CBP Online Contract Supplier Locator. CMS has directed beneficiaries to call  its 1-800-MEDICARE beneficiary help line with CBP questions— referred to by CMS as inquiries. CMS posts quarterly reports of these health  outcomes on its website. Medicare Claims Data Show Larger Decreases in Beneficiary Utilization in Competitive Bidding Areas than Comparator Areas, but Beneficiary Access Does Not Appear to Have Been Affected

Our analysis of Medicare claims data found that for five of the six product  categories we examined, the number of distinct beneficiaries furnished  CBP-covered items generally decreased more in the competitive bidding  areas than in the comparator areas in each month of 2011 and 2012  compared to the same month of 2010. As CMS has  reported, the CBP may have curbed previous inappropriate distribution of  some CBP-covered items in competitive bidding areas. For the comparator areas, the  number of beneficiaries furnished one or more items decreased by about   5 percent in May 2011 and by about 16 percent in May 2012. CMS Reports that Its Ongoing Monitoring Tools Indicate that CBP’s Round 1 Rebid Has Not Affected Beneficiary Access and Satisfaction

As it did in 2011, CMS continued several ongoing activities to monitor  CBP’s effects on beneficiaries in 2012. According to CMS data, the agency  obtained responses from at least 400 beneficiaries in each of the nine  competitive bidding areas and nine comparator areas to collect  beneficiary satisfaction ratings for six questions related to the  beneficiary’s initial interaction with DME suppliers, the training received  regarding DME items, the delivery of the DME item, the quality of service  provided by the supplier, the customer service provided by the supplier,  and the supplier’s overall complaint handling. For the Round 1 Rebid Product Categories and Areas, a Small Number of Contract Suppliers Accounted for a Large Portion of the CBP Market Share in 2011 and 2012

For the round 1 rebid product categories we examined, a small number of  contract suppliers accounted for a large portion of Medicare total allowed  charges across 2011 and 2012. Few contract suppliers left the CBP through contract  terminations, voluntarily withdrawing from Medicare, or having had a  change in ownership. For five of the six product  categories, we found that, in general, the top 4 suppliers—those with the  highest individual Medicare total allowed charges across all quarters of  2011 and 2012—accounted for a large portion of the market in all  competitive bidding areas, although the top 4 suppliers for each product   In our examples, the  category could vary by competitive bidding area.top 4 suppliers’ combined market share in the fourth quarter of 2012  ranged from 50 percent for the enteral product category in the Dallas  competitive bidding area to 86 percent for the walkers product category in  the Orlando competitive bidding area. In CBP’s First Two Years, About 8 Percent of Contract Suppliers Had Contracts Terminated or Voluntarily Withdrew From Medicare

By the end of the CBP’s second year, 27 of the original 356 contract  suppliers—about 8 percent—had been terminated by CMS or had  voluntarily withdrawn from Medicare, according to CMS data. Concluding Observations

The CBP round 1 rebid’s savings for both the Medicare program and the  rebid-covered beneficiaries continued in the second year, with CMS  reporting total savings of more than $400 million in the rebid’s first two  years due to its lower payments, decreased utilization, and lower  beneficiary coinsurance. CMS’s monitoring  activities, however, did not indicate beneficiary access issues. CMS’s fraud prevention efforts may also be affecting DME  utilization. Continued monitoring of CBP experience is important to determine the full  effects it may have on Medicare beneficiaries and DME suppliers. With the CBP’s 3-year round 1 rebid complete, the CBP’s 2013 round 2  expansion into an additional 100 competitive bidding areas, the 2013  implementation of the national mail-order diabetic testing supplies  program, and the 2013 selection of the new contract suppliers in the  original nine areas for the next 3-year contracts beginning in 2014,  significant new data will soon be available to further assess the impact of  the program. In its general comments, HHS  stated that CMS will continue monitoring the CBP to ensure Medicare  beneficiaries are not adversely affected by the program, including  continuing to use its real-time claims monitoring system. Appendix I: Number of Suppliers in the Round 1 Rebid Competitive Bidding Areas and Their Comparator Areas; 2010 and 2012

