Understanding the 75/25 Blended Rate and Why We Need Legislative Action!

Published in Government Relations on August 21, 2023

In 2020, amidst the challenges posed by the COVID-19 pandemic, the healthcare industry witnessed the introduction of the 75/25 blended rate through the passage of the CARES Act. This rate adjustment, named after its 75% and 25% allocation model, aimed to protect access to DME products and services in non-rural, non-competitive bid areas by temporarily increasing Medicare reimbursement rates for providers serving those areas. Craig Douglas, VP of Payer and Member Relations, and Ronda Buhrmester, Sr. Director of Reimbursement and Payer Relations, recently released a podcast going into a deep explanation of the 75/25 blended rate and why keeping them in place is so important to the industry. In this article, we will highlight some of the key points around the 75/25 blended rate, its significance, its implications for the industry, and the ongoing legislative efforts to extend its benefits.

Origins of the 75/25 Blended Rate

The 75/25 blended rate emerged as a response to the COVID-19 pandemic with the enactment of the CARES Act in early 2020. This legislative action was designed to ensure that medical equipment suppliers could continue providing essential services despite the challenges posed by the pandemic. The "75/25" in its name refers to the proportion of reimbursement rates calculated from two different periods: 75% from the post-competitive bidding rates and 25% from the unadjusted fee schedule in place before competitive bidding. This blended rate was implemented to counter the decline in reimbursement rates experienced in the years leading up to the CARES Act.

Understanding the Blended Rate Calculation

To grasp the concept of the 75/25 blended rate, let's consider an illustrative example with a CPAP device (HCPCS code: E0601). Prior to competitive bidding and rate adjustments, the reimbursement for this device was approximately $100. Through various rounds of competitive bidding, the reimbursement rate saw a substantial reduction to around $40 by 2020. The blended rate calculation takes 75% of the lower 2020 rate (75% of $40) and 25% of the pre-competitive bidding rate ($100), yielding a blended rate of approximately $55 for most non-rural areas.

Extension Efforts: Senate Bill S.1294

The 75/25 blended rate significantly impacted the reimbursement landscape for specific medical equipment codes, particularly those that experienced substantial decreases due to competitive bidding. This adjustment aimed to ensure that suppliers could continue providing essential medical equipment to patients while maintaining financial sustainability.

However, the 75/25 rates are not permanent; they are currently slated to end on 12/31/2023. When this happens, those rates will revert to what was in place prior to the implementation of the 75/25 blend, adjusted for inflation. This will mean a decrease in reimbursement of up to 40% for many DME products provided to non-rural, non-CBA beneficiaries. Click below to view a chart with examples of what the impact will look like for several high-utilization products.

View the Impact Chart

To sustain the benefits of the 75/25 blended rate, industry stakeholders, including suppliers and advocates, have been rallying behind Senate Bill S.1294. This bill seeks to extend the blended rate for non-rural areas until the end of 2024. The primary motivation behind this legislative effort is to address the increasing costs of goods, operational expenses, and the continued impact of the pandemic on the healthcare industry. Without the extension, reimbursement rates would revert to pre-CARES Act levels, potentially creating access challenges and financial strains for suppliers.

Taking Action

The push to extend the 75/25 blended rate requires active participation from medical equipment suppliers and industry stakeholders. Supporting Senate Bill S.1294 is crucial to maintaining fair reimbursement rates and ensuring patient access to vital equipment. On the VGM Government Relations website, there is a user-friendly tool that enables suppliers to quickly find their congressional representatives and send letters advocating for the passage of the bill. This advocacy process takes just minutes and can make a significant impact on the outcome of the legislation. It is a quick and easy process. Simply click here, type in your zip code, fill in your information, and push send.

The 75/25 blended rate introduced through the CARES Act brought a temporary yet impactful relief to medical equipment suppliers facing declining reimbursement rates coupled with increasing costs. As the industry navigates the post-pandemic landscape, the extension of this blended rate through Senate Bill S.1294 is paramount to sustaining patient access and the financial viability of suppliers. By understanding the intricacies of this rate adjustment and actively participating in advocacy efforts, stakeholders can contribute to ensuring quality patient care and a resilient healthcare industry.

Listen to the Podcast

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