This is the accessible text file for GAO report number GAO-14-156 
entitled 'Medicare: Second Year Update for CMS's Durable Medical 
Equipment Competitive Bidding Program Round 1 Rebid' which was 
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United States Government Accountability Office: 
GAO: 

Report to the Subcommittee on Health, Committee on Ways and Means, 
House of Representatives: 

March 2014: 

Medicare: 

Second Year Update for CMS's Durable Medical Equipment Competitive 
Bidding Program Round 1 Rebid: 

GAO-14-156: 

GAO Highlights: 

Highlights of GAO-14-156, a report to the Subcommittee on Health, 
Committee on Ways and Means, House of Representatives. 

Why GAO Did This Study: 

the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 required that CMS implement the CBP for certain DME. In 2008, the 
Medicare Improvements for Patients and Providers Act terminated the 
first round of supplier contracts and required CMS to repeat the CBP 
round 1—referred to as the round 1 rebid, resulting in the award of 
contracts to suppliers with CBP payments that began January 1, 2011. 

GAO was asked to review issues concerning the rebid's second year of 
operation-—2012. This report reviews the round 1 rebid's effects on 
(1) Medicare beneficiaries, (2) the market share of contract 
suppliers, and (3) all suppliers, including both contract and non-
contract suppliers (the suppliers not awarded rebid contracts.) To 
examine the effects on Medicare beneficiaries, GAO compared Medicare 
claims data for 2011 and 2012 with that for 2010, the year before the 
round 1 rebid. GAO also examined other information about CMS's efforts 
to monitor the effects of the CBP, and interviewed DME industry 
representatives and officials from Medicare beneficiary organizations. 
To examine the effects on both contract and non-contract suppliers, 
GAO compared Medicare claims data for 2012 with that for 2010 and 
analyzed other data provided by CMS. 

What GAO Found: 

The Medicare competitive bidding program (CBP) for durable medical 
equipment (DME) is administered by the Centers for Medicare & Medicaid 
Services (CMS) within the Department of Health and Human Services. 
Under the CBP, only competitively selected contract suppliers can 
furnish certain DME product categories (such as oxygen supplies and 
hospital beds) at competitively determined prices to Medicare 
beneficiaries in designated competitive bidding areas. The CBP's round 
1 rebid was in effect for a 3-year period, from 2011 through 2013. It 
included nine DME product categories in nine geographic areas. For CBP 
monitoring purposes, CMS also selected nine comparator areas that were 
demographically similar to the rebid areas. GAO's analysis found that 
in 2012, the second year of the round 1 rebid: 

* The number of beneficiaries furnished DME items included in the CBP 
generally decreased more in the CBP areas than in the comparator 
areas. For example, the number of beneficiaries furnished oxygen 
supplies decreased by about 22 percent in the CBP areas and by about 
16 percent in the comparator areas. According to CMS, CBP may have 
reduced inappropriate usage of DME and these decreases do not 
necessarily reflect beneficiary access issues. Based on its monitoring 
tools, which include comparing changes in the health outcomes of 
beneficiaries in the CBP areas to those in the comparator areas, CMS 
has concluded that beneficiaries have not been affected adversely by 
the CBP. 

* In general, a small number of contract suppliers had a large 
proportion of the market share in the nine competitive bidding areas. 
The top four contract suppliers generally accounted for a large 
proportion of the market in all CBP areas, although the top four 
suppliers for each product category were not the same in every 
competitive bidding area. CMS has reported that few contract suppliers 
had contracts terminated by the agency or voluntarily withdrew from 
Medicare. 

* The total number of DME suppliers and Medicare allowed charges 
decreased more in the CBP areas than in the comparator areas. For 
example, the number of suppliers in the CBP areas with Medicare 
allowed charges of $2,500 or more decreased, on average, 27 percent. 
In the comparator areas, supplier numbers decreased by 5 percent. The 
decreases in supplier numbers may reflect other factors, such as CMS's 
efforts to reduce Medicare DME fraud. 

The round 1 rebid's first 2 years achieved Medicare cost savings of 
about $400 million as estimated by CMS, and did not appear to have 
adversely affected beneficiary access to CBP-covered items. However, 
with CBP's national mail-order diabetic testing supplies program and 
expansion into an additional 100 bidding areas in July 2013, it will 
be important for CMS to continue its efforts to monitor the effects of 
the CBP. 

In commenting on a draft of this report, HHS cited the results of CMS'
s monitoring of beneficiaries' access to CBP items as evidence that 
CBP has not adversely affected beneficiaries. 

View [hyperlink, http://www.gao.gov/products/GAO-14-156]. For more 
information, contact Kathleen M. King at (202) 512-7114 or 
kingk@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Medicare Claims Data Show Larger Decreases in Beneficiary Utilization 
in Competitive Bidding Areas than Comparator Areas, but Beneficiary 
Access Does Not Appear to Have Been Affected: 

For the Round 1 Rebid Product Categories and Areas, a Small Number of 
Contract Suppliers Accounted for a Large Portion of the CBP Market 
Share in 2011 and 2012: 

The Number of Suppliers and Their Medicare Allowed Charges Generally 
Decreased More in Competitive Bidding Areas than in Comparator Areas: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Number of Suppliers in the Round 1 Rebid Competitive 
Bidding Areas and Their Comparator Areas; 2010 and 2012: 

Appendix II: Medicare Allowed Charges for Round 1 Rebid Competitive 
Bidding Areas and Their Comparator Areas; 2010 and 2012: 

Appendix III: Comments from the Department of Health and Human 
Services: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Total Number of Round 1 Rebid Product Categories and 
Competitive Bidding Areas Affected by the 11 Terminated Contract 
Suppliers, 2011 and 2012: 

Table 2: Total Number of Round 1 Rebid Product Categories and 
Competitive Bidding Areas Affected by the 16 Contract Suppliers that 
Voluntarily Withdrew from Medicare, 2011 and 2012: 

Table 3: Twelve Ownership Changes Involving Round 1 Rebid Contact 
Suppliers, 2011 and 2012: 

Table 4: Percentage Decreases in Number of Suppliers by Medicare 
Allowed Charge Amounts Comparing Round 1 Rebid Competitive Bidding 
Areas and Their Comparator Areas, Third Quarter 2010 to Third Quarter 
2012: 

Table 5: Percentage Decrease in Total Medicare Allowed Charges 
Comparing Round 1 Rebid Competitive Bidding Areas and Their Comparator 
Areas, Third Quarter 2010 to Third Quarter 201: 

Figures: 

Figure 1: Competitive Bidding Program Timeline, 1997-2014: 

Figure 2: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid Enteral Product Category Items; Each Month of 
2011 and 2012 Compared to the Same Month of 2010: 

Figure 3: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid Hospital Bed Product Category Items; Each 
Month of 2011 and 2012 Compared to the Same Month of 2010: 

Figure 4: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid Oxygen Product Category Items; Each Month of 
2011 and 2012 Compared to the Same Month of 2010: 

Figure 5: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid Walkers Product Category Items; Each Month of 
2011 and 2012 Compared to the Same Month of 2010: 

Figure 6: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Certain Round 1 Rebid Standard Power Wheelchair Product 
Category Items; Each Month of 2011 and 2012 Compared to the Same Month 
of 2010: 

Figure 7: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid CPAP/RAD Product Category Items; Each Month of 
2011 and 2012 Compared to the Same Month of 2010: 

Figure 8: Number of Round 1 Rebid Inquiries to 1-800-MEDICARE by 
Quarter, 2011 and 2012: 

Figure 9: Number of Round 1 Rebid Product Category Inquiries to 1-800-
MEDICARE by Quarter, 2012: 

Figure 10: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 20 Round 1 Rebid 
CPAP/RAD Product Category Codes, Pittsburgh Competitive Bidding Area, 
2011 and 2012: 

Figure 11: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 20 Round 1 Rebid 
CPAP/RAD Product Category Codes, Cleveland Competitive Bidding Area, 
2011 and 2012: 

Figure 12: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 17 Round 1 Rebid 
Enteral Product Category Codes, Cincinnati Competitive Bidding Area, 
2011 and 2012: 

Figure 13: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 17 Round 1 Rebid 
Enteral Product Category Codes, Dallas Competitive Bidding Area, 2011 
and 2012: 

Figure 14: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 31 Round 1 Rebid 
Hospital Bed Product Category Codes, Riverside Competitive Bidding 
Area, 2011 and 2012: 

Figure 15: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 31 Round 1 Rebid 
Hospital Bed Product Category Codes, Orlando Competitive Bidding Area, 
2011 and 2012: 

Figure 16: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 12 Round 1 Rebid 
Oxygen Product Category Codes, Cleveland Competitive Bidding Area, 
2011 and 2012: 

Figure 17: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 12 Round 1 Rebid 
Oxygen Product Category Codes, Kansas City Competitive Bidding Area, 
2011 and 2012: 

Figure 18: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 17 Round 1 Rebid 
Walkers Product Category Codes, Pittsburgh Competitive Bidding Area, 
2011 and 2012: 

Figure 19: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 17 Round 1 Rebid 
Walkers Product Category Codes, Orlando Competitive Bidding Area, 2011 
and 2012: 

Figure 20: Contract Supplier with the Highest Percentage of Medicare 
Total Allowed Charges for 20 Round 1 Rebid Standard Power Wheelchair 
Product Category Codes, Miami Competitive Bidding Area, 2011 and 2012: 

Figure 21: Contract Supplier with the Highest Percentage of Medicare 
Total Allowed Charges for 20 Round 1 Rebid Standard Power Wheelchair 
Product Category Codes, Riverside Competitive Bidding Area, 2011 and 
2012: 

Abbreviations: 

CAO: competitive acquisition ombudsman: 

CBP: competitive bidding program: 

CMS: Centers for Medicare & Medicaid Services: 

CPAP/RAD: continuous positive airway pressure devices and   
respiratory assist devices: 

CSR: customer service representative: 

DME: durable medical equipment: 

DMEPOS: durable medical equipment, prosthetics, orthotics, and related 
supplies: 

HCPCS: Healthcare Common Procedure Coding System: 

HHS: Department of Health and Human Services: 

NPWT: negative pressure wound therapy: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

March 7, 2014: 

The Honorable Kevin Brady: 
Chairman: 
The Honorable Jim McDermott: 
Ranking Member: 
Subcommittee on Health: 
Committee on Ways and Means: 

House of Representatives: 

In 2012, Medicare--a federal health insurance program--spent $11.4 
billion on durable medical equipment (DME),[Footnote 1] prosthetics, 
orthotics, and related supplies for beneficiaries.[Footnote 2] The 
Medicare program is administered by the Centers for Medicare & 
Medicaid Services (CMS) within the Department of Health and Human 
Services (HHS). Most Medicare beneficiaries participate in Medicare 
Part B,[Footnote 3] which helps pay for DMEPOS items and supplies, 
such as oxygen, wheelchairs, hospital beds, walkers, orthotics, 
prosthetics, and supplies if they are medically necessary and 
prescribed by a physician. Medicare beneficiaries typically obtain 
these items from suppliers, which submit claims for payment to 
Medicare on behalf of beneficiaries. 

To achieve Medicare savings for DMEPOS and to address DMEPOS fraud 
concerns,[Footnote 4] Congress, through the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003,[Footnote 5] required 
CMS to phase in a competitive bidding program (CBP) for DME and other 
items. Under CBP, DME suppliers--referred to as contract suppliers--
are competitively selected to furnish certain DME product categories 
to Medicare beneficiaries in designated competitive bidding areas. 
[Footnote 6],[Footnote 7] Suppliers not selected for a CBP contract 
are referred to as non-contract suppliers. Non-contract suppliers 
generally cannot furnish CBP-covered items, however, some of them may 
be grandfathered to continue to furnish some CBP-covered items to 
certain beneficiaries for a limited time or may act as subcontractors 
to contract suppliers.[Footnote 8] 

Beginning in 2009, CMS conducted a competition and awarded contracts 
to suppliers in nine competitive bidding areas for nine product 
categories,[Footnote 9],[Footnote 10] referred to as the round 1 
rebid.[Footnote 11] According to CMS, CBP's round 1 rebid competitive 
bidding areas were selected, in part, because they had high 
utilization, suggesting that some utilization may have been 
unnecessary. About 2 million of Medicare's estimated 45 million 
beneficiaries reside in the nine competitive bidding areas.[Footnote 
12] The original 356 suppliers that were awarded CBP round 1 rebid 
contracts--contract suppliers--were paid at the competitively 
determined payments for the CBP-covered DME items beginning on January 
1, 2011. CMS estimated that the round 1 rebid saved Medicare and 
beneficiaries--through lower coinsurance--about $400 million in its 
first two years.[Footnote 13] 

In a 2012 report, we reported on the first year--2011--of CBP's round 
1 rebid.[Footnote 14] We found that early data indicated that 
beneficiary utilization had decreased in some CBP product categories, 
but CMS's multiple monitoring activities generally indicated that 
beneficiary access and satisfaction had not been affected. You asked 
us to examine particular issues concerning the CBP round 1 rebid's 
second year--2012. In this report, we review (1) the extent to which 
Medicare beneficiaries have been affected by CBP's round 1 rebid, (2) 
the development of contract suppliers' market share in CBP's round 1 
rebid, and (3) the extent to which all suppliers--including both 
contract and non-contract suppliers--have been affected by CBP's round 
1 rebid. 

To examine the extent to which beneficiaries have been affected by the 
CBP round 1 rebid, we analyzed changes in utilization of CBP-covered 
DME items by comparing Medicare claims data from 2010, the year prior 
to the CBP round 1 rebid, to post-CBP round 1 rebid claims data from 
2011 and 2012.[Footnote 15] We used these data to determine whether 
the number of CBP-covered beneficiaries utilizing CBP-covered items 
and services increased or decreased in each month of 2011 and 2012 
compared to the same month in 2010 for six of the round 1 rebid's nine 
product categories.[Footnote 16] We did these analyses for Medicare 
beneficiaries using CBP-covered items in both the nine competitive 
bidding areas and in the nine areas selected by CMS--referred to as 
comparator areas--in this report.[Footnote 17],[Footnote 18] We also 
examined how the CBP round 1 rebid may have affected Medicare 
beneficiary access to and satisfaction with selected DME items by 
analyzing 2011 and 2012 CBP inquiry data from the 1-800-MEDICARE 
beneficiary help line, and CBP complaint data, and interviewing CMS 
officials and officials from a sample of Medicare beneficiary advocacy 
groups. 

