Home Health & Hospice Week

In a new wrinkle, court sides with CIGNA.

Suppliers may wind up losing in the feds' race to implement a new system for processing Medicare claims for durable medical equipment, prosthetics and orthotics.

A federal court decision handed down March 10 is likely to delay considerably the Centers for Medicare & Medicaid Services' quick transition to Medicare claims-processing by DME Medicare administrative contractors (DMACs)--at least in some regions.

The newly appointed DMACs are scheduled to take over that responsibility from DME regional carriers starting July 1, according to CMS. But the court case initiated by CIGNA Government Services is likely to delay that implementation goal in Regions C and D.

Prepare for Rough Transition

The delay itself isn't necessarily bad news for suppliers, explains Peter Thomas, general counsel for the National Association for the Advancement of Orthotics and Prosthetics in Washington, DC. But a rough transition to DMACs could mean that suppliers ultimately wind up with more unpaid claims or cases of late payment under the new system.

Background: The Medicare Modernization Act of 2003 calls on CMS to use competitive bidding procedures to replace current Medicare contractors, fiscal intermediaries and carriers with a uniform entity dubbed the Medicare administrative contractor (MAC). The law requires the new system to be in place entirely by 2011. CMS has told Congress that it aims for implementation in 2009.

The feds' plan to ramp up DMACs by July 1 first hit a speed bump in January when the Government Accountability Office put a hold on CMS' new DMAC contracts with Noridian Administrative Services for Region D and Palmetto GBA for Region C. The GAO's stay on the contracts came in response to a Jan. 10 protest from CIGNA, the current Region D DMERC.

The decision this month by the U.S. Court of Federal Claims brakes CMS' push toward DMACs with additional force. The court upheld the GAO's stay on the contracts with Noridian and Palmetto, calling CMS "arbitrary" and "capricious" in its efforts thus far to transition to DMACs.

The court's ruling prevents CMS from working with Noridian and Palmetto in the DMAC transition, pending a GAO decision due in May. "At the current time, there's no transition activity with the DMACs for either [region] C or D," a CMS official tells Eli.

"Allowing the awardees to continue ... could skew the playing field if the GAO were to order a reopening of the procurement, thus compromising competition," Judge Mary Ellen Coster Williams writes in the court's decision. Last year, the GAO criticized CMS for not planning adequately the transition toward MACs.

Among the GAO's concerns was CMS' ability to protect the interests of providers and suppliers during the transition. For suppliers, the lesson learned is to watch closely for new developments.

"Medicare should notify suppliers in time to make necessary administrative changes," advises Kathy Dodson of the government affairs division of the American Orthotic & Prosthetic Association in Alexandria, VA. But given the process to date, it may be wise for suppliers not to expect too much too soon.

A delay in moving toward DMACs in Regions C and D could turn out to be a positive for suppliers, suggests Asela Cuervo of the Law Offices of Asela Cuervo in Washington, DC, representing the American Association for Homecare. "A delay would essentially stagger the transition," she explains. "That could be a plus for suppliers operating in multiple regions."

Note: The court decision (No. 06-108C, 3/10/06) is at www.uscfc.uscourts.gov/2006.htm.