Dive Brief:

• An Office of Inspector General probe has found CMS followed procedures 97% of the time when awarding contracts for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).

• The investigation looked at CMS’ selection of 225 DMEPOS suppliers in 2014. OIG found CMS failed to consistently follow competitive bidding procedures when selecting six of the suppliers.

• While the failings only caused an estimated overspend of 0.03%, OIG wants CMS to ensure it has a system for identifying potentially unlicensed suppliers to prevent problems in the future.

Dive Insight:

CMS implemented a competitive bidding program in 2011 in response to legislation passed in 2003. To assess whether the bidding program is working as intended, OIG looked at how CMS handled 30 single-payment amounts (SPAs) and the selection of 225 suppliers over the first six months of 2014.

OIG found fault with a fraction of CMS’ work. According to OIG, the agency selected five suppliers that were noncompliant with financial statement requirements and one supplier that lacked the applicable state license. CMS’ failure to consistently follow its procedures when selecting all 225 suppliers affected three of the 30 sampled SPAs, leading to an estimated overspend of $25,054.

The overspend is a tiny fraction of the $73 million CMS paid out over the analyzed period, but OIG sees it, and the failings that caused it, as evidence of the need for improvements. OIG is recommending CMS follows its procedures, ensures that suppliers have the applicable licenses, and establishes a system for identifying potentially unlicensed suppliers.

CMS concurred with the advice, telling OIG it is setting up a system to “continuously monitor DMEPOS suppliers to ensure that they maintain an active license throughout the duration of their Medicare enrollment.” 

The focus on establishing a system covering the duration of enrollment reflects OIG’s discovery that the licenses of seven suppliers lapsed after the close of the bidding window. CMS’ competitive bidding procedures require suppliers to maintain licenses for the duration of their three-year contracts.

The report comes in the run up to the 2021 competitive bidding round. In the absence of a delay, which some DME suppliers are pushing for, CMS will announce contract suppliers in the fall and implement contracts and prices at the start of next year. Last year, trade groups created a website to help suppliers navigate CMS’ current competitive bidding process.