“There is no way a supplier can obtain brand name testing supplies, employ the staff to fulfill reorders, bill Medicare, and maintain a sophisticated fulfillment center(s) at that rate.”

From: Where Are My Keys? (blog)

Know anyone that recieves mail-order diabetic suppies that is on Medicare?

Big changes are coming, and coming quickly:

CMS also conducted a national mail-order competition for diabetic testing supplies concurrent with the Round 2 competition. CMS announced that Medicare payment for diabetic testing supplies (100 lancets and test strips) under competitive bidding will be reduced from $77.90 to a national rate of $22.47. While the competition for diabetic testing supplies was intended to apply only to mail-order suppliers, it is important to note that the American Taxpayer Relief Act of 2012 (ATRA), which was signed into law on January 2, 2013, sets Medicare payment amounts for retail diabetic supplies at the national mail ordercompetitive bidding single-payment amounts, effective July 1, 2013.  In other words, as a result of the ATRA, the competitive bidding process is being used to reduce pricing for DMEPOS other than items that actually were subject to competitive bidding. This policy was adopted despite CMS’s previous acknowledgment that “there are pricing differences between mail order and non-mail order diabetic testing supplies because of the delivery methods for these supplies.”  Even though under competitive bidding program rules, only successful bidders that sign a contract with CMS will be eligible to furnish mail order diabetes supplies to Medicare beneficiaries as of July 1, 2013, Medicare beneficiaries will not be limited to using contract suppliers to obtain retail/storefront diabetes supplies. In sum, a Medicare beneficiary must use a contract supplier to obtain mail orderdiabetic testing supplies, but can pick up diabetic testing supplies from any local retailer; the payment to the supplier and the beneficiary copayment will be the same in either setting. (The ATRA also temporarily reduces fee schedule amounts for retail diabetic testing supplies to mail order amounts from April 1, 2013 until the national mail-order program single payment amounts start on July 1, 2013.)

CMS next will be mailing contracts to “winning” bidders. According to a CMSfact sheet, 14,654 contract offers will be made to 867 Round 2 bidders, who have 3,109 locations to serve Medicare beneficiaries in the CBAs. CMS also will offer 15 contracts for the national mail-order program; the national mail-order program winners have 48 locations in all. CMS notes that about 62% of Round 2 winning suppliers are small suppliers (gross revenues of $3.5 million or less), and 33% of national mail-order contract offers will go to small suppliers. When the contracting process is complete, unsuccessful bidders will be notified of the reasons they were not offered a contract. CMS expects to announce the names of the contract suppliers in the spring of 2013. CMSand the Competitive Bidding Implementation Contractor (CBIC) also will be stepping up educational activities leading up to implementation of Round 2 and national mail-order bidding.

Let me put a few things in perspective for you.

The “old” Medicare reimbursement rate was $77.90 for 100 test strips, and 100 lancets (the thingy you use to prick your finger, to get the blood sample for testing).  Keep in mind that the retail cost for a box of 100 strips from a name brand runs around $95-110 (These are One Touch, AccuCheck, Contour, the ones you see advertised on TV, and the most popular).  A retailer buy the strips from a wholesaler, apply their markup, and then sell to cash, insurance, and Medicare patients.

The new reimbursement rate for 100 strips, and 100 lancets is $22.47.

There is no way a supplier can obtain brand name testing supplies, employ the staff to fulfill reorders, bill Medicare, and maintain a sophisticated fulfillment center(s) at that rate.

When the old rates were in effect, manufacturers were selling the strips to the fulfillment houses in the $5.50-$8.00 range (for a box of 50 strips).  In order for a fulfillment house to make a few bucks, they will have to be purchasing from the vendors in the $2.50-$3.00 range.

Those strips (especially the brand name ones Granny is using today), just aren’t out there.

To further complicate things, CMS seems proud that a third of the mail-order winners are small companies (under $3.5 million in gross revenue).  How can these small companies scale up in a 5 month period (program goes live in July) to support Nationwide sales?

By the way, those small companies that won contracts?  They don’t even know they have won yet, and won’t until “Spring 2013, giving them even less time to ramp up activities.

Why do I see this becoming a giant cluster-fuck?

Don’t forget that there will also be a tremendous ripple going through anyone that works in the blood glucose testing space: companies will fold, many jobs will be lost (manufacturing, sales, fulfillment, R&D).  There are companies that went out of business when this reimbursement change was announced, they just don’t know they are out of business yet.  That “news” will come in the Spring/Summer of 2013.

Stay tuned.