	Number of suppliers with $2,500 or more in

	Number of suppliers with $2,500 or more in

Appendix II: Medicare Allowed Charges for Round 1 Rebid Competitive Bidding Areas and Their Comparator Areas; 2010 and 2012

	Round 1 rebid competitive bidding areas and their comparator areas 1 Charlotte Virginia Beach comparator

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

Appendix IV: GAO Contact and Staff Acknowledgments

	GAO Contact

	Staff Acknowledgments

In addition to the contact named above, key contributors to this report  were Martin T. Gahart, Assistant Director; Yesook Merrill, Assistant  Director; Todd Anderson; Dan Lee; Drew Long; Michelle Paluga;   Hemi Tewarson; and Opal Winebrenner. Medicare: Issues for Manufacturer-level Competitive Bidding for Durable  Medical Equipment.
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. In 2008, the Medicare Improvements for Patients and Providers Act terminated the first round of supplier contracts and required CMS to repeat the CBP round 1—referred to as the round 1 rebid, resulting in the award of contracts to suppliers with CBP payments that began January 1, 2011.
GAO was asked to review issues concerning the rebid's second year of operation—2012. This report reviews the round 1 rebid's effects on (1) Medicare beneficiaries, (2) the market share of contract suppliers, and (3) all suppliers, including both contract and non-contract suppliers (the suppliers not awarded rebid contracts.) To examine the effects on Medicare beneficiaries, GAO compared Medicare claims data for 2011 and 2012 with that for 2010, the year before the round 1 rebid. GAO also examined other information about CMS's efforts to monitor the effects of the CBP, and interviewed DME industry representatives and officials from Medicare beneficiary organizations. To examine the effects on both contract and non-contract suppliers, GAO compared Medicare claims data for 2012 with that for 2010 and analyzed other data provided by CMS.

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. Under the CBP, only competitively selected contract suppliers can furnish certain DME product categories (such as oxygen supplies and hospital beds) at competitively determined prices to Medicare beneficiaries in designated competitive bidding areas. The CBP's round 1 rebid was in effect for a 3-year period, from 2011 through 2013. It included nine DME product categories in nine geographic areas. For CBP monitoring purposes, CMS also selected nine comparator areas that were demographically similar to the rebid areas. GAO's analysis found that in 2012, the second year of the round 1 rebid:
The number of beneficiaries furnished DME items included in the CBP generally decreased more in the CBP areas than in the comparator areas. For example, the number of beneficiaries furnished oxygen supplies decreased by about 22 percent in the CBP areas and by about 16 percent in the comparator areas. According to CMS, CBP may have reduced inappropriate usage of DME and these decreases do not necessarily reflect beneficiary access issues. Based on its monitoring tools, which include comparing changes in the health outcomes of beneficiaries in the CBP areas to those in the comparator areas, CMS has concluded that beneficiaries have not been affected adversely by the CBP.
In general, a small number of contract suppliers had a large proportion of the market share in the nine competitive bidding areas. The top four contract suppliers generally accounted for a large proportion of the market in all CBP areas, although the top four suppliers for each product category were not the same in every competitive bidding area. CMS has reported that few contract suppliers had contracts terminated by the agency or voluntarily withdrew from Medicare.
The total number of DME suppliers and Medicare allowed charges decreased more in the CBP areas than in the comparator areas. For example, the number of suppliers in the CBP areas with Medicare allowed charges of $2,500 or more decreased, on average, 27 percent. In the comparator areas, supplier numbers decreased by 5 percent. The decreases in supplier numbers may reflect other factors, such as CMS's efforts to reduce Medicare DME fraud.
The round 1 rebid's first 2 years achieved Medicare cost savings of about $400 million as estimated by CMS, and did not appear to have adversely affected beneficiary access to CBP-covered items. However, with CBP's national mail-order diabetic testing supplies program and expansion into an additional 100 bidding areas in July 2013, it will be important for CMS to continue its efforts to monitor the effects of the CBP.
In commenting on a draft of this report, HHS cited the results of CMS's monitoring of beneficiaries' access to CBP items as evidence that CBP has not adversely affected beneficiaries.