To examine the development of contract suppliers' market share in the 
round 1 rebid, we obtained and analyzed quarterly Medicare claims data 
to review contract suppliers' Medicare market shares in 2011 and 2012 
for six of the nine product categories in each competitive bidding 
area. To ensure that we captured all Medicare total allowed charges 
submitted by a distinct contract supplier that may have been doing 
business in several locations under different registered names, 
national provider identifier numbers, or provider transaction access 
numbers, we used the unique bidder number assigned by CMS to each 
distinct bidding supplier and combined all Medicare total allowed 
charges submitted under any other identifying numbers for each product 
category and competitive bidding area.[Footnote 19] We then arrayed 
from highest to lowest all contract suppliers' individual Medicare 
total allowed charges for 2011 and 2012 combined and reviewed the 
individual market share of the top 4 suppliers for five product 
categories as well as the top supplier for the sixth product category 
in each competitive bidding area. [Hyperlink, 
http://dm.gao.gov?library=GAOHQ&doc=6334094] [Footnote 20] For each 
product category in each competitive bidding area, we also summed all 
other contract suppliers' individual Medicare total allowed charges to 
show their combined market share for each quarter of 2011 and 2012. 
Some Medicare total allowed charges were submitted by non-contract 
suppliers. We identified distinct non-contract suppliers, to the 
extent possible, by summing all the Medicare total allowed charges 
submitted under any national provider identifier number or provider 
transaction access number that were associated with one tax 
identification number for each product category in each competitive 
bidding area. Medicare total allowed charges submitted by non-contract 
suppliers were identified by their tax identification numbers because 
unique bidder numbers were not available. 

To further determine the extent that contract suppliers may have been 
affected by the round 1 rebid, we asked CMS for information on how 
many CBP contract suppliers have had their CBP contracts terminated; 
have voluntarily withdrawn from Medicare, which results in CMS 
canceling their CBP contracts; or have acquired or been acquired by 
other DME suppliers. To determine whether there have been changes in 
the number of subcontractor suppliers and grandfathered suppliers in 
CBP areas,[Footnote 21] we obtained information from CMS on the number 
of CBP contract suppliers that subcontracted with other suppliers to 
help fulfill their CBP contracts, and the extent that grandfathered 
suppliers were still furnishing items and services to CBP-covered 
beneficiaries. 

To examine the extent to which all suppliers--both contract and non-
contract suppliers--may have been affected by the round 1 rebid, we 
obtained and analyzed CMS Medicare claims data for the nine 
competitive bidding areas and their nine comparator areas. We compared 
the number of suppliers with total Medicare allowed charges at two 
levels in the 18 areas using the allowed charge data for the third 
quarter 2010, and for the third quarter 2012, the comparable quarter 
in the round 1 rebid's second year. The third quarter of 2010 was the 
last one before the round 1 rebid contract suppliers were announced in 
November 2010 and before the DME marketplace began to adjust to CBP in 
the fourth quarter of 2010. For example, CMS officials told us that 
some suppliers furnished diabetic beneficiaries with additional 
testing supplies in late 2010 before the beneficiaries switched to 
contract suppliers in 2011. For this analysis, we included suppliers 
with at least one allowed charge for a beneficiary residing in any of 
the 18 areas for any Medicare DMEPOS fee-for-service HCPCS codes, 
excluding the prosthetic and orthotic codes as this category generally 
represents more individualized items needing to be fitted to a 
beneficiary and including the parenteral--intravenous nutrition--
codes.[Footnote 22] 

To assess the reliability of the data we received from CMS, we 
reviewed and identified outliers in the data, and followed up with CMS 
officials to clarify and resolve any discrepancies. We assessed the 
reliability of Medicare claims data from CMS's 100 Percent Standard 
Analytic Files by reviewing existing information about the data and 
the systems that produced them and performing appropriate electronic 
data checks. We determined that these data were sufficiently reliable 
for the purposes of this report. 

We conducted this performance audit from August 2012 through March 
2014 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings 
based on our audit objectives. 

Background: 

Medicare traditionally has paid DMEPOS suppliers through fee schedule 
amounts based on suppliers' historical charges to Medicare.[Footnote 
23] The purpose of CBP is to improve how Medicare payment amounts are 
set by paying only competitively selected contract suppliers amounts 
based on competitive bids, thereby providing Medicare program savings 
and reducing Medicare beneficiaries' out-of-pocket expenses for DMEPOS 
items and services. 

The CBP: 

CMS and its CBP implementation contractor--Palmetto GBA--administer 
and implement the CBP and its bidding rounds.[Footnote 24] In each 
competitive bidding area included in a CBP bidding round, suppliers 
can bid for one or more product categories' CBP-covered 
items.[Footnote 25] The suppliers' bids are evaluated based on the 
supplier's eligibility, financial status, and bid prices. From this 
evaluation, the CBP payments--referred to as single payment amounts--
are determined for each CBP-covered item in each competitive bidding 
area, and the winning suppliers are selected.[Footnote 26] Winning 
suppliers are then offered CBP contracts. If the supplier accepts its 
contract offer, it agrees to accept Medicare assignment on the CBP-
covered items for the product category and in the competitive bidding 
area involved,[Footnote 27] and to be paid the relevant CBP single 
payment amounts. 

CMS was also required to take steps to ensure that small suppliers 
could be awarded CBP contracts, and accordingly set a target that 30 
percent of the qualified suppliers in each product category in each 
competitive bidding area would be small suppliers as defined for CBP. 
[Footnote 28] In instances where the small supplier target is not 
initially met, CMS may award additional small suppliers CBP contracts 
after the agency has determined the number of suppliers needed to meet 
or exceed CMS's estimated beneficiary demand. To help ensure 
beneficiary access and choice, CMS tries to award at least five 
contracts in each product category in each competitive bidding area. 
[Footnote 29] CMS is required by law to recompete the CBP contracts at 
least once every three years. (See figure 1 for CBP's legislative 
history and program implementation timeline.) 

Figure 1: Competitive Bidding Program Timeline, 1997-2014: 

[Refer to PDF for image: timeline] 

1997: 
Balanced Budget Act of 1997 required CMS to test competitive bidding 
as a way to set payments for certain Medicare Part B services and 
supplies selected by CMS.[A] 

1999-2002: 
CMS conducted 3 DME competitive bidding demonstration projects. 

2003: 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
required CMS to implement competitive bidding for DME and certain 
other items.[B] 

2007: 
CBP Round 1: 
April 2: 10 product categories and 10 competitive bidding areas were 
announced; 
May 15: 60-day bid window opened; CMS issued instructions to suppliers 
on how to submit bids; 
Sept. 25: Bid window closed; was open for 134 days. 

2008: 
CBP Round 1: 
May 19: 329 contract suppliers were announced; 
July 1: Contracts and single payment amounts became effective. 

July 15: Medicare Improvements for Patients and Providers Act of 2008 
enacted;[C] round 1 stopped and contracts and single payment amounts 
were terminated; round rebid postponed until 2009. 

2009: 
CBP Round 1 Rebid: 
Oct. 21: 60-day bid window opened for 9 product categories and 9 
competitive bidding areas.[D] 

2010: 
CBP Round 1 Rebid: 
July 2: Single payment amounts announced; contract award process began; 
Nov. 3: 356 contract suppliers were announced. 

2011: 
CBP Round 1 Rebid: 
Jan. 1: Contracts and single payment amounts became effective. 

CBP Round 2 and the National Diabetic Testing Supplies Program: 
Aug. 19: Eight product categories and 100 competitive bidding areas 
and the	national diabetic testing supplies program were announced.[E] 

2012: 
CBP Round 2 and the National Diabetic Testing Supplies Program: 
Jan. 30: 60-day bid window opened. 

2012: 
CBP Round 1 Rebid Recompete: 
April 17: Six product categories and 9 competitive bidding areas were 
announced; 
Oct. 15: 60-day bid window opened. 

2013: 
CBP Round 2 and the National Diabetic Testing Supplies Program: 
Jan. 30: Single payment amounts announced; contract award process 
began; 
April 9: 799 round 2 and 18 national diabetic testing supplies program 
contract suppliers were announced; 
July 1: Contracts and single payments amounts became effective. 

2013: 
CBP Round 1 Rebid Recompete: 
Oct. 1: Single payment amounts announced; contract award process began. 

2014: 
CBP Round 1 Rebid Recompete: 
Jan. 1: Contracts and single payment amounts became effective. 

Source: GAO analysis of data provided by the Centers for Medicare & 
Medicaid Services (CMS). 

[A] Pub. L. No. 105-33, § 4319(a), 111 Stat. 251, 392-4 (1997) 
(codified, as amended, at 42 U.S.C. § 1395w-3). 

[B] Pub. L. No. 108-173 § (302)(b), 117 Stat. 2066, 2224-30 (2003) 
(codified, as amended, at 42 U.S.C. § 1395w-3). Items and services 
covered by the competition were durable medical equipment (DME) and 
related supplies, off-the-shelf orthotics, and enteral nutrients and 
related equipment and supplies. 

[C] Pub. L. No. 110-275, § 154(a)(2), 122 Stat. 2494, 2560-3 (2008) 
(codified, as amended, at 42 U.S.C. § 1395w-3). 

[D] The Medicare Improvements for Patients and Providers Act of 2008 
and implementing regulations require CMS to notify suppliers of 
missing financial documentation if their bids are submitted within the 
covered document review date, which is the later of: (1) 30 days 
before the final date for the close of the bid window; or (2) 30 days 
after the bid window opens. For the round 1 rebid, CMS was required to 
notify eligible suppliers of missing financial documentation within 45 
days after the end of the covered document review date. For other 
competitive bidding program (CBP) rounds, CMS is required to notify 
eligible suppliers of missing financial documentation within 90 days 
after the end of the covered document review date. 

[E] The national mail-order competition includes all parts of the 
United States, including the 50 states, the District of Columbia, 
Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa. 

[End of figure] 

The CBP rounds include: 

* Round 1 rebid. CMS awarded contracts to 356 contract suppliers for 
the provision of DME items and services in nine product categories in 
nine competitive bidding areas. The contracts took effect on January 
1, 2011 and expired after three years on December 31, 2013, except for 
the mail-order diabetic testing supplies contracts, which expired on 
December 31, 2012. 

* Round 2. Round 2 expands CBP to another 100 competitive bidding 
areas in 91 metropolitan statistical areas. The single payment amounts 
for covered items were effective July 1, 2013 under round 2 contracts. 
The round 2 product categories are the same as the round 1 rebid 
except for the addition of the negative pressure wound therapy (NPWT) 
category,[Footnote 30] the deletion of the complex power wheelchairs 
and mail-order diabetic supplies categories, and the extension of the 
support surfaces category to all round 2 competitive bidding areas. 
[Footnote 31] The round 2 contracts are for a term of 3 years. 

* National mail-order diabetic testing supplies program. The CBP 
national mail-order diabetic testing supplies program competition was 
conducted at the same time as round 2, and its competitively 
determined single payment amounts were effective July 1, 2013. 
[Footnote 32] Unlike in the round 1 rebid, suppliers bidding for the 
national program had to demonstrate that their bids would cover at 
least 50 percent, by sales volume, of all types of diabetic testing 
strips on the market.[Footnote 33] These contracts are for a term of 3 
years. Non-mail order Medicare payments are the same as the mail-order 
single payment amounts for the CBP-covered items.[Footnote 34] 

* Round 1 recompete. In anticipation of the expiration of the round 1 
rebid contracts, in 2012 CMS recompeted contracts for the nine round 1 
rebid competitive bidding areas, referred to as the round 1 recompete. 
The round 1 recompete's six product categories differ from the round 1 
rebid categories by adding infusion pumps,[Footnote 35] NPWT pumps, 
deleting complex wheelchairs, and creating a new category that 
includes home equipment, such as hospital beds and commode chairs. 
[Footnote 36] The recompete contracts have a 3-year term, with an 
effective date of January 1, 2014. 

CBP Contract Supplier Terminations, Voluntary Withdrawals, and Changes 
in Ownership: 

A contract supplier may no longer participate in CBP if CMS terminates 
its contract, if it voluntarily withdraws from Medicare, or if it has 
experienced a certain type of change of ownership. CMS can terminate a 
contract supplier's CBP contract if a supplier fails to meet its 
contractual obligations.[Footnote 37] In that case, CMS may request 
that the supplier submit a corrective action plan, suspend or 
terminate the contract, preclude it from participating in CBP, or 
revoke its billing number. A contract supplier that has its CBP 
contract terminated may continue to operate as a Medicare supplier and 
submit Medicare claims for non-CBP covered items and services. 
Contract suppliers may choose to voluntarily withdraw from Medicare, 
and thus no longer be a Medicare supplier. Contract suppliers may also 
have a change in ownership that impacts their participation in CBP, 
but their CBP contracts may be transferred only under certain 
circumstances. A change in ownership, also referred to as a CHOW, may 
result in either (1) a new entity or company that did not exist before 
the merger or acquisition transaction; or (2) a successor entity or 
company that exists before the transaction, merges or acquires a 
contract supplier, and continues to exist as it did before the 
transaction. If a contract supplier is negotiating an ownership 
change, the supplier must notify CMS in advance and CMS may award the 
CBP contract to the entity that merges with or acquires the contract 
supplier in certain circumstances. These circumstances include when 
the successor entity is acquiring the assets of the contract supplier 
and submits a signed agreement to CMS in advance of the acquisition 
stating that it will assume all obligations under the contract. 

Beneficiary Sources for CBP Assistance: 

Medicare beneficiaries residing in competitive bidding areas have 
several sources available to help them locate contract suppliers and 
receive assistance for CBP-related issues. 

* CBP Online Contract Supplier Locator. To locate a CBP contract 
supplier, beneficiaries can use the CMS online supplier locator tool 
on CMS's Medicare website.[Footnote 38] The contract locator tool 
contains the names of the contract suppliers in each competitive 
bidding area, as well as the product categories for which they furnish 
CBP-covered items. Contract suppliers are responsible for submitting 
information regarding the specific brands of items they furnish in the 
upcoming quarter, and CMS uses this information to update the supplier 
locator. 

* 1-800-MEDICARE Inquiries. CMS has directed beneficiaries to call its 
1-800-MEDICARE beneficiary help line with CBP questions--referred to 
by CMS as inquiries.[Footnote 39] Callers are assisted by trained CBP 
customer service representatives (CSR) who use several scripts to 
answer general questions about CBP and specific product categories and 
assist beneficiaries in finding CBP suppliers.[Footnote 40] If a 
beneficiary's inquiry cannot be addressed by the scripts, the CSR will 
forward the inquiry to an advanced-level CSR who will research the 
issue and respond to the beneficiary's inquiry. 

