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Focus on Regulation

Is Inherent Reasonableness Coming Back to CMS?

Six and a half years after CMS promulgated regulations for the use of “inherent reasonableness” authority to alter a payment rate, CMS is considering applying this little used authority to Medicare payment levels for non-mail order diabetic testing supplies. In 2011, a competitive bidding process for the mail order equivalent of such supplies resulted in an average reduction in Medicare-allowed payment amounts of 55% (for a mail-ordered box of 50 strips). CMS thus believes that a significant disparity exists between the Medicare payment amounts for mail order versus non-mail order diabetic testing supplies, with non-mail ordered supplies being paid for at higher rates.  Based on this and a review of other pricing information for these supplies, CMS believes that sizeable savings are possible in this area.

CMS is contemplating the use of its authority to adjust payment amounts that are inherently unreasonable as an alternative to using the competitive bidding process for non-mail order testing supplies at this time. The agency believes that this will help reduce the difference in price between mail order and non-mail order diabetic testing supplies, and create program savings.  In addition, it believes using its inherently unreasonable authority will allow beneficiaries greater choice of supplier than use of the competitive bidding process.

CMS will host a public meeting Monday, July 23, 2012 from 9 am to 1 pm to solicit comments from suppliers and other interested parties.  Both oral and written comments will be accepted. Participants must register in advance.