincinnati-Middletown, Ohio, Kentucky, and 
Indiana); (3) Cleveland (Cleveland-Elyria-Mentor, Ohio); (4) Dallas 
(Dallas-Fort Worth-Arlington, Texas); (5) Kansas City (Kansas City, 
Missouri and Kansas); (6) Miami (Miami-Fort Lauderdale-Pompano Beach, 
Florida); (7) Orlando (Orlando-Kissimmee, Florida); (8) Pittsburgh 
(Pittsburgh, Pennsylvania); and (9) Riverside (Riverside-San 
Bernardino-Ontario, California). 

[28] Under the American Taxpayer Relief Act of 2012, diabetic testing 
supplies furnished on or after July 1, 2013, are paid at the same CBP 
SPAs as the diabetic testing supply items included in the national 
mail-order program, regardless of whether they are furnished by mail-
order or non-mail order. Pub. L. No. 112-240, § 636, 126 Stat. 2313, 
2356 (2013). 

[29] CMS tries to award at least five contracts in each product 
category in each competitive bidding area. According to CMS, the 
agency initially offered at least five contracts, and at least five 
were accepted by suppliers for each product category and competitive 
bidding area included in the round 1 rebid, round 1 recompete, and 
round 2. However, a total of three round 2 contracts were later voided 
due to licensure issues in the negative pressure wound therapy product 
category across 3 of the 100 competitive bidding areas. Therefore, 
there were a total of four contract suppliers for that product 
category in each of those three round 2 competitive bidding areas. 

[30] Bids that won on price were used to establish Medicare's SPAs for 
each item in a product category in a competitive bidding area. 

[31] CMS officials told us that after round 1 in 2008 they changed the 
way CMS reported bid disqualifications for subsequent rounds by 
establishing a CBP bid disqualification hierarchy that ranks a 
supplier's bid disqualifications on the basis of reason codes. CMS 
officials told us that although a supplier that had a bid disqualified 
for more than one reason was notified of all reasons, they counted a 
bid that was disqualified for more than one reason code only once--
under the highest reason code of the hierarchy. If a bid was 
disqualified for any reason, but would have also lost on price, CMS 
included it under the "lost on price" reason code--the highest code of 
its hierarchy. 

[32] According to CMS officials, for the round 1 recompete, round 2, 
and national mail-order program, CMS revised some of the 10 financial 
measures or ratios that were used in the round 1 rebid. Specifically, 
CMS deleted the quick ratio--(cash + accounts receivables)/current 
liabilities--and added the debt-to-equity ratio--total liabilities/ 
shareholder's equity. CMS also included amortization in the quality-of-
earnings ratio--cash flow from operations/(net income + depreciation + 
amortization). 

[33] In April 2014, the HHS Office of Inspector General reported that 
it was in the process of conducting a limited-scope review of the 
efficacy of CMS's procedures for ensuring supplier compliance with 
applicable licensure requirements for CBP round 2. 

[34] As part of their CBP bid submission, bidding suppliers are 
required to complete a national mail-order 50 percent compliance form 
that demonstrates that their bid covers at least 50 percent, by 
volume, of all types of mail-order diabetic testing strips on the 
market. 

[35] Financial documentation means a financial, tax, or other document 
required to be submitted in order to meet CMS's financial standards 
for the CBP. The Medicare Improvements for Patients and Providers Act 
of 2008 and implementing regulations define the covered document 
review date as the later of (1) 30 days before the final date for the 
close of the bid window; or (2) 30 days after the bid window opens. 
For CBP rounds beginning after the round 1 rebid, CMS must notify 
eligible suppliers of missing financial documentation within 90 days 
after the end of the covered document review date. This process 
applies only to the timely submission of financial documentation and 
does not apply to any determination by CMS as to the accuracy or 
completeness of the documentation submitted or whether the documents 
meet applicable financial requirements. 

[36] See [hyperlink, http://www.gao.gov/products/GAO-12-693]. 

[37] During CBP round 1, we reported that CMS did not communicate 
effectively to suppliers that they had an opportunity to have their 
round 1 bids reviewed. CMS officials told us that they conducted a 
post-bid review process for suppliers that contacted the agency with 
questions or requested a review and subsequently found that 10 of the 
357 round 1 suppliers that had bids reviewed had been disqualified 
incorrectly. After reviewing the language that CMS provided to 
suppliers during CBP round 1, we determined that CMS did not 
communicate effectively to suppliers that they had an opportunity to 
have disqualified round 1 bids reviewed. As a result, in 2009, we 
recommended, and CMS agreed, that if CMS chose to conduct a review of 
disqualification decisions during the round 1 rebid and future bids, 
CMS should notify and give all suppliers an equal opportunity for 
review, and clearly indicate how suppliers can request a review. See 
GAO, Medicare: CMS Working to Address Problems from Round 1 of the 
Durable Medical Equipment Competitive Bidding Program, [hyperlink, 
http://www.gao.gov/products/GAO-10-27] (Washington, D.C.: Nov. 6, 
2009). CMS provided additional information for subsequent CBP rounds. 

[38] All bids must be bona fide, meaning that they cannot be higher 
than the Medicare fee schedule or lower than the supplier's cost. 
During the bid evaluation process, Palmetto GBA screens every bid to 
ensure that it is bona fide. 