* Palmetto GBA and CMS regional offices. Palmetto GBA, the CBP 
implementation contractor, investigates all beneficiary or supplier 
complaints related to alleged CBP contract violations.[Footnote 41] In 
addition, Palmetto GBA provides CBP-related information and updates 
through its website.[Footnote 42] Local Palmetto GBA staff are 
stationed in the competitive bidding areas and work with CMS regional 
staff to monitor CBP activities and identify and address any emerging 
issues. CMS also uses its regional offices as the focal point for 
calls that cannot be resolved by 1-800-MEDICARE; for example, the 
offices may assist when a CSR is unable to help a beneficiary find a 
contract supplier. 

* Competitive Acquisition Ombudsman (CAO). The CMS CAO was created to 
respond to CBP-related complaints and inquiries made by suppliers and 
individuals, and works with CMS officials and contractors and Palmetto 
GBA to resolve them. The CAO is required to submit an annual report 
detailing CBP-related activities to Congress.[Footnote 43] 

CMS's CBP Monitoring Activities: 

CMS has implemented several activities to monitor whether beneficiary 
access or satisfaction have been affected by the implementation of CBP. 

* Inquiries and Complaints to 1-800-MEDICARE. CMS tracks all CBP-
related inquiries to 1-800-MEDICARE. All calls are first classified as 
inquiries and CMS defines as a CBP complaint only those inquiries that 
cannot be resolved by any 1-800-MEDICARE CSR and is elevated to 
another entity, such as Palmetto GBA, CMS's regional offices, or the 
CAO for resolution. 

* Beneficiary Satisfaction Surveys. CMS conducted pre and post-
implementation surveys to measure beneficiary satisfaction with CBP's 
round 1 rebid. The pre-implementation survey was conducted from June 
to August 2010, the first post-implementation survey was conducted 
from August to October 2011, and the second post-implementation survey 
was conducted in June 2013. CMS surveyed beneficiaries in the nine 
round 1 rebid competitive bidding areas, as well as the nine 
comparator areas. 

* National Claims History. CMS conducts daily monitoring of national 
Medicare claims data to identify utilization trends, monitor 
beneficiary access, address aberrations in services, and target 
potential fraud and abuse. CMS tracks health outcomes--such as 
hospitalizations, emergency room visits, physician visits, admissions 
to skilled nursing facilities, and deaths--for beneficiaries likely to 
use a CBP-covered product and who have used a CBP-covered product, in 
both competitive bidding areas and comparator areas to determine 
whether health outcomes in the competitive bidding areas remain 
consistent with national trends. CMS posts quarterly reports of these 
health outcomes on its website. [Hyperlink, 
http://dm.gao.gov?library=GAOHQ&doc=6455771] [Footnote 44] 

* Form C. Each quarter, CMS requires contract suppliers to submit a 
Form C that lists the specific CBP-covered DME items they plan to 
furnish the following quarter--including the brand names and equipment 
models.[Footnote 45] According to Palmetto GBA, this information is 
used to update the Medicare supplier directory tool and to evaluate 
beneficiary access to competitively bid items, as well as the quality 
of items and services. 

* Secret shopping. CMS has conducted secret shopping calls in which 
individuals posed as beneficiaries and requested items, such as 
specific diabetic supplies from contract suppliers to determine 
whether the suppliers offer the supplies they claim to furnish. Secret 
shopping is conducted on a limited ad-hoc basis and may be done in 
response to specific complaints received, or to evaluate certain 
contract suppliers and monitor their performance and compliance with 
the terms of their CBP contracts. 

Medicare Claims Data Show Larger Decreases in Beneficiary Utilization 
in Competitive Bidding Areas than Comparator Areas, but Beneficiary 
Access Does Not Appear to Have Been Affected: 

Our analysis of Medicare claims data found that for five of the six 
product categories we examined, the number of distinct beneficiaries 
furnished CBP-covered items generally decreased more in the 
competitive bidding areas than in the comparator areas in each month 
of 2011 and 2012 compared to the same month of 2010. CMS continued 
several ongoing monitoring activities and reported that the CBP round 
1 rebid did not affect beneficiary access and satisfaction in its 
second year. In addition, several Medicare beneficiary advocacy groups 
that we interviewed did not report widespread access issues among 
their members. 

Medicare Claims Data Show Larger Decreases in Beneficiary Utilization 
in Competitive Bidding Areas than Comparator Areas: 

Our analysis of Medicare claims data found that the number of distinct 
beneficiaries furnished CBP-covered items generally decreased more in 
the nine competitive bidding areas than in the nine comparator areas 
in each month of 2011 and 2012 compared to the same month of 2010 for 
five of the six product categories we analyzed.[Footnote 46] However, 
the larger decreases in the number of beneficiaries furnished CBP-
covered items in the competitive bidding areas do not necessarily 
indicate that CBP-covered beneficiaries did not receive needed DME. As 
CMS has reported, the CBP may have curbed previous inappropriate 
distribution of some CBP-covered items in competitive bidding areas. 

Enteral Product Category: 

Our analysis found that fewer beneficiaries received one or more 
enteral product category items in each month of 2011 and 2012 compared 
to the same month of 2010. In 2012, the declines were roughly 
equivalent in the competitive bidding areas and the comparator areas. 
(See figure 2.) For example, in the competitive bidding areas, the 
number of CBP-covered beneficiaries who received one or more items in 
May 2012 decreased by about 4 percent compared to May 2010. In the 
comparator areas, the number of beneficiaries who received one or more 
items was about 6 percent lower in May 2012 compared to May 2010. 

Figure 2: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid Enteral Product Category Items; Each Month of 
2011 and 2012 Compared to the Same Month of 2010: 

[Refer to PDF for image: multiple line graph] 

2011: 

January: 
Beneficiaries in competitive bidding areas: -18.2%; 
Beneficiaries in comparator areas: -10.0 

February; 
Beneficiaries in competitive bidding areas: -19.0%; 
Beneficiaries in comparator areas: -3.7%. 

March; 
Beneficiaries in competitive bidding areas: -14.4%; 
Beneficiaries in comparator areas: -3.8%. 

April; 
Beneficiaries in competitive bidding areas: -10.8%; 
Beneficiaries in comparator areas: -3.8%. 

May; 
Beneficiaries in competitive bidding areas: -10.6%; 
Beneficiaries in comparator areas: -4.7%. 

June; 
Beneficiaries in competitive bidding areas: -9.0%; 
Beneficiaries in comparator areas: -3.3%. 

July; 
Beneficiaries in competitive bidding areas: -10.2%; 
Beneficiaries in comparator areas: -5.3%. 

August; 
Beneficiaries in competitive bidding areas: -9.9%; 
Beneficiaries in comparator areas: -4.4%. 

September; 
Beneficiaries in competitive bidding areas: -11.0%; 
Beneficiaries in comparator areas: -5.7%. 

October; 
Beneficiaries in competitive bidding areas: -9.7%; 
Beneficiaries in comparator areas: -7.2%. 

November; 
Beneficiaries in competitive bidding areas: -6.6%; 
Beneficiaries in comparator areas: -5.6%. 

December; 
Beneficiaries in competitive bidding areas: -5.2%; 
Beneficiaries in comparator areas: -6.8%. 

2012: 

January; 
Beneficiaries in competitive bidding areas: -12.2%; 
Beneficiaries in comparator areas: -12.1%. 

February; 
Beneficiaries in competitive bidding areas: -5.1%; 
Beneficiaries in comparator areas: -3.1%. 

March; 
Beneficiaries in competitive bidding areas: -3.7%; 
Beneficiaries in comparator areas: -5.2%. 

April; 
Beneficiaries in competitive bidding areas: -3.8%; 
Beneficiaries in comparator areas: -5.7%. 

May; 
Beneficiaries in competitive bidding areas: -3.9%; 
Beneficiaries in comparator areas: -6.0%. 

June; 
Beneficiaries in competitive bidding areas: -7.4%; 
Beneficiaries in comparator areas: -6.6%. 

July; 
Beneficiaries in competitive bidding areas: -8.6%; 
Beneficiaries in comparator areas: -8.0%. 

August; 
Beneficiaries in competitive bidding areas: -8.4%; 
Beneficiaries in comparator areas: -7.8%. 

September; 
Beneficiaries in competitive bidding areas: -9.5%; 
Beneficiaries in comparator areas: -9.3%. 

October; 
Beneficiaries in competitive bidding areas: -8.5%; 
Beneficiaries in comparator areas: -7.9%. 

November; 
Beneficiaries in competitive bidding areas: -8.4%; 
Beneficiaries in comparator areas: -7.2%. 

December; 
Beneficiaries in competitive bidding areas: -9.9%; 
Beneficiaries in comparator areas: -8.3%. 

Source: GAO analysis of CMS data. 

Note: This analysis was based on Medicare claims data for all 17 rebid-
covered codes in the enteral product category. 

[End of figure] 

Hospital Bed Product Category: 

Our analysis found that fewer beneficiaries received one or more 
hospital bed product category items in all months of 2011 and 2012 
compared to the same month of 2010 in the competitive bidding areas, 
with consistently lesser declines in the comparator areas over the 
same period. (See figure 3.) 

Figure 3: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid Hospital Bed Product Category Items; Each 
Month of 2011 and 2012 Compared to the Same Month of 2010: 

[Refer to PDF for image: multiple line graph] 

2011: 

January; 
Beneficiaries in competitive bidding areas: -8.4%; 
Beneficiaries in comparator areas: 2.8%. 

February; 
Beneficiaries in competitive bidding areas: -10.0%; 
Beneficiaries in comparator areas: 2.0%. 

March; 
Beneficiaries in competitive bidding areas: -11.4%; 
Beneficiaries in comparator areas: 1.7%. 

April; 
Beneficiaries in competitive bidding areas: -13.4%; 
Beneficiaries in comparator areas: -0.05%. 

May; 
Beneficiaries in competitive bidding areas: -14.1%; 
Beneficiaries in comparator areas: -2.0%. 

June; 
Beneficiaries in competitive bidding areas: -13.0%; 
Beneficiaries in comparator areas: -2.3%. 

July; 
Beneficiaries in competitive bidding areas: -13.3%; 
Beneficiaries in comparator areas: -3.2%. 

August; 
Beneficiaries in competitive bidding areas: -13.6%; 
Beneficiaries in comparator areas: -2.8%. 

September; 
Beneficiaries in competitive bidding areas: -14.2%; 
Beneficiaries in comparator areas: -2.7%. 

October; 
Beneficiaries in competitive bidding areas: -15.3%; 
Beneficiaries in comparator areas: -3.1%. 

November; 
Beneficiaries in competitive bidding areas: -14.5%; 
Beneficiaries in comparator areas: -3.5%. 

December; 
Beneficiaries in competitive bidding areas: -16.8%; 
Beneficiaries in comparator areas: -3.9%. 

2012: 

January; 
Beneficiaries in competitive bidding areas: -18.8%; 
Beneficiaries in comparator areas: 0.5%. 

February; 
Beneficiaries in competitive bidding areas: -16.4%; 
Beneficiaries in comparator areas: 0.07%. 

March; 
Beneficiaries in competitive bidding areas: -16.2%; 
Beneficiaries in comparator areas: -1.5%. 

April; 
Beneficiaries in competitive bidding areas: -16.6%; 
Beneficiaries in comparator areas: -2.7%. 

May; 
Beneficiaries in competitive bidding areas: -17.7%; 
Beneficiaries in comparator areas: -3.7%. 

June; 
Beneficiaries in competitive bidding areas: -18.8%; 
Beneficiaries in comparator areas: -4.9%. 

July; 
Beneficiaries in competitive bidding areas: -18.2%; 
Beneficiaries in comparator areas: -6.6%. 

August; 
Beneficiaries in competitive bidding areas: -19.3%; 
Beneficiaries in comparator areas: -6.2%. 

September; 
Beneficiaries in competitive bidding areas: -20.4%; 
Beneficiaries in comparator areas: -7.4%. 

October; 
Beneficiaries in competitive bidding areas: -20.6%; 
Beneficiaries in comparator areas: -8.8%. 

November; 
Beneficiaries in competitive bidding areas: -20.1%; 
Beneficiaries in comparator areas: -10.0%. 

December; 
Beneficiaries in competitive bidding areas: -24.0%; 
Beneficiaries in comparator areas: -13.7%. 

Source: GAO analysis of CMS data. 

Note: This analysis was based on Medicare claims data for all 31 rebid-
covered codes in the hospital bed product category. 

[End of figure] 

Oxygen Product Category: 

Our analysis of Medicare claims data found that the number of 
beneficiaries who received one or more oxygen product category items 
each month of 2011 and 2012 compared to the same month of 2010 
decreased more in the competitive bidding areas than in the comparator 
areas, although there were substantial declines in both types of 
areas. (See figure 4.) For example, compared to May 2010, the number 
of beneficiaries furnished one or more oxygen product category items 
decreased by about 9 percent in May 2011 and by about 22 percent in 
May 2012 in the competitive bidding areas. For the comparator areas, 
the number of beneficiaries furnished one or more items decreased by 
about 5 percent in May 2011 and by about 16 percent in May 2012. 

Figure 4: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid Oxygen Product Category Items; Each Month of 
2011 and 2012 Compared to the Same Month of 2010: 

[Refer to PDF for image: multiple line graph] 

2011: 

January; 
Beneficiaries in competitive bidding areas: -6.6%; 
Beneficiaries in comparator areas: -2.4%. 

February; 
Beneficiaries in competitive bidding areas: -6.3%; 
Beneficiaries in comparator areas: -1.8%. 

March; 
Beneficiaries in competitive bidding areas: -7.3%; 
Beneficiaries in comparator areas: -3.9%. 

April; 
Beneficiaries in competitive bidding areas: -8.1%; 
Beneficiaries in comparator areas: -3.9%. 

May; 
Beneficiaries in competitive bidding areas: -9.0%; 
Beneficiaries in comparator areas: -4.6%. 

June; 
Beneficiaries in competitive bidding areas: -9.5%; 
Beneficiaries in comparator areas: -4.9%. 

July; 
Beneficiaries in competitive bidding areas: -10.6%; 
Beneficiaries in comparator areas: -6.7%. 

August; 
Beneficiaries in competitive bidding areas: -8.6%; 
Beneficiaries in comparator areas: -6.1%. 

