Reducing Medicare Payments for Urinary Catheters

Published in Billing, Reimbursement, Audits and Compliance on September 19, 2022

The Office of Evaluation and Inspection, a component of OIG (Office of Inspector General) and HHS (Health and Human Services), recently released "Reducing Medicare’s Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of Dollars Each Year,” a study that was performed on urinary catheters. The study included a sample of 600 traditional Medicare FFS (Fee for Service) claims from the fiscal year 2020 with three HCPCS codes: A4351, A4352, and A4353.

Many suppliers received letters requesting information from this study. The suppliers that received requests were to submit acquisition costs for catheters, features of the catheters, and whether the catheters were delivered by mail. Comparison of the suppliers’ acquisition costs to Medicare payment amounts was the study's primary purpose.

The report calculations estimated that traditional Medicare FFS payments were 3.4 times the suppliers’ acquisition costs resulting in $407 million paid by Medicare, whereas suppliers paid approximately $121 million in acquisition costs. The report stated the following: “Recognizing suppliers face other costs beyond the cost of acquiring catheters and need an opportunity to maintain a profit. However, the differences between Medicare reimbursements and suppliers' acquisition costs indicate that Medicare and its beneficiaries can achieve substantial savings while allowing for other costs.” 

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The recommendation from the OIG to CMS was to reduce the Medicare FFS payment rates for intermittent urinary catheters, and in doing so, CMS should continue to take steps to ensure beneficiaries have access to the catheters that best serve their medical needs.

Previously, when CMS sought to obtain savings for other items under federal statutes and regulations, the agency had used competitive bidding for its “inherent reasonableness” process methodologies. CMS suggests both methodologies include mechanisms to consider the protection of beneficiary access.

The report noted the addition of urinary catheters to the competitive bid program could attain savings dependent upon the bids that suppliers submit to Medicare

According to the report, if the inherent reasonableness process methodology were chosen, it would allow Medicare to directly modify the payment for these items. Under this methodology, for a payment amount to be considered grossly deficient or excessive, CMS must determine that an adjustment of 15 percent or more is necessary to produce a realistic and equitable payment.

Furthermore, statutes and regulations do not require CMS to implement the total necessary adjustment at one time. For example, if a reduction of 20 percent were required to produce a realistic and equitable payment amount, CMS could implement the reduction over two years. CMS has used the inherent reasonable process to adjust payment amounts only once (in 1995) to lower payment rates for standard home blood glucose monitors. Before adopting a new payment limit, CMS must take public comment during rulemaking which allows stakeholders to raise concerns about beneficiary access.

CMS did not explicitly indicate where it concurred with the recommendation. Instead, CMS stated that it will take the recommendations under consideration as it determines appropriate next steps.

VGM will continue to monitor this issue and report/update information to our members.

READ THE FULL REPORT HERE

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