Home Health & Hospice Week

CMS proceeds despite GAO concerns.

Durable medical equipment suppliers should prepare for a possible rough ride ahead when Medicare contracting reform gets underway.

The Centers for Medicare & Medicaid Services is proceeding with plans to shift DME claims processing from the DME regional carriers to the new Medicare Administrative Contractors. The agency on Sept. 2 issued a program transmittal detailing the realignment of DMERC regions A, B, C and D to DME MAC jurisdictions A, B, C and D.

The transmittal comes on the heels of a new report from the watchdog Government Accountability Office detailing serious shortcomings with the contracting reform initiative, which the Medicare Moderniza-tion Act mandated.

The MMA requires CMS to transfer the work of current claims contractors - including the DMERCs - to new Medicare administrative contractors by October 2011, but the agency plans to transfer all claims processing work to the MACs by July 2009.

"If these transitions go awry, physicians and other providers could experience payment delays and errors," the GAO report warns.

DME industry leaders echo the watchdog's concerns about the accelerated process. "I have to agree with GAO," Eric Sokol, director of the Washington-based Power Mobility Coalition, tells Eli. "Why rush into this? You want to make sure systems are in place and transitions are smooth."

As the designated guinea pigs for the reforms, DME suppliers would likely be the first to feel the pain. CMS decided to launch the initiative within the DME sector because it believes the workload of the four current DMERCs is stable and the risk of any significant program disruption to the provider and beneficiary communities is minimal.

CMS' plan fails to provide detailed information on the risks of contracting reform and steps to mitigate them, the report states. It notes that implementing contracting reform is an "inherently high-risk activity" that entails complex transitions of claims workloads.

CMS previously has transferred up to 10 percent of the claims administration workload in a year. "However, the scale of the proposed transitions is much greater, since CMS plans to transfer as much as 91 percent of the annual claims processing workload - which represents an estimated $250 billion in payment to providers - to MACs in less than two years," the GAO says.

The plan does not fully explain how CMS will monitor MACs' performance or how it will juggle contracting reform at the same time it's implementing the new prescription drug benefit. Furthermore, CMS's cost and savings estimates are "too uncertain" to support implementation decisions, the GAO cautions.

CMS calculates that contracting reform would cost about $666 million over a six-year period - a much higher amount than reported in the agency's congressional report on contracting reform. CMS came up with that figure by looking at previous transitions of claims workloads. But in doing so, the agency had to make assumptions about how many contractors will be involved and the size of the claims transitions.

Savings Estimate Merely Guesswork

The agency's total savings estimate of over $1.9 billion in a six-year period is based on the assumption that MACs will reduce improper payments by $1.4 billion. But that figure, developed by an external consultant, "is based on questionable evidence and assumptions that were not validated by the CMS staff who oversee medical reviews," the GAO reports.

The GAO calls on CMS to extend the implementation schedule and complete its workload transitions by October 2011. However, CMS does not concur with that recommendation, arguing that extending the transition schedule would increase the risk of current contractors leaving the program.

Sen. Charles Grassley (R-IA), chair of the Senate Finance Committee, urges CMS to address immediately the problems GAO found. "This is really a situation where an ounce of prevention is worth a pound of cure," Grassley says. 

Note: The report (GAO-05-873) is online at www.gao.gov. Program transmittal 670 will be available online at www.cms.hhs.gov/manuals/transmittals/comm_date_dsc.asp.