September; 
Beneficiaries in competitive bidding areas: -9.3%; 
Beneficiaries in comparator areas: -6.9%. 

October; 
Beneficiaries in competitive bidding areas: -11.2%; 
Beneficiaries in comparator areas: -7.3%. 

November; 
Beneficiaries in competitive bidding areas: -12.9%; 
Beneficiaries in comparator areas: -8.6%. 

December; 
Beneficiaries in competitive bidding areas: -12.6%; 
Beneficiaries in comparator areas: -9.5%. 

2012: 

January; 
Beneficiaries in competitive bidding areas: -17.3%; 
Beneficiaries in comparator areas: -12.7%. 

February; 
Beneficiaries in competitive bidding areas: -17.6%; 
Beneficiaries in comparator areas: -12.5%. 

March; 
Beneficiaries in competitive bidding areas: -19.8%; 
Beneficiaries in comparator areas: -14.4%. 

April; 
Beneficiaries in competitive bidding areas: -20.8%; 
Beneficiaries in comparator areas: -15.0%. 

May; 
Beneficiaries in competitive bidding areas: -21.8%; 
Beneficiaries in comparator areas: -15.9%. 

June; 
Beneficiaries in competitive bidding areas: -22.6%; 
Beneficiaries in comparator areas: -17.2%. 

July; 
Beneficiaries in competitive bidding areas: -24.1%; 
Beneficiaries in comparator areas: -19.3%. 

August; 
Beneficiaries in competitive bidding areas: -23.1%; 
Beneficiaries in comparator areas: -19.5%. 

September; 
Beneficiaries in competitive bidding areas: -23.6%; 
Beneficiaries in comparator areas: -20.5%. 

October; 
Beneficiaries in competitive bidding areas: -23.3%; 
Beneficiaries in comparator areas: -20.3%. 

November; 
Beneficiaries in competitive bidding areas: -23.3%; 
Beneficiaries in comparator areas: -20.1%. 

December; 
Beneficiaries in competitive bidding areas: -23.1%; 
Beneficiaries in comparator areas: -20.2%. 

Source: GAO analysis of CMS data. 

Note: This analysis was based on Medicare claims data for all 12 rebid-
covered codes in the oxygen product category. 

[End of figure] 

Walkers Product Category: 

Our analysis found that substantially fewer beneficiaries in the 
competitive bidding areas received one or more walkers product 
category items in each month of 2011 and 2012 compared to the same 
month of 2010, although there were also declines in the comparator 
areas. (See figure 5.) For example, compared to May 2010, the number 
of CBP-covered beneficiaries who received one or more walkers product 
category items was about 26 percent lower in May 2011 and about 24 
percent lower in May 2012. In the comparator areas, compared to May 
2010, 6 percent fewer beneficiaries received one or more walkers 
product category items in May 2011 and about 5 percent fewer 
beneficiaries received one or more of these items in May 2012. 

Figure 5: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid Walkers Product Category Items; Each Month of 
2011 and 2012 Compared to the Same Month of 2010: 

[Refer to PDF for image: multiple line graph] 

2011: 

January; 
Beneficiaries in competitive bidding areas: -34.1%; 
Beneficiaries in comparator areas: 2.7%. 

February; 
Beneficiaries in competitive bidding areas: -29.7%; 
Beneficiaries in comparator areas: -2.9%. 

March; 
Beneficiaries in competitive bidding areas: -28.9%; 
Beneficiaries in comparator areas: -5.7%. 

April; 
Beneficiaries in competitive bidding areas: -32.2%; 
Beneficiaries in comparator areas: -5.4%. 

May; 
Beneficiaries in competitive bidding areas: -25.6%; 
Beneficiaries in comparator areas: -6.2%. 

June; 
Beneficiaries in competitive bidding areas: -26.4%; 
Beneficiaries in comparator areas: -4.8%. 

July; 
Beneficiaries in competitive bidding areas: -30.1%; 
Beneficiaries in comparator areas: -6.9%. 

August; 
Beneficiaries in competitive bidding areas: -26.0%; 
Beneficiaries in comparator areas: -0.9%. 

September; 
Beneficiaries in competitive bidding areas: -27.5%; 
Beneficiaries in comparator areas: -1.6%. 

October; 
Beneficiaries in competitive bidding areas: -25.9%; 
Beneficiaries in comparator areas: -2.1%. 

November; 
Beneficiaries in competitive bidding areas: -27.1%; 
Beneficiaries in comparator areas: -3.7%. 

December; 
Beneficiaries in competitive bidding areas: -31.2%; 
Beneficiaries in comparator areas: -6.2%. 

2012: 

January; 
Beneficiaries in competitive bidding areas: -23.0%; 
Beneficiaries in comparator areas: -5.5%. 

February; 
Beneficiaries in competitive bidding areas: -18.2%; 
Beneficiaries in comparator areas: 1.4%. 

March; 
Beneficiaries in competitive bidding areas: -26.0%; 
Beneficiaries in comparator areas: -10.6%. 

April; 
Beneficiaries in competitive bidding areas: -28.3%; 
Beneficiaries in comparator areas: -10.7%. 

May; 
Beneficiaries in competitive bidding areas: -23.9%; 
Beneficiaries in comparator areas: -4.7%. 

June; 
Beneficiaries in competitive bidding areas: -24.6%; 
Beneficiaries in comparator areas: -7.3%. 

July; 
Beneficiaries in competitive bidding areas: -26.3%; 
Beneficiaries in comparator areas: -10.6%. 

August; 
Beneficiaries in competitive bidding areas: -19.4%; 
Beneficiaries in comparator areas: -2.4%. 

September; 
Beneficiaries in competitive bidding areas: -27.0%; 
Beneficiaries in comparator areas: -11.5%. 

October; 
Beneficiaries in competitive bidding areas: -22.6%; 
Beneficiaries in comparator areas: -4.3%. 

November; 
Beneficiaries in competitive bidding areas: -23.1%; 
Beneficiaries in comparator areas: -5.7%. 

December; 
Beneficiaries in competitive bidding areas: -36.1%; 
Beneficiaries in comparator areas: -15.5%. 

Source: GAO analysis of CMS data. 

Note: This analysis was based on Medicare claims data for all 17 rebid-
covered codes in the walker product category. 

[End of figure] 

Standard Power Wheelchair Product Category: 

We found that fewer beneficiaries in the competitive bidding areas 
received one or more standard power wheelchair product category items 
each month of 2011 and 2012 compared to the same month of 
2010.[Footnote 47] (See figure 6.) For example, compared to May 2010, 
about 16 percent fewer beneficiaries in the competitive bidding areas 
received one or more standard power wheelchair product category items 
in May 2011 and about 15 percent fewer in May 2012. We did not include 
like information for the comparator areas because CMS changed the 
payment policy for standard power wheelchairs in non-competitive 
bidding areas only, making a comparison to the competitive bidding 
areas difficult. This change in payment policy, which was effective 
January 1, 2011, eliminated the option for the lump sum purchase 
payment for standard power wheelchairs in all non-competitive bidding 
areas. 

Figure 6: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Certain Round 1 Rebid Standard Power Wheelchair Product 
Category Items; Each Month of 2011 and 2012 Compared to the Same Month 
of 2010: 

[Refer to PDF for image: line graph] 

2011: 

January; 
Beneficiaries in competitive bidding areas: -45.2%. 

February; 
Beneficiaries in competitive bidding areas: -33.8%. 

March; 
Beneficiaries in competitive bidding areas: -34.8%. 

April; 
Beneficiaries in competitive bidding areas: -33.4%. 

May; 
Beneficiaries in competitive bidding areas: -15.5%. 

June; 
Beneficiaries in competitive bidding areas: -16.9%. 

July; 
Beneficiaries in competitive bidding areas: -23.6%. 

August; 
Beneficiaries in competitive bidding areas: -14.5%. 

September; 
Beneficiaries in competitive bidding areas: -17.5%. 

October; 
Beneficiaries in competitive bidding areas: -22.5%. 

November; 
Beneficiaries in competitive bidding areas: -20%. 

December; 
Beneficiaries in competitive bidding areas: -40.7%. 

2012: 

January; 
Beneficiaries in competitive bidding areas: -18.7%. 

February; 
Beneficiaries in competitive bidding areas: -7.3%. 

March; 
Beneficiaries in competitive bidding areas: -29.7%. 

April; 
Beneficiaries in competitive bidding areas: -33.8%. 

May; 
Beneficiaries in competitive bidding areas: -15.1%. 

June; 
Beneficiaries in competitive bidding areas: -37.3%. 

July; 
Beneficiaries in competitive bidding areas: -33.0%. 

August; 
Beneficiaries in competitive bidding areas: -27.0%. 

September; 
Beneficiaries in competitive bidding areas: -53.9%. 

October; 
Beneficiaries in competitive bidding areas: -61.0%. 

November; 
Beneficiaries in competitive bidding areas: -53.9%. 

December; 
Beneficiaries in competitive bidding areas: -71.0%. 

Source: GAO analysis of CMS data. 

Note: This analysis was based on Medicare claims data for the 20 
distinct rebid-covered codes in the standard power wheelchair product 
category. 

[End of figure] 

CPAP/RAD Product Category: 

We found that the difference in beneficiary utilization of CPAP/RAD 
product category items--used, for example, to treat sleep apnea--was 
greater between the competitive bidding areas and comparator areas in 
the beginning of the round 1 rebid, although the difference decreased 
over time. It was the only product category we analyzed that 
experienced a period of utilization increase in the competitive 
bidding areas and the comparator areas, although utilization was lower 
in the competitive bidding areas.[Footnote 48] (See figure 7.) The 
number of distinct beneficiaries residing in the nine competitive 
bidding areas who received one or more of these items decreased in all 
months of 2011, but was higher in most months of 2012 compared to the 
same month of 2010. For example, the number of CBP-covered 
beneficiaries who received one or more CPAP/RAD product category items 
was about 10 percent lower in May 2011, but about 5 percent higher in 
May 2012. In contrast, utilization of CPAP/RAD product category items 
furnished to beneficiaries residing in the comparator areas generally 
increased in all months of 2011 and 2012 compared to the same month of 
2010. For example, compared to May 2010, the number of comparator area 
beneficiaries who received these items was about 3 percent higher in 
May 2011 and about 14 percent higher in May 2012. 

Figure 7: Change in the Number of Distinct Medicare Beneficiaries 
Furnished Round 1 Rebid CPAP/RAD Product Category Items; Each Month of 
2011 and 2012 Compared to the Same Month of 2010: 

[Refer to PDF for image: multiple line graph] 

2011: 

January; 
Beneficiaries in competitive bidding areas: -16.4%; 
Beneficiaries in comparator areas: 6.8%. 

February; 
Beneficiaries in competitive bidding areas: -15.3%; 
Beneficiaries in comparator areas: 6.2%. 

March; 
Beneficiaries in competitive bidding areas: -15.0%; 
Beneficiaries in comparator areas: 5.3%. 

April; 
Beneficiaries in competitive bidding areas: -16.2%; 
Beneficiaries in comparator areas: 1.0%. 

May; 
Beneficiaries in competitive bidding areas: -10.5%; 
Beneficiaries in comparator areas: 2.8%. 

June; 
Beneficiaries in competitive bidding areas: -9.5%; 
Beneficiaries in comparator areas: 1.5%. 

July; 
Beneficiaries in competitive bidding areas: -11.3%; 
Beneficiaries in comparator areas: -0.5%. 

August; 
Beneficiaries in competitive bidding areas: -7.1%; 
Beneficiaries in comparator areas: 3.7%. 

September; 
Beneficiaries in competitive bidding areas: -6.7%; 
Beneficiaries in comparator areas: 1.8%. 

October; 
Beneficiaries in competitive bidding areas: -7.5%; 
Beneficiaries in comparator areas: 2.0%. 

November; 
Beneficiaries in competitive bidding areas: -6.9%; 
Beneficiaries in comparator areas: 3.0%. 

December; 
Beneficiaries in competitive bidding areas: -8.8%; 
Beneficiaries in comparator areas: 1.6%. 

2012: 

January; 
Beneficiaries in competitive bidding areas: -0.7%; 
Beneficiaries in comparator areas: 10.8%. 

February; 
Beneficiaries in competitive bidding areas: 2.0%; 
Beneficiaries in comparator areas: 14.5%. 

March; 
Beneficiaries in competitive bidding areas: 1.1%; 
Beneficiaries in comparator areas: 11.9%. 

April; 
Beneficiaries in competitive bidding areas: 2.4%; 
Beneficiaries in comparator areas: 11.3%. 

May; 
Beneficiaries in competitive bidding areas: 4.7%; 
Beneficiaries in comparator areas: 14.4%. 

June; 
Beneficiaries in competitive bidding areas: -1.6%; 
Beneficiaries in comparator areas: 8.0%. 

July; 
Beneficiaries in competitive bidding areas: 0.8%; 
Beneficiaries in comparator areas: 8.8%. 

August; 
Beneficiaries in competitive bidding areas: 4.4%; 
Beneficiaries in comparator areas: 11.6%. 

September; 
Beneficiaries in competitive bidding areas: 0.4%; 
Beneficiaries in comparator areas: 4.9%. 

October; 
Beneficiaries in competitive bidding areas: 6.2%; 
Beneficiaries in comparator areas: 11.6%. 

November; 
Beneficiaries in competitive bidding areas: 6.1%; 
Beneficiaries in comparator areas: 10.7%. 

December; 
Beneficiaries in competitive bidding areas: 0.6%; 
Beneficiaries in comparator areas: 8.2%. 

Source: GAO analysis of CMS data. 

Note: This analysis was based on Medicare claims data for all 20 rebid-
covered codes in the continuous positive airway pressure devices and 
respiratory assist devices (CPAP/RAD) product category. 

[End of figure] 

CMS Reports that Its Ongoing Monitoring Tools Indicate that CBP's 
Round 1 Rebid Has Not Affected Beneficiary Access and Satisfaction: 

As it did in 2011, CMS continued several ongoing activities to monitor 
CBP's effects on beneficiaries in 2012.[Footnote 49] CMS's activities 
included monitoring the number of CBP-related inquiries and complaints 
made to 1-800-MEDICARE and the health outcomes of CBP-covered 
beneficiaries in competitive bidding areas. CMS reported that the 
implementation of the CBP round 1 rebid did not result in beneficiary 
access issues in the first two years of the program. In addition, 
representatives of several Medicare beneficiary advocacy groups that 
we interviewed did not report that widespread access issues occurred. 