[39] We determined the number of distinct suppliers since contract 
suppliers can be counted more than once if they are new to more than 
one product category or more than one competitive bidding area. 

[40] SPAs are determined by arraying the price offers in winning bids 
from lowest to highest and selecting the median price offered by the 
suppliers for an item. The median price becomes the SPA. SPAs can vary 
by competitive bidding area. To calculate an average SPA for each 
HCPCS code, we averaged the SPAs across all competitive bidding areas 
included in each round. For example, round 2 SPAs for respiratory 
assist devices (HCPCS code E0470) ranged from a low of $106.90 in the 
Northern New Jersey Metro competitive bidding area to a high of 
$138.85 in the Worchester, Massachusetts, competitive bidding area, 
and the average SPA was $115.75. 

[41] The 2010 Medicare fee-for-service payment amount was used as a 
comparison point for this analysis because 2010 was the year that 
preceded the round 1 rebid, which resulted in contracts that were 
effective from January 1, 2011, through December 31, 2013. CBP SPAs 
are required to be less than or equal to the Medicare fee-for-service 
payment for the same item. We averaged Medicare fee-for-service 
payments for 2010 using payments within the continental states and the 
District of Columbia only, because Alaska and Hawaii are not subject 
to Medicare's fee-for-service payment amount ceiling and floor limits. 

[42] See [hyperlink, http://www.gao.gov/products/GAO-12-693]. For our 
previous work on the CBP, we reported on the top 34 HCPCS codes that 
CMS identified as representing the top 80 percent high-cost and high-
utilization codes for the round 1 rebid. 

[43] Mail-order diabetic testing supplies were not included in the 
round 1 recompete because CBP's national mail-order program was 
implemented before the recompete. The national mail-order program 
competition took place at the same time as the round 2 competition. 

[44] For the full list of 34 codes, see [hyperlink, 
http://www.gao.gov/products/GAO-12-693]. HCPCS codes A4253, A4256, and 
A4259 were included in the list of 34 codes CMS identified as 
representing the top 80 percent high-cost and high-utilization codes 
included in the CBP round 1 rebid, and were common to the round 1 
rebid and national mail-order program. 

[45] The 2010 Medicare mail-order fee-for-service payment amount was 
used as a comparison point for this analysis because 2010 was the year 
that preceded the round 1 rebid, which resulted in contracts that were 
effective from January 1, 2011, through December 31, 2013. CBP SPAs 
are required to be less than or equal to the Medicare fee-for-service 
payment amount for the same item. We averaged Medicare mail-order fee-
for-service payments for 2010 using payments within the continental 
states and the District of Columbia only, because Alaska and Hawaii 
are not subject to Medicare's fee-for-service payment amount ceiling 
and floor limits. 

[46] SPAs are determined by arraying the price offers in winning bids 
from lowest to highest and selecting the median price offered by the 
suppliers for an item. The median price becomes the SPA. SPAs can vary 
by competitive bidding area. To calculate an average SPA for each 
HCPCS code, we averaged the SPAs across all competitive bidding areas 
included in the round 1 rebid. For example, SPAs for the round 1 rebid 
for HCPCS code A4253 KL ranged from a low of $13.88 in the Riverside-
San Bernadino-Ontario, California, competitive bidding area to a high 
of $15.62 in the Cleveland-Elyria-Mentor, Ohio, competitive bidding 
area, and the average SPA was $14.62. For the national mail-order 
program, CMS determined one SPA for each HCPCS code, so no averaging 
was necessary. 

[47] A4253 is blood glucose test or reagent strips for home blood 
glucose monitor, per 50 strips. A4258 is a spring-powered device for 
lancet, each; and A4259 is lancets, per box of 100. 

[48] A4233 is a replacement battery, alkaline (other than J cell), for 
use with medically necessary home blood glucose monitor owned by 
patients, each. A4236 is a replacement battery, silver oxide, for use 
with medically necessary home blood glucose monitor owned by patient, 
each. 

[49] See [hyperlink, http://www.gao.gov/products/GAO-12-693]. 

[50] Of the six codes excluded from our analysis, three are diabetic 
testing supply codes common to both the round 1 rebid and the national 
mail-order program and are presented in table 12 of this appendix. The 
other three codes were for complex rehabilitative power wheelchairs. 
The CBP round 1 rebid's complex rehabilitative power wheelchairs 
product category was excluded from the CBP round 1 recompete and round 
2. 

[51] The 2010 Medicare fee-for-service payment amount was used as a 
comparison point for this analysis because 2010 was the year that 
preceded the round 1 rebid, which operated from January 1, 2011, 
through December 31, 2013. CBP SPAs are required to be less than or 
equal to the Medicare fee-for-service payment amount for the same 
item. We averaged Medicare fee-for-service payments for 2010 using 
payments within the continental states and the District of Columbia 
only, because Alaska and Hawaii are not subject to Medicare's fee-for-
service payment amount ceiling and floor. 

[End of section] 

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E-mail: fraudnet@gao.gov; 
Automated answering system: (800) 424-5454 or (202) 512-7470. 

Congressional Relations: 

Katherine Siggerud, Managing Director, siggerudk@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, DC 20548. 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, DC 20548. 

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