<US Politics> CMS issues Inherent Reasonableness Rule

<US Politics> CMS issues Inherent Reasonableness Rule

AOPA

12/24/2002

The Centers for Medicare and Medicaid Services (CMS) recently issued
Federal regulations outlining the criteria it and the DMERCs will use to
unilaterally adjust Medicare payments for Medicare Part B services,
including O&P services, that are determined to be grossly excessive or
deficient.

This rule, called Inherent Reasonableness (IR) Authority, could have
severe implications for the O&P community now and for the foreseeable
future especially when viewed in conjunction with the prospects of a
Medicare competitive bidding program for certain orthotic services and
the potential threat of Medicare O&P fee schedule payment freezes.

Under the rule, CMS or its carriers may adjust Medicare payments by up
to 15 percent per year for items that are determined to be reimbursed at
an inappropriately high or low rate. For example, if CMS or a DMERC
determines that a device is overpriced by 25 percent, CMS could reduce
payments by 15 percent in one year and by another 10 in the next. This
power can also be used to raise fees, however, AOPA anticipates that its
greatest use will be to reduce fees.

The rule will go into effect on Feb. 11, 2003.

By issuing the rule as an interim final rule, CMS will allow interested
parties to submit additional comments. CMS has specifically asked the
public to help it define what is considered grossly excessive or
grossly deficient. These comments will be due by Feb. 11, 2003. AOPA
will submit comments on behalf of its members to CMS on this rule.

The following are some of the highlights of the IR rule:

***In determining device payments that may be subject to inherent
reasonableness authority, CMS will take into consideration payments made
by other purchasers such as the Veterans Administration.

***CMS will not limit itself in the use of reimbursement data from
competitive bidding, negotiated rate setting, other innovative payment
methodologies or volume discounts to determine if Medicare's
reimbursement rates constitute a reasonable payment amount for an item
or service.

***CMS did not establish an appeals mechanism in the rule for devices
that are subject to IR. Thus, under the rule, if a device payment is
determined to be grossly excessive, Medicare will issue a public
notice and begin a 60-day process to implement the new fee(s). While
the public may comment on the proposed reduction during the 60-day
period, the O&P industry will have no administrative recourse to reverse
CMS' decision once the new fee(s) are put into place.

***When determining payments using its gap-filling methodology for
medical equipment (particularly new technology), CMS reserves the right
to adjust gap-filled fee schedule amounts that they determine to be
grossly deficient or excessive using the inherent reasonableness
process.

**CMS will allow any party to submit a request to CMS or a Medicare
Carrier for an inherent reasonableness adjustment.

***The rule indicates that CMS will be required to notify all suppliers
and/or organizations representing suppliers of any proposed inherent
reasonableness adjustments. It is unclear if CMS will notify AOPA and
other suppliers through a formal notice to the association, through
DMERC bulletins or through the Federal Register.