Total Number of Inquiries and Complaints Significantly Decreased in 
CBP's Second Year: 

According to data provided by CMS, 1-800-MEDICARE received a total of 
44,249 CBP-related questions--referred to by CMS as inquiries--in 
2012, which was fewer than the 127,466 CBP-related inquiries reported 
in 2011. The total number of quarterly CBP-related inquiries to 1-800-
MEDICARE ranged from a high of 56,941 in the first quarter of 2011 
(17,672 product-related inquiries plus 39,269 general CBP inquiries) 
to a low of 7,969 in the fourth quarter of 2012 (4,119 product-related 
inquiries plus 3,850 general CBP inquiries). (See figure 8.) The 
majority of total inquiries for both 2011 and 2012 were general in 
nature; for example, CMS officials told us that inquiries were related 
to questions about the program or finding a contract supplier. About 2 
million beneficiaries reside in CBP round 1 rebid competitive bidding 
areas; the ratio of inquiries to 1-800-MEDICARE compared with CBP 
beneficiaries is approximately 1 inquiry for every 45 beneficiaries. 
[Footnote 50] 

Figure 8: Number of Round 1 Rebid Inquiries to 1-800-MEDICARE by 
Quarter, 2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Number of Round 1 Rebid inquiries: 

Q1, 2011; 
General inquiries: 39,269; 
Product-related inquiries: 17,672. 

Q2, 2011; 
General inquiries: 14,637; 
Product-related inquiries: 19,230. 

Q3, 2011; 
General inquiries: 9,056; 
Product-related inquiries: 12,204. 

Q4, 2011; 
General inquiries: 6,430; 
Product-related inquiries: 8,968. 

Q1, 2012; 
General inquiries: 6,273; 
Product-related inquiries: 6,727. 

Q2, 2012; 
General inquiries: 7,863; 
Product-related inquiries: 6,730. 

Q3, 2012; 
General inquiries: 4,307; 
Product-related inquiries: 4,380. 

Q4, 2012; 
General inquiries: 3,850; 
Product-related inquiries: 4,119. 

Source: GAO analysis of CMS data. 

Notes: Product-related inquiries were related to a specific item or 
product category. According to CMS data, an increase in the number of 
inquiries in the second quarter of 2012 was attributed to an internal 
communication from the 1-800-MEDICARE beneficiary call center to its 
customer service representatives in May 2012 reminding them when it is 
appropriate to transfer beneficiaries to the competitive bidding 
program queue. Confusion resulting from the communication led to an 
increase in number of calls inappropriately transferred to the 
competitive bidding program queue. 

[End of figure] 

As was also the case in 2011, CMS data showed that the majority of all 
CBP product-category specific inquiries to 1-800-MEDICARE--over 13,000 
in 2012--were related to mail-order diabetic supplies. The enteral 
product category and support surfaces product category received the 
fewest number of inquiries. (See figure 9.) 

Figure 9: Number of Round 1 Rebid Product Category Inquiries to 1-800-
MEDICARE by Quarter, 2012: 

[Refer to PDF for image: vertical bar graph] 

Product category: CPAP/RAD; 
First quarter: 617; 
Second Quarter: 598; 
Third quarter: 394; 
Fourth Quarter: 217. 

Product category: Complex power wheelchairs; 
First quarter: 129; 
Second Quarter: 99; 
Third quarter: 77; 
Fourth Quarter: 51. 

Product category: Enteral nutrients; 
First quarter: 32; 
Second Quarter: 45; 
Third quarter: 21; 
Fourth Quarter: 13. 

Product category: Hospital beds; 
First quarter: 268; 
Second Quarter: 354; 
Third quarter: 250; 
Fourth Quarter: 117. 

Product category: Mail-order diabetic supplies; 
First quarter: 4,142; 
Second Quarter: 3,685; 
Third quarter: 2,292; 
Fourth Quarter: 2,991. 

Product category: Oxygen; 
First quarter: 226; 
Second Quarter: 312; 
Third quarter: 242; 
Fourth Quarter: 125. 

Product category: Standard power wheelchairs; 
First quarter: 778; 
Second Quarter: 983; 
Third quarter: 672; 
Fourth Quarter: 363. 

Product category: Support Surfaces; 
First quarter: 32; 
Second Quarter: 23; 
Third quarter: 15; 
Fourth Quarter: 20. 

Product category: Walkers; 
First quarter: 503; 
Second Quarter: 631; 
Third quarter: 417; 
Fourth Quarter: 222. 

Source: CMS data. 

[End of figure] 

All calls to 1-800-MEDICARE are initially classified as inquiries and 
only recorded as complaints if they cannot be resolved by a CSR. 
[Footnote 51] In 2012, CMS classified 43 CBP-related calls to 1-800-
MEDICARE as complaints, which was a decline from 151 complaints in 
2011. Among the 43 complaints, 13 complaints were specific to the 
walkers product category, which was almost more than twice the number 
of complaints associated with any of the other product categories. 
Twelve of the 13 complaints were related to a specific walker brand 
and model that can be billed under HCPCS code E0147, which has the 
highest single payment amount of all CBP-covered HCPCS codes included 
in the walkers product category.[Footnote 52] Some complainants 
reported that contract suppliers would not provide the specific walker 
brand and model prescribed by beneficiaries' physicians because the 
CBP single payment amount is lower than the cost of the item. 
According to Palmetto GBA data, in response to one complaint, it 
conducted secret shopping calls to two contract suppliers and was told 
by both that they did not carry the specific walker brand and model 
and could not obtain it. After Palmetto GBA explained the terms of 
their contracts, both contract suppliers then agreed to provide it. 
[Footnote 53] Half of these 12 complaints originated in the Miami 
competitive bidding area, where there was a decline in utilization for 
these walkers. 

CMS Has Several Other Monitoring Efforts to Conduct CBP Program 
Oversight: 

According to CMS, the agency continues to monitor national Medicare 
claims data to identify utilization trends, monitor health outcomes 
and beneficiary access, address aberrations in services, and target 
potential fraud and abuse. As part of this effort, CMS monitors a 
range of health outcomes--including deaths, hospitalizations, 
emergency room visits, physician visits, and admissions to skilled 
nursing facilities--for beneficiaries likely to use a CBP-covered item 
or who have used a CBP-covered item, in both competitive bidding areas 
and their comparator areas. In both 2011 and 2012, CMS's monitoring of 
health outcomes from national claims data indicated that CBP-covered 
beneficiaries continued to have access to necessary and appropriate 
CBP-covered items and supplies, and that health outcomes in the 
competitive bidding areas were consistent with national trends. 
However, as we previously reported,[Footnote 54] while these outcomes 
are reassuring, they may not reflect other outcomes that did not 
require physician, hospital, or emergency room visits, such as whether 
beneficiaries received the DME item they needed on time, or whether 
health outcomes were caused by problems accessing CBP-covered DME. 

CMS data show that the agency monitored beneficiary access by 
conducting more secret shopping calls in 2012 than it did in 2011--300 
versus 32. According to that data, the highest number of secret 
shopping calls in 2012 involved the oxygen product category (109) and 
the second highest number of calls involved the walker product 
category (58). According to CMS officials, secret shopping calls were 
prompted by beneficiary and industry concerns expressed to CMS. For 
example, CMS officials told us that the agency received complaints 
that contract suppliers were not providing liquid oxygen equipment and 
specific walker models. According to these officials, when conducting 
secret shopper calls, CMS provides contract suppliers additional 
education on competitive bidding program and supplier quality standard 
requirements. CMS then conducts subsequent secret shopper calls to 
verify that the contract suppliers are adhering to the requirements. 

CMS conducted a pre-CBP implementation survey in 2010 and post-CBP 
implementation survey in 2011 to measure beneficiary satisfaction with 
the CBP round 1 rebid's first year. According to CMS data, the agency 
obtained responses from at least 400 beneficiaries in each of the nine 
competitive bidding areas and nine comparator areas to collect 
beneficiary satisfaction ratings for six questions related to the 
beneficiary's initial interaction with DME suppliers, the training 
received regarding DME items, the delivery of the DME item, the 
quality of service provided by the supplier, the customer service 
provided by the supplier, and the supplier's overall complaint 
handling. According to CMS data, results of the pre-2010 and post-CBP 
2011 implementation surveys showed that responses from beneficiaries 
were similar and generally positive in both the competitive bidding 
areas and comparator areas.[Footnote 55] CMS officials told us that 
CMS conducted a follow-up beneficiary satisfaction survey in June 2013 
using the original survey questions and methodology, but as of 
November 20, 2013, survey results were not yet available. 

Beneficiary Advocacy Groups We Interviewed Did Not Report Widespread 
CBP Beneficiary Access Concerns: 

We interviewed representatives from several beneficiary advocacy 
groups about their members' experiences with CBP, and whether they 
were aware of any CBP-related beneficiary access and choice issues 
that may have occurred among their members. The beneficiary groups 
represent beneficiaries with specific issues, such as those with 
diabetes and disabilities requiring wheelchairs. In general, these 
representatives either reported no or few concerns, or provided 
anecdotal examples of beneficiary access issues, such as difficulty 
obtaining wheelchair repairs, or difficulty locating contract 
suppliers. They did not indicate that their CBP-covered beneficiary 
members had been negatively affected by widespread access issues or 
concerns in the first two years of the CBP round 1 rebid. 

For the Round 1 Rebid Product Categories and Areas, a Small Number of 
Contract Suppliers Accounted for a Large Portion of the CBP Market 
Share in 2011 and 2012: 

For the round 1 rebid product categories we examined, a small number 
of contract suppliers accounted for a large portion of Medicare total 
allowed charges across 2011 and 2012. One contract supplier had a high 
percentage of the total market share for the standard power wheelchair 
product category across 2011 and 2012, but was terminated as a 
contract supplier in 2013. Few contract suppliers left the CBP through 
contract terminations, voluntarily withdrawing from Medicare, or 
having had a change in ownership. 

A Small Number of Contract Suppliers Accounted for a Large Portion of 
the Market Share: 

We examined the contract supplier market share development for six 
product categories in 2011 and 2012 and found that the trends for each 
product category were relatively consistent across the nine 
competitive bidding areas. For each product category, we illustrate 
typical market share development trends by showing examples from two 
competitive bidding areas. (See figure 10 through figure 21.) For five 
of the six product categories, we found that, in general, the top 4 
suppliers--those with the highest individual Medicare total allowed 
charges across all quarters of 2011 and 2012--accounted for a large 
portion of the market in all competitive bidding areas, although the 
top 4 suppliers for each product category could vary by competitive 
bidding area.[Footnote 56] In our examples, the top 4 suppliers' 
combined market share in the fourth quarter of 2012 ranged from 50 
percent for the enteral product category in the Dallas competitive 
bidding area to 86 percent for the walkers product category in the 
Orlando competitive bidding area. 

CPAP/RAD Product Category: 

Our analysis of Medicare claims data for the CPAP/RAD product category 
indicates that, in general, the market share among the top 4 contract 
suppliers increased steadily, the combined market share for the other 
contract suppliers' remained relatively consistent with some small 
increases, and the non-contract suppliers' combined market share 
decreased throughout 2011 and 2012. For example, in the Pittsburgh 
competitive bidding area, by the fourth quarter of 2012, the top 4 
contract suppliers combined had about 63 percent of the market, while 
the other 10 contract suppliers combined had 35 percent of the market. 
(See figure 10.) This is fairly similar to the contract supplier 
market share trend in the Cleveland competitive bidding area, where 
the top 4 contract suppliers combined had about 73 percent of the 
market and the other 8 contract suppliers combined had about 26 
percent in the fourth quarter of 2012. (See figure 11.) 

Figure 10: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 20 Round 1 Rebid 
CPAP/RAD Product Category Codes, Pittsburgh Competitive Bidding Area, 
2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 14.6%; 
Contract supplier #2: 11.5%; 
Contract supplier #3: 7.1%; 
Contract supplier #4: 7.6%; 
All other contract suppliers: 27.6%; 
All other non-contract suppliers: 31.7%. 

Q2, 2011; 
Contract supplier #1: 14.8%; 
Contract supplier #2: 13%; 
Contract supplier #3: 10.2%; 
Contract supplier #4: 11.7%; 
All other contract suppliers: 32.1%; 
All other non-contract suppliers: 18.3%. 

Q3, 2011; 
Contract supplier #1: 19.5; 
Contract supplier #2: 14; 
Contract supplier #3: 12.6; 
Contract supplier #4: 11.2; 
All other contract suppliers: 31.7; 
All other non-contract suppliers: 11.1%. 

Q4, 2011; 
Contract supplier #1: 21.9%; 
Contract supplier #2: 15.1%; 
Contract supplier #3: 13.1%; 
Contract supplier #4: 12.6%; 
All other contract suppliers: 32.8%; 
All other non-contract suppliers: 4.5%. 

Q1, 2012; 
Contract supplier #1: 21.9%; 
Contract supplier #2: 14.1%; 
Contract supplier #3: 14.9%; 
Contract supplier #4: 13.7%; 
All other contract suppliers: 31.9%; 
All other non-contract suppliers: 3.5%. 

Q2, 2012; 
Contract supplier #1: 23%; 
Contract supplier #2: 13.6%; 
Contract supplier #3: 14.1%; 
Contract supplier #4: 12.3%; 
All other contract suppliers: 34.5%; 
All other non-contract suppliers: 2.6%. 

Q3, 2012; 
Contract supplier #1: 23.9%; 
Contract supplier #2: 13.1%; 
Contract supplier #3: 13.5%; 
Contract supplier #4: 12.1%; 
All other contract suppliers: 35.5%; 
All other non-contract suppliers: 1.9%. 

Q4, 2012; 
Contract supplier #1: 24.6%; 
Contract supplier #2: 13.5%; 
Contract supplier #3: 12.1%; 
Contract supplier #4: 12.7%; 
All other contract suppliers: 35%; 
All other non-contract suppliers: 2.2%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered continuous positive airway pressure devices and respiratory 
assist devices (CPAP/RAD) product category codes across all 8 quarters 
of 2011 and 2012. For the "all other contract suppliers" group, we 
combined the other 10 contract suppliers' individual percentages of 
Medicare total allowed charges for the codes. For the "all other non-
contract suppliers" group, we combined non-contract suppliers' 
individual percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Figure 11: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 20 Round 1 Rebid 
CPAP/RAD Product Category Codes, Cleveland Competitive Bidding Area, 
2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 15.7%; 
Contract supplier #2: 8.1%; 
Contract supplier #3: 10.8%; 
Contract supplier #4: 5.2%; 
All other contract suppliers: 23.9%; 
All other non-contract suppliers: 36.3%. 

Q2, 2011; 
Contract supplier #1: 15.5%; 
Contract supplier #2: 14.3%; 
Contract supplier #3: 15.9%; 
Contract supplier #4: 9.1%; 
All other contract suppliers: 25.6%; 
All other non-contract suppliers: 19.7%. 

Q3, 2011; 
Contract supplier #1: 19.3%; 
Contract supplier #2: 16.3%; 
Contract supplier #3: 15.1%; 
Contract supplier #4: 10.9%; 
All other contract suppliers: 26.2%; 
All other non-contract suppliers: 12.3%. 

Q4, 2011; 
Contract supplier #1: 20.1%; 
Contract supplier #2: 16.5%; 
Contract supplier #3: 14.1%; 
Contract supplier #4: 12.4%; 
All other contract suppliers: 30.1%; 
All other non-contract suppliers: 6.8%. 

Q1, 2012; 
Contract supplier #1: 21.6%; 
Contract supplier #2: 16.7%; 
Contract supplier #3: 14.9%; 
Contract supplier #4: 13.9%; 
All other contract suppliers: 30.3%; 
All other non-contract suppliers: 2.6%. 

Q2, 2012; 
Contract supplier #1: 23.4%; 
Contract supplier #2: 15.6%; 
Contract supplier #3: 15.4%; 
Contract supplier #4: 14.8%; 
All other contract suppliers: 28.9%; 
All other non-contract suppliers: 2.1%. 

Q3, 2012; 
Contract supplier #1: 26.1%; 
Contract supplier #2: 16%; 
Contract supplier #3: 15%; 
Contract supplier #4: 14.1%; 
All other contract suppliers: 27.1%; 
All other non-contract suppliers: 1.7%. 

Q4, 2012; 
Contract supplier #1: 28.9%; 
Contract supplier #2: 16.3%; 
Contract supplier #3: 13.1%; 
Contract supplier #4: 14.4%; 
All other contract suppliers: 25.9%; 
All other non-contract suppliers: 1.4%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered continuous positive airway pressure devices and respiratory 
assist devices (CPAP/RAD) product category codes across all 8 quarters 
of 2011 and 2012. For the "all other contract suppliers" group, we 
combined the other 8 contract suppliers' individual percentages of 
Medicare total allowed charges for the codes. For the "all other non-
contract suppliers" group, we combined non-contract suppliers' 
individual percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Enteral Product Category: 

Our analysis of Medicare claims data for the enteral product category 
indicates that, in general, the market share of the top 4 contract 
suppliers and all other contract suppliers combined remained 
relatively consistent or increased throughout 2011 and 2012. For 
example, in the Cincinnati competitive bidding area, the top 4 
contract suppliers combined had about 70 percent or more of the market 
share throughout 2011 and 2012.[Footnote 57] For that same time 
period, the other 10 contract suppliers combined generally had about 
20 percent of the market in that area. (See figure 12.) In the Dallas 
competitive bidding area, the top 4 contract suppliers combined had 
less of the market share--between about 43 to 55 percent each quarter 
of 2011 and 2012--while the other 20 contract suppliers had more of 
the market share each quarter. (See figure 13.) 

Figure 12: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 17 Round 1 Rebid 
Enteral Product Category Codes, Cincinnati Competitive Bidding Area, 
2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 30.3%; 
Contract supplier #2: 10.9%; 
Contract supplier #3: 21.3%; 
Contract supplier #4: 7.2%; 
All other contract suppliers: 11%; 
All other non-contract suppliers: 19.4%. 

Q2, 2011; 
Contract supplier #1: 26.7%; 
Contract supplier #2: 14%; 
Contract supplier #3: 22%; 
Contract supplier #4: 11.7%; 
All other contract suppliers: 21.3%; 
All other non-contract suppliers: 4.2%. 

Q3, 2011; 
Contract supplier #1: 26.4%; 
Contract supplier #2: 17.6%; 
Contract supplier #3: 18.7%; 
Contract supplier #4: 10.8%; 
All other contract suppliers: 21.4%; 
All other non-contract suppliers: 5.2%. 

Q4, 2011; 
Contract supplier #1: 24%; 
Contract supplier #2: 19.3%; 
Contract supplier #3: 18%; 
Contract supplier #4: 11.7%; 
All other contract suppliers: 22.3%; 
All other non-contract suppliers: 4.8%. 

Q1, 2012; 
Contract supplier #1: 23.7%; 
Contract supplier #2: 22.3%; 
Contract supplier #3: 17.5%; 
Contract supplier #4: 11.3%; 
All other contract suppliers: 21.4%; 
All other non-contract suppliers: 3.8%. 

Q2, 2012; 
Contract supplier #1: 29.1%; 
Contract supplier #2: 21.4%; 
Contract supplier #3: 14.9%; 
Contract supplier #4: 11.1%; 
All other contract suppliers: 20.6%; 
All other non-contract suppliers: 2.9%. 

Q3, 2012; 
Contract supplier #1: 30.8%; 
Contract supplier #2: 21.7%; 
Contract supplier #3: 12.3%; 
Contract supplier #4: 12.3%; 
All other contract suppliers: 20.2%; 
All other non-contract suppliers: 2.7%. 

Q4, 2012; 
Contract supplier #1: 27.4%; 
Contract supplier #2: 23.8%; 
Contract supplier #3: 13%; 
Contract supplier #4: 13%; 
All other contract suppliers: 19.9%; 
All other non-contract suppliers: 2.9%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered enteral product category codes across all 8 quarters of 2011 
and 2012. For the "all other contract suppliers" group, we combined 
the other 10 contract suppliers' individual percentages of Medicare 
total allowed charges for the codes. For the "all other non-contract 
suppliers" group, we combined non-contract suppliers' individual 
percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Figure 13: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 17 Round 1 Rebid 
Enteral Product Category Codes, Dallas Competitive Bidding Area, 2011 
and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 13.7%; 
Contract supplier #2: 15.5%; 
Contract supplier #3: 7.5%; 
Contract supplier #4: 7.2%; 
All other contract suppliers: 30.4%; 
All other non-contract suppliers: 25.9%. 

Q2, 2011; 
Contract supplier #1: 15.9%; 
Contract supplier #2: 16.1%; 
Contract supplier #3: 8.3%; 
Contract supplier #4: 11.8%; 
All other contract suppliers: 38.6%; 
All other non-contract suppliers: 9.2%. 

Q3, 2011; 
Contract supplier #1: 18.4%; 
Contract supplier #2: 17.1%; 
Contract supplier #3: 9%; 
Contract supplier #4: 9%; 
All other contract suppliers: 43%; 
All other non-contract suppliers: 3.6%. 

Q4, 2011; 
Contract supplier #1: 20.5%; 
Contract supplier #2: 16%; 
Contract supplier #3: 10.2%; 
Contract supplier #4: 8.3%; 
All other contract suppliers: 42.1%; 
All other non-contract suppliers: 2.9%. 

Q1, 2012; 
Contract supplier #1: 21.7%; 
Contract supplier #2: 17.4%; 
Contract supplier #3: 9.7%; 
Contract supplier #4: 6.2%; 
All other contract suppliers: 42.2%; 
All other non-contract suppliers: 2.8%. 

Q2, 2012; 
Contract supplier #1: 23.9%; 
Contract supplier #2: 15.2%; 
Contract supplier #3: 9.1%; 
Contract supplier #4: 7.1%; 
All other contract suppliers: 41.6%; 
All other non-contract suppliers: 3%. 

Q3, 2012; 
Contract supplier #1: 23.5%; 
Contract supplier #2: 15.3%; 
Contract supplier #3: 9%; 
Contract supplier #4: 7%; 
All other contract suppliers: 42.5%; 
All other non-contract suppliers: 2.8%. 

Q4, 2012; 
Contract supplier #1: 19%; 
Contract supplier #2: 15.7%; 
Contract supplier #3: 8.5%; 
Contract supplier #4: 6.3%; 
All other contract suppliers: 48.2%; 
All other non-contract suppliers: 2.4%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered enteral product category codes across all 8 quarters of 2011 
and 2012. For the "all other contract suppliers" group, we combined 
the other 20 contract suppliers' individual percentages of Medicare 
total allowed charges for the codes. For the "all other non-contract 
suppliers" group, we combined non-contract suppliers' individual 
percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Hospital Bed Product Category: 

Our analysis of Medicare claims data for the hospital bed product 
category indicates that contract suppliers' percentages of Medicare 
total allowed charges increased steadily throughout 2011 and 2012 as 
non-contract suppliers' percentages of Medicare total allowed charges 
substantially decreased. In both the Riverside and Orlando competitive 
bidding areas, the top 4 contract suppliers accounted for more than 80 
percent of the market by the fourth quarter of 2012, with the other 
contract suppliers totaling about 10 percent of Medicare total allowed 
charges in each of the areas. (See figure14 and figure 15.) 

Figure 14: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 31 Round 1 Rebid 
Hospital Bed Product Category Codes, Riverside Competitive Bidding 
Area, 2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 4.6%; 
Contract supplier #2: 9.3%; 
Contract supplier #3: 6%; 
Contract supplier #4: 2.1%; 
All other contract suppliers: 2.8%; 
All other non-contract suppliers: 75.4%. 

Q2, 2011; 
Contract supplier #1: 13.9%; 
Contract supplier #2: 12.4%; 
Contract supplier #3: 9.9%; 
Contract supplier #4: 4.3%; 
All other contract suppliers: 5.9%; 
All other non-contract suppliers: 53.6%. 

Q3, 2011; 
Contract supplier #1: 20.6%; 
Contract supplier #2: 14.3%; 
Contract supplier #3: 11.9%; 
Contract supplier #4: 7.1%; 
All other contract suppliers: 7.2%; 
All other non-contract suppliers: 39%. 

Q4, 2011; 
Contract supplier #1: 29.4%; 
Contract supplier #2: 15.7%; 
Contract supplier #3: 14.6%; 
Contract supplier #4: 10.1%; 
All other contract suppliers: 9%; 
All other non-contract suppliers: 21.4%. 

Q1, 2012; 
Contract supplier #1: 37%; 
Contract supplier #2: 16.2%; 
Contract supplier #3: 17.8%; 
Contract supplier #4: 11.8%; 
All other contract suppliers: 9.2%; 
All other non-contract suppliers: 8.1%. 

Q2, 2012; 
Contract supplier #1: 39.4%; 
Contract supplier #2: 16%; 
Contract supplier #3: 17.2%; 
Contract supplier #4: 11.2%; 
All other contract suppliers: 8.7%; 
All other non-contract suppliers: 7.4%. 

Q3, 2012; 
Contract supplier #1: 40.3%; 
Contract supplier #2: 14.5%; 
Contract supplier #3: 18%; 
Contract supplier #4: 11.5%; 
All other contract suppliers: 8.5%; 
All other non-contract suppliers: 7.2%. 

Q4, 2012; 
Contract supplier #1: 40.2%; 
Contract supplier #2: 13.3%; 
Contract supplier #3: 20.6%; 
Contract supplier #4: 9.1%; 
All other contract suppliers: 8.1%; 
All other non-contract suppliers: 8.8%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered hospital bed product category codes across all 8 quarters of 
2011 and 2012. For the "all other contract suppliers" group, we 
combined the other 6 contract suppliers' individual percentages of 
Medicare total allowed charges for the codes. For the "all other non-
contract suppliers" group, we combined non-contract suppliers' 
individual percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Figure 15: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 31 Round 1 Rebid 
Hospital Bed Product Category Codes, Orlando Competitive Bidding Area, 
2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 10.7%; 
Contract supplier #2: 14.6%; 
Contract supplier #3: 5.2%; 
Contract supplier #4: 2.1%; 
All other contract suppliers: 4.3%; 
All other non-contract suppliers: 63.1%. 

Q2, 2011; 
Contract supplier #1: 13%; 
Contract supplier #2: 19.2%; 
Contract supplier #3: 8.4%; 
Contract supplier #4: 4.8%; 
All other contract suppliers: 8%; 
All other non-contract suppliers: 46.7%. 

Q3, 2011; 
Contract supplier #1: 16.7%; 
Contract supplier #2: 20.7%; 
Contract supplier #3: 12.1%; 
Contract supplier #4: 5.5%; 
All other contract suppliers: 12.9%; 
All other non-contract suppliers: 32.1%. 

Q4, 2011; 
Contract supplier #1: 21.1%; 
Contract supplier #2: 20.6%; 
Contract supplier #3: 19%; 
Contract supplier #4: 7.4%; 
All other contract suppliers: 15.1%; 
All other non-contract suppliers: 16.8%. 

Q1, 2012; 
Contract supplier #1: 24.7%; 
Contract supplier #2: 18.6%; 
Contract supplier #3: 21.7%; 
Contract supplier #4: 13.1%; 
All other contract suppliers: 14.8%; 
All other non-contract suppliers: 7%. 

Q2, 2012; 
Contract supplier #1: 24.9%; 
Contract supplier #2: 16.1%; 
Contract supplier #3: 19.9%; 
Contract supplier #4: 19.1%; 
All other contract suppliers: 13.2%; 
All other non-contract suppliers: 6.8%. 

Q3, 2012; 
Contract supplier #1: 25.1%; 
Contract supplier #2: 16.2%; 
Contract supplier #3: 20.8%; 
Contract supplier #4: 21%; 
All other contract suppliers: 11.8%; 
All other non-contract suppliers: 5.2%. 

Q4, 2012; 
Contract supplier #1: 24.6%; 
Contract supplier #2: 16.4%; 
Contract supplier #3: 23.8%; 
Contract supplier #4: 21.1%; 
All other contract suppliers: 9.3%; 
All other non-contract suppliers: 4.9%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered hospital bed product category codes across all 8 quarters of 
2011 and 2012. For the "all other contract suppliers" group, we 
combined the other 6 contract suppliers' individual percentages of 
Medicare total allowed charges for the codes. For the "all other non-
contract suppliers" group, we combined non-contract suppliers' 
individual percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Oxygen Product Category: 

Our analysis of Medicare claims data for the oxygen product category 
indicates that the market share of the top 4 contract suppliers and 
all other contract suppliers combined remained relatively consistent 
or increased from the first quarter of 2011 to the fourth quarter of 
2012. For example, in the Cleveland competitive bidding area, the top 
4 suppliers had about 65 percent of the market in the first quarter of 
2011 and about 71 percent of the market in the fourth quarter of 2012. 
(See figure 16.) In the Kansas City competitive bidding area, the top 
4 suppliers had about 71 percent of the market in the first quarter of 
2011 and about 83 percent of the market in the fourth quarter of 2012. 
(See figure 17.) 

Figure 16: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 12 Round 1 Rebid 
Oxygen Product Category Codes, Cleveland Competitive Bidding Area, 
2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 30.3%; 
Contract supplier #2: 15.7%; 
Contract supplier #3: 13.7%; 
Contract supplier #4: 4.8%; 
All other contract suppliers: 22.2%; 
All other non-contract suppliers: 13.3%. 

Q2, 2011; 
Contract supplier #1: 28.7%; 
Contract supplier #2: 17.1%; 
Contract supplier #3: 16.4%; 
Contract supplier #4: 5.1%; 
All other contract suppliers: 24.3%; 
All other non-contract suppliers: 8.6%. 

Q3, 2011; 
Contract supplier #1: 32%; 
Contract supplier #2: 16.6%; 
Contract supplier #3: 15.1%; 
Contract supplier #4: 5%; 
All other contract suppliers: 24.3%; 
All other non-contract suppliers: 7.1%. 

Q4, 2011; 
Contract supplier #1: 33.3%; 
Contract supplier #2: 16.7%; 
Contract supplier #3: 14.5%; 
Contract supplier #4: 5.2%; 
All other contract suppliers: 25.2%; 
All other non-contract suppliers: 5.1%. 

Q1, 2012; 
Contract supplier #1: 32.7%; 
Contract supplier #2: 17.6%; 
Contract supplier #3: 14.3%; 
Contract supplier #4: 5.4%; 
All other contract suppliers: 25.7%; 
All other non-contract suppliers: 4.4%. 

Q2, 2012; 
Contract supplier #1: 34.2%; 
Contract supplier #2: 17.5%; 
Contract supplier #3: 13.4%; 
Contract supplier #4: 5.7%; 
All other contract suppliers: 25.5%; 
All other non-contract suppliers: 3.8%. 

Q3, 2012; 
Contract supplier #1: 35%; 
Contract supplier #2: 17.5%; 
Contract supplier #3: 12.6%; 
Contract supplier #4: 5.8%; 
All other contract suppliers: 25.7%; 
All other non-contract suppliers: 3.5%. 

Q4, 2012; 
Contract supplier #1: 36%; 
Contract supplier #2: 17.3%; 
Contract supplier #3: 12%; 
Contract supplier #4: 5.8%; 
All other contract suppliers: 25.9%; 
All other non-contract suppliers: 3%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered oxygen product category codes across all 8 quarters of 2011 
and 2012. For the "all other contract suppliers" group, we combined 
the other 13 contract suppliers' individual percentages of Medicare 
total allowed charges for the codes. For the "all other non-contract 
suppliers" group, we combined non-contract suppliers' individual 
percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Figure 17: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 12 Round 1 Rebid 
Oxygen Product Category Codes, Kansas City Competitive Bidding Area, 
2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 32.7%; 
Contract supplier #2: 32.1%; 
Contract supplier #3: 3.7%; 
Contract supplier #4: 2.2%; 
All other contract suppliers: 13.8%; 
All other non-contract suppliers: 15.5%. 

Q2, 2011; 
Contract supplier #1: 30.3%; 
Contract supplier #2: 32.7%; 
Contract supplier #3: 5.2%; 
Contract supplier #4: 4.7%; 
All other contract suppliers: 11.9%; 
All other non-contract suppliers: 15.2%. 

Q3, 2011; 
Contract supplier #1: 30.1%; 
Contract supplier #2: 32.4%; 
Contract supplier #3: 6.1%; 
Contract supplier #4: 5.6%; 
All other contract suppliers: 11.1%; 
All other non-contract suppliers: 14.9%. 

Q4, 2011; 
Contract supplier #1: 32.6%; 
Contract supplier #2: 30.6%; 
Contract supplier #3: 7.4%; 
Contract supplier #4: 5.3%; 
All other contract suppliers: 12.7%; 
All other non-contract suppliers: 11.5%. 

Q1, 2012; 
Contract supplier #1: 31.9%; 
Contract supplier #2: 34.5%; 
Contract supplier #3: 8%; 
Contract supplier #4: 5.5%; 
All other contract suppliers: 13.1%; 
All other non-contract suppliers: 7%. 

Q2, 2012; 
Contract supplier #1: 35.9%; 
Contract supplier #2: 33.1%; 
Contract supplier #3: 8.6%; 
Contract supplier #4: 5%; 
All other contract suppliers: 12.9%; 
All other non-contract suppliers: 4.6%. 

Q3, 2012; 
Contract supplier #1: 36.3%; 
Contract supplier #2: 32.6%; 
Contract supplier #3: 9.1%; 
Contract supplier #4: 4.7%; 
All other contract suppliers: 13.8%; 
All other non-contract suppliers: 3.6%. 

Q4, 2012; 
Contract supplier #1: 36.5%; 
Contract supplier #2: 32.1%; 
Contract supplier #3: 10.5%; 
Contract supplier #4: 4.2%; 
All other contract suppliers: 13.5%; 
All other non-contract suppliers: 3.2%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered oxygen product category codes across all 8 quarters of 2011 
and 2012. For the "all other contract suppliers" group, we combined 
the other 8 contract suppliers' individual percentages of Medicare 
total allowed charges for the codes. For the "all other non-contract 
suppliers" group, we combined non-contract suppliers' individual 
percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Walkers Product Category: 

Our analysis of Medicare claims data for the walkers product category 
indicates that the market share of the top 4 contract suppliers and 
all other contract suppliers combined remained relatively consistent 
throughout 2011 and 2012. For example, in the Pittsburgh competitive 
bidding area, the top 4 contract suppliers combined had at least 65 
percent of the total market share each quarter of 2011 and 2012. The 
other 11 contract suppliers combined had between about 20 to 30 
percent of the market share each quarter over that time period. (See 
figure 18.) The Orlando competitive bidding area showed a similar 
market share trend where the top 4 contract suppliers combined 
maintained at least 72 percent of the total market share each quarter 
of 2011 and 2012. The other 13 contract suppliers combined 
consistently had about 20 percent each quarter. (See figure 19.) 

Figure 18: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 17 Round 1 Rebid 
Walkers Product Category Codes, Pittsburgh Competitive Bidding Area, 
2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 25.7%; 
Contract supplier #2: 19.5%; 
Contract supplier #3: 15.4%; 
Contract supplier #4: 16.1%; 
All other contract suppliers: 18.9%; 
All other non-contract suppliers: 4.3%. 

Q2, 2011; 
Contract supplier #1: 23.4%; 
Contract supplier #2: 23.4%; 
Contract supplier #3: 16.7%; 
Contract supplier #4: 16.2%; 
All other contract suppliers: 18.3%; 
All other non-contract suppliers: 1.9%. 

Q3, 2011; 
Contract supplier #1: 26.4%; 
Contract supplier #2: 17.9%; 
Contract supplier #3: 14.8%; 
Contract supplier #4: 14.4%; 
All other contract suppliers: 22.8%; 
All other non-contract suppliers: 3.7%. 

Q4, 2011; 
Contract supplier #1: 20.7%; 
Contract supplier #2: 19.3%; 
Contract supplier #3: 15%; 
Contract supplier #4: 12.5%; 
All other contract suppliers: 29.3%; 
All other non-contract suppliers: 3.3%. 

Q1, 2012; 
Contract supplier #1: 23.7%; 
Contract supplier #2: 20.3%; 
Contract supplier #3: 14.2%; 
Contract supplier #4: 13%; 
All other contract suppliers: 24%; 
All other non-contract suppliers: 4.8%. 

Q2, 2012; 
Contract supplier #1: 25.2%; 
Contract supplier #2: 24.1%; 
Contract supplier #3: 12.5%; 
Contract supplier #4: 11.5%; 
All other contract suppliers: 25%; 
All other non-contract suppliers: 1.8%. 

Q3, 2012; 
Contract supplier #1: 23.1%; 
Contract supplier #2: 24.3%; 
Contract supplier #3: 14.9%; 
Contract supplier #4: 12.8%; 
All other contract suppliers: 22.9%; 
All other non-contract suppliers: 2.1%. 

Q4, 2012; 
Contract supplier #1: 22.7%; 
Contract supplier #2: 30.9%; 
Contract supplier #3: 11.1%; 
Contract supplier #4: 12.6%; 
All other contract suppliers: 21.1%; 
All other non-contract suppliers: 1.6%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered walkers product category codes across all 8 quarters of 2011 
and 2012. For the "all other contract suppliers" group, we combined 
the other 11 contract suppliers' individual percentages of Medicare 
total allowed charges for the codes. For the "all other non-contract 
suppliers" group, we combined non-contract suppliers' individual 
percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Figure 19: Four Contract Suppliers with the Highest Individual 
Percentage of Medicare Total Allowed Charges for All 17 Round 1 Rebid 
Walkers Product Category Codes, Orlando Competitive Bidding Area, 2011 
and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 29.6%; 
Contract supplier #2: 15.6%; 
Contract supplier #3: 12.8%; 
Contract supplier #4: 14.5%; 
All other contract suppliers: 18.6%; 
All other non-contract suppliers: 8.9%. 

Q2, 2011; 
Contract supplier #1: 29.3%; 
Contract supplier #2: 19.9%; 
Contract supplier #3: 11.3%; 
Contract supplier #4: 13.5%; 
All other contract suppliers: 16.9%; 
All other non-contract suppliers: 9%. 

Q3, 2011; 
Contract supplier #1: 29.6%; 
Contract supplier #2: 23.8%; 
Contract supplier #3: 10.1%; 
Contract supplier #4: 8.7%; 
All other contract suppliers: 19.2%; 
All other non-contract suppliers: 8.6%. 

Q4, 2011; 
Contract supplier #1: 26.1%; 
Contract supplier #2: 27.7%; 
Contract supplier #3: 13.1%; 
Contract supplier #4: 6.3%; 
All other contract suppliers: 19.7%; 
All other non-contract suppliers: 7.2%. 

Q1, 2012; 
Contract supplier #1: 30.7%; 
Contract supplier #2: 25.2%; 
Contract supplier #3: 17.5%; 
Contract supplier #4: 3.7%; 
All other contract suppliers: 18.4%; 
All other non-contract suppliers: 4.5%. 

Q2, 2012; 
Contract supplier #1: 27.8%; 
Contract supplier #2: 23.1%; 
Contract supplier #3: 15.6%; 
Contract supplier #4: 6.6%; 
All other contract suppliers: 21.8%; 
All other non-contract suppliers: 5.1%. 

Q3, 2012; 
Contract supplier #1: 28.6%; 
Contract supplier #2: 27.5%; 
Contract supplier #3: 13%; 
Contract supplier #4: 6.6%; 
All other contract suppliers: 17.6%; 
All other non-contract suppliers: 6.8%. 

Q4, 2012; 
Contract supplier #1: 31.5%; 
Contract supplier #2: 28.1%; 
Contract supplier #3: 13.1%; 
Contract supplier #4: 4.8%; 
All other contract suppliers: 18.4%; 
All other non-contract suppliers: 4.2%. 

Source: GAO analysis of CMS data. 

Note: The figure includes each of the 4 contract suppliers with the 
highest percentages of Medicare total allowed charges for rebid-
covered walkers product category codes across all 8 quarters of 2011 
and 2012. For the "all other contract suppliers" group, we combined 
the other 13 contract suppliers' individual percentages of Medicare 
total allowed charges for the codes. For the "all other non-contract 
suppliers" group, we combined non-contract suppliers' individual 
percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Standard Power Wheelchair Product Category: 

Our analysis of Medicare claims data for the standard power wheelchair 
product category indicates that the market share for the top contract 
supplier, The Scooter Store's Alliance Seating & Mobility Division 
(The Scooter Store), was very high in all quarters of 2011 and 2012 
across all competitive bidding areas. Specifically, The Scooter Store 
had the highest individual supplier percent of all CBP-covered 
Medicare total allowed charges across all quarters of 2011 and 2012 
combined for the standard power wheelchair product category in eight 
of the nine competitive bidding areas, and the second highest in the 
ninth competitive bidding area.[Footnote 58] The Scooter Store's 
individual percentages of all Medicare total allowed charges in the 
fourth quarter of 2012 were: Pittsburgh (82 percent), Orlando (81 
percent), Miami (75 percent), Riverside (72 percent), Cleveland (62 
percent), Dallas (60 percent), Charlotte (48 percent), Kansas City (41 
percent), and Cincinnati (37 percent). 

In the Miami competitive bidding area, Medicare claims data show that 
The Scooter Store's highest individual percentage of all Medicare 
total allowed charges was about 84 percent in the second quarter of 
2011. (See figure 20.) In the Riverside competitive bidding area, The 
Scooter Store's highest individual percentage of all Medicare total 
allowed charges was about 72 percent in the fourth quarter of 2012. 
(See figure 21.) 

Figure 20: Contract Supplier with the Highest Percentage of Medicare 
Total Allowed Charges for 20 Round 1 Rebid Standard Power Wheelchair 
Product Category Codes, Miami Competitive Bidding Area, 2011 and 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 82.5%; 
All other contract suppliers: 13.6%; 
All other non-contract suppliers: 3.9%. 

Q2, 2011; 
Contract supplier #1: 83.6%; 
All other contract suppliers: 13.4%; 
All other non-contract suppliers: 2.9%. 

Q3, 2011; 
Contract supplier #1: 78.9%; 
All other contract suppliers: 19.1%; 
All other non-contract suppliers: 2%. 

Q4, 2011; 
Contract supplier #1: 75.5%; 
All other contract suppliers: 22.1%; 
All other non-contract suppliers: 2.4%. 

Q1, 2012; 
Contract supplier #1: 79.7%; 
All other contract suppliers: 19.2%; 
All other non-contract suppliers: 1.1%. 

Q2, 2012; 
Contract supplier #1: 74.2%; 
All other contract suppliers: 24.6%; 
All other non-contract suppliers: 1.2%. 

Q3, 2012; 
Contract supplier #1: 67%; 
All other contract suppliers: 31.6%; 
All other non-contract suppliers: 1.4%. 

Q4, 2012; 
Contract supplier #1: 74.6%; 
All other contract suppliers: 21.9%; 
All other non-contract suppliers: 3.5%. 

Source: GAO analysis of CMS data. 

Note: The figure includes the contract supplier with the highest 
percentage of Medicare total allowed charges for 20 rebid-covered 
standard power wheelchair product category codes across all 8 quarters 
of 2011 and 2012. For the "all other contract suppliers" group, we 
combined the other 15 contract suppliers' individual percentages of 
Medicare total allowed charges for the codes. For the "all other non-
contract suppliers" group, we combined non-contract suppliers' 
individual percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Figure 21: Contract Supplier with the Highest Percentage of Medicare 
Total Allowed Charges for 20 Round 1 Rebid Standard Power Wheelchair 
Product Category Codes, Riverside Competitive Bidding Area, 2011 and 
2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Percentage of all Medicare total allowed charges each quarter: 

Q1, 2011; 
Contract supplier #1: 69.4%; 
All other contract suppliers: 27.4%; 
All other non-contract suppliers: 3.3%. 

Q2, 2011; 
Contract supplier #1: 51.5%; 
All other contract suppliers: 42.5%; 
All other non-contract suppliers: 6%. 

Q3, 2011; 
Contract supplier #1: 58.1%; 
All other contract suppliers: 38.6%; 
All other non-contract suppliers: 3.2%. 

Q4, 2011; 
Contract supplier #1: 53.2%; 
All other contract suppliers: 41.2%; 
All other non-contract suppliers: 5.6%. 

Q1, 2012; 
Contract supplier #1: 65.6%; 
All other contract suppliers: 29.8%; 
All other non-contract suppliers: 4.6%. 

Q2, 2012; 
Contract supplier #1: 60.9%; 
All other contract suppliers: 35.4%; 
All other non-contract suppliers: 3.8%. 

Q3, 2012; 
Contract supplier #1: 61.9%; 
All other contract suppliers: 36.4%; 
All other non-contract suppliers: 1.7%. 

Q4, 2012; 
Contract supplier #1: 71.7%; 
All other contract suppliers: 25.5%; 
All other non-contract suppliers: 2.9%. 

Source: GAO analysis of CMS data. 

Note: The figure includes the contract supplier with the highest 
percentage of Medicare total allowed charges for 20 rebid-covered 
standard power wheelchair product category codes across all 8 quarters 
of 2011 and 2012. For the "all other contract suppliers" group, we 
combined the other 27 contract suppliers' individual percentages of 
Medicare total allowed charges for the codes. For the "all other non-
contract suppliers" group, we combined non-contract suppliers' 
individual percentages of Medicare total allowed charges for the codes. 

[End of figure] 

Round 1 Rebid's Top Standard Power Wheelchair Contract Supplier in 
2011 and 2012 Was Terminated in 2013: 

In September 2013, CMS issued a termination notice, with an effective 
date of October 26, 2013, for The Scooter Store's CBP round 1 rebid 
contract in all competitive bidding areas. Prior to issuing the 
termination notice, CMS removed all references to both The Scooter 
Store and its Alliance Seating & Mobility Division from all CBP round 
1 rebid contract supplier lists on its website in March 2013. A CMS 
official told us that the removal occurred because of compliance 
issues identified with The Scooter Store's round 1 rebid contract and 
that CMS began initiating the contract termination process at that 
time.[Footnote 59] According to CMS, it carefully scrutinizes CBP 
bidders to ensure that only qualified suppliers are selected to 
participate in the program; however, The Scooter Store had been the 
subject of allegations of fraud prior to being awarded a contract in 
both CBP's round 1 and round 1 rebid. Specifically, in 2007, The 
Scooter Store entered into a civil settlement agreement with the U.S. 
Government to resolve several lawsuits and agreed to pay $4 million 
and relinquish its right to receive reimbursement for pending Medicare 
claims.[Footnote 60] In one of the lawsuits, the Government alleged 
that the company violated the civil False Claims Act and defrauded the 
United States by, among other things, enticing some beneficiaries to 
obtain power scooters covered by Medicare and Medicaid and then 
supplying more costly power wheelchairs that beneficiaries did not 
want, did not need, or could not use. 

Although too soon to determine the full effects, The Scooter Store's 
2013 termination as a contract supplier could potentially result in 
access issues for beneficiaries residing in the CBP round 1 rebid 
competitive bidding areas. For example, one round 1 rebid contract 
supplier we interviewed told us that her company received calls from 
some of The Scooter Store's beneficiaries seeking wheelchair repairs. 
However, this contract supplier and two others told us that some 
contract suppliers are reluctant or unwilling to repair a wheelchair 
that they did not originally provide because if the contract suppliers 
did the repairs, and CMS later determined that The Scooter Store had 
furnished a wheelchair that did not meet documentation requirements, 
CMS could recover payments made to the repairing contract suppliers. 

Few Contract Suppliers Left the Competitive Bidding Program in its 
First Two Years: 

In the round 1 rebid's second year, a few contract suppliers--8 
percent--had their contracts terminated by CMS or voluntarily withdrew 
from Medicare, and some had an ownership change. Contract suppliers 
continued to use subcontractors to provide certain services to 
beneficiaries in the round 1 rebid competitive bidding areas, but no 
new agreements were disclosed in 2012. The number of grandfathered 
suppliers decreased in 2012 to the point that CMS discontinued its 
monitoring as rental agreements expired. 

In CBP's First Two Years, About 8 Percent of Contract Suppliers Had 
Contracts Terminated or Voluntarily Withdrew From Medicare: 

By the end of the CBP's second year, 27 of the original 356 contract 
suppliers--about 8 percent--had been terminated by CMS or had 
voluntarily withdrawn from Medicare, according to CMS data. Eleven 
contract suppliers were terminated--4 in 2012 and 7 in 2011. Nine 
terminated suppliers were small suppliers as defined for CBP. One 
terminated supplier was not experienced in one of its competitive 
bidding areas; all were experienced in their product categories. The 
11 terminated contract suppliers had a total of 22 round 1 rebid 
product category and competitive bidding area combinations. (See table 
1.) The oxygen product category and the Miami competitive bidding area 
were the most affected. 

Table 1: Total Number of Round 1 Rebid Product Categories and 
Competitive Bidding Areas Affected by the 11 Terminated Contract 
Suppliers, 2011 and 2012: 

Product category: Oxygen; 6; 
Competitive bidding area: Miami; 9. 

Product category: Standard wheelchairs; 5; 
Competitive bidding area: Orlando; 4. 

Product category: Complex wheelchairs; 3; 
Competitive bidding area: Kansas City; 3. 

Product category: CPAP/RAD; 2; 
Competitive bidding area: Riverside; 3. 

Product category: Enteral; 2; 
Competitive bidding area: Cincinnati; 1. 

Product category: Walkers; 2; 
Competitive bidding area: Dallas; 1. 

Product category: Hospital beds; 1; 
Competitive bidding area: Pittsburgh; 1. 

Product category: Support surfaces; 1; 
Competitive bidding area: Charlotte; 0. 

Product category: Mail-order diabetic testing supplies; 0; 
Competitive bidding area: Cleveland; 0. 

Product category: Total; 22; 
Competitive bidding area: Total; 22. 

Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) 
data. 

Note: In general, a contract supplier enters into a single contract 
with CMS for the relevant competitive bidding program (CBP) round, 
which covers all the product category and competitive bidding area 
combinations awarded to and accepted by the contract supplier. The 
number of product category and competitive bidding area combinations 
within each contract supplier's contract can vary. Accordingly, for 
this analysis, we counted the number of product categories and 
competitive bidding areas individually that were affected by CMS's 
termination of 11 contract suppliers. 

[End of table] 

Sixteen contract suppliers withdrew voluntarily from Medicare, 7 in 
2012 and 9 in 2011. Of these 16 withdrawn suppliers, 13 were small 
suppliers. Two suppliers that withdrew had no experience in 1 of their 
product categories; and all 16 were experienced in their competitive 
bidding areas. The 16 suppliers that withdrew had a total of 37 round 
1 rebid product category and competitive bidding area combinations. 
(See table 2.) The oxygen product category and the Miami competitive 
bidding area were the most affected. 

Table 2: Total Number of Round 1 Rebid Product Categories and 
Competitive Bidding Areas Affected by the 16 Contract Suppliers that 
Voluntarily Withdrew from Medicare, 2011 and 2012: 

Product category: Oxygen; 14; 
Competitive bidding area: Miami; 16. 

Product category: Standard wheelchairs; 6; 
Competitive bidding area: Riverside; 6. 

Product category: Enteral; 4; 
Competitive bidding area: Kansas City; 5. 

Product category: CPAP/RAD; 3; 
Competitive bidding area: Orlando; 5. 

Product category: Complex wheelchairs; 3; 
Competitive bidding area: Charlotte; 3. 

Product category: Hospital beds; 3; 
Competitive bidding area: Dallas; 2. 

Product category: Walkers; 3; 
Competitive bidding area: Cincinnati; 0. 

Product category: Support surfaces; 1; 
Competitive bidding area: Cleveland; 0. 

Product category: Mail-order diabetic testing supplies; 0; 
Competitive bidding area: Pittsburgh; 0. 

Product category: Total; 37; 
Competitive bidding area: Total; 37. 

Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) 
data. 

[A] CPAP/RAD are continuous positive airway pressure devices and 
respiratory assist devices, and related supplies and accessories used 
to treat sleep apnea for example. 

Note: In general, a contract supplier enters into a single contract 
with CMS for the relevant competitive bidding program (CBP) round, 
which covers all the product category and competitive bidding area 
combinations awarded to and accepted by the contract supplier. The 
number of product category and competitive bidding area combinations 
within each contract supplier's contract can vary. Accordingly, for 
this analysis, we counted the number of product categories and 
competitive bidding areas individually that were affected by the 16 
contract suppliers that voluntarily withdrew from Medicare. 

[End of table] 

Twelve Contract Supplier Ownership Changes Occurred in CBP's First Two 
Years: 

During the round 1 rebid's first two years, 12 of the original 356 
round 1 rebid contract suppliers--3 percent--had a change in 
ownership. (See table 3.) For 11 of the 12 changes, CMS awarded the 
round 1 rebid contracts to the acquiring entity as the entity assumed 
the obligations under these contracts. In 2012, the only ownership 
change involved a contract supplier that purchased another contract 
supplier, but did not assume the purchased supplier's CBP contracts. 
In this ownership change, the purchasing contract supplier already had 
CBP contracts in the same competitive bidding areas for the same 
product categories, and began serving the purchased contract 
supplier's Medicare beneficiaries including its grandfathered 
beneficiaries. 

Table 3: Twelve Ownership Changes Involving Round 1 Rebid Contact 
Suppliers, 2011 and 2012: 

Supplier ownership change transaction: Contract supplier purchases 
another contract supplier; 
Which supplier assumes the involved round 1 rebid contract: CMS allows 
the purchasing contract supplier to assume the purchased contract 
supplier's contract or contracts; 
Ownership changes: 7[A]. 

Supplier ownership change transaction: Non-contract supplier purchases 
a contract supplier; 
Which supplier assumes the involved round 1 rebid contract: CMS allows 
the purchasing non-contract supplier to assume the purchased contract 
supplier's contract or contracts (non-contract supplier becomes 
contract supplier); 
Ownership changes: 5. 

Supplier ownership change transaction: Total; 
Ownership changes: 12. 

Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) 
data. 

Note: During the period after CMS announced the round 1 rebid single 
payment amounts on July 2, 2010, until the round 1 rebid began January 
1, 2011, CMS also approved these ownership changes: (1) two contract 
supplier purchases of other contract suppliers, and (2) one non-
contract supplier purchase of a contract supplier. 

[A] In one transaction, the purchasing contract supplier did not assume 
the purchased supplier's round 1 rebid contract because it already had 
a rebid contract for the same product categories in the same 
competitive bidding areas. 

[End of table] 

Contract Suppliers Did Not Enter Into New Subcontracting Agreements, 
and Grandfathered Suppliers Continued to Decrease: 

While contract suppliers have continued to use subcontractor suppliers 
to assist them in furnishing items to CBP-covered 
beneficiaries,[Footnote 61] CMS officials told us no contract 
suppliers disclosed any new subcontracting agreements in 2012 or 
during the first three months of 2013. As of April 2013, CMS data 
indicated that 116 distinct contract suppliers have had at least one 
subcontracting agreement; in total, there were 730 agreements 
involving 228 distinct subcontractor suppliers. Forty-seven percent 
(55) of the 116 contract suppliers had one subcontract agreement. The 
other 61 contract suppliers had multiple subcontracts, including one 
contract supplier with 50 agreements. Eight of the 116 contract 
suppliers had subcontract agreements that ended in 2011, 2012, or 
early 2013. 

CMS officials also told us that the number of grandfathered suppliers 
had so diminished that the agency was no longer monitoring them after 
the second quarter 2012. As we previously reported,[Footnote 62] the 
number of grandfathered suppliers had declined steadily during the 
rebid's first year (2011); in December 2011, 22 percent (575 of 2,594) 
of the grandfathered suppliers were still billing Medicare for CBP-
covered beneficiaries they had at the end of December 2010, the year 
before the CBP began.[Footnote 63] 

The Number of Suppliers and Their Medicare Allowed Charges Generally 
Decreased More in Competitive Bidding Areas than in Comparator Areas: 

Comparing the third quarters of 2010, before the rebid began, and 
2012, the rebid's second year, both the number of suppliers and their 
Medicare allowed charges generally decreased more in the competitive 
bidding areas than in the comparator areas.[Footnote 64] (See appendix 
I.) The number of suppliers with Medicare allowed charge amounts of 
$2,500 or more per quarter decreased an average of 27 percent in the 
competitive bidding areas, and 5 percent in the comparator areas. (See 
table 4.) All nine competitive bidding areas and six of the nine 
comparator areas experienced decreases in those supplier numbers. The 
Miami competitive bidding area experienced the greatest change in 
suppliers--decreasing by 227 suppliers--a 32 percent change. The 
number of large suppliers, which we define as having quarterly allowed 
Medicare charges of $100,000 or more, decreased an average of 18 
percent in the competitive bidding areas, while there was essentially 
no change in the average number of large suppliers in the comparator 
areas. All nine competitive bidding areas and three of the nine 
comparator areas had decreases in these large suppliers. The 
Cincinnati competitive bidding area had the greatest percentage 
decrease in suppliers at this level--32 percent. 

Table 4: Percentage Decreases in Number of Suppliers by Medicare 
Allowed Charge Amounts Comparing