OIG to Determine If CMS Awarded DMEPOS Contracts to Unlicensed Suppliers

Daniel R. Levinson, Inspector General of the HHS Office of Inspector General (OIG) has responded to a request by Congressmen Glenn Thompson (R-Penn.) and Bruce Braley (D-Iowa) that the OIG investigate whether CMS has awarded contracts to unlicensed Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) companies in an attempt to set a predetermined price point for DMEPOS categorized products. According to the Congressmen, awards to unlicensed suppliers run contrary to the eligibility rules established by CMS, which provides that such bids will be disqualified. Additionally, the Congressmen are concerned that the inclusion of unqualified bids will lead to a significant distortion of the bid prices which should require that CMS undertake an immediate review of all legal and valid bid submissions and adjust the bid prices accordingly.

Previous Congressional Letter to CMS

On June 12, 2013, Congressmen Thompson and Braley wrote CMS Administrator, Marilyn Tavenner, on behalf of 211 Congressmen on both sides of the aisle, expressing their concerns with CMS’ Competitive Bidding (CB) Program for DMEPOS and requesting an administrative delay of Round 2 of the program through the end of 2013.

The Congressional letter to CMS Administrator Tavenner indicated that many members of Congress have continuing concerns about the lack of transparency, the lack of binding bids during the contract process, and the improper vetting of the financial wherewithal of many firms that have been awarded contracts to service many bid areas far from their current base of operations. In their letter, the Congressmen indicated that: (1) CMS has awarded DMEPOS contracts to as many as 33 bidders that do not hold a valid DME license in Tennessee; (2) 68 out of 138 unique companies that were awarded contracts for Maryland do not hold the necessary Maryland Residential Service Agency License; and (3) 58 of the contracts in the six Ohio bid areas are held by firms that are not appropriately licensed to provide items in Ohio.

The letter to CMS Administrator Tavenner also indicated that further analyses suggest that many contract suppliers in Round 2 bid areas are not accredited, nor certified in the specific product category for which they have been awarded a contract.

OIG’s Response

In his response to the June 20, 2013 letter from Congressmen Braley and Thompson, IG Levinson agreed that DMEPOS companies should meet state licensure and accreditation requirements. As a consequence, Levinson indicated that OIG will conduct a limited scope review to address concerns related to licensure and accreditation of DMEPOS companies in Tennessee, Maryland, Michigan, and Ohio.

Under the review, Levinson indicates the OIG will: (1) determine how CMS applied state licensing requirements under Round 2 of the DMEPOS CB program to suppliers that were awarded contracts in these four states; (2) determine the impact on the single payment amounts as well as the CB program in the affected competitive bidding areas; and (3) perform a post-award review of CMS’ CB program after implementation of Rounds 1 and 2 of the bidding, as required by the Medicare Improvements for Patients and Providers Act of 2008.

Levinson also indicates that OIG is currently finalizing its review of Round 1 and will commence work this year to incorporate a post-award review of Round 2. According to Levinson, these reviews will determine whether CMS selected DMEPOS suppliers and computed the single payment amounts in the Round 2 program in accordance with federal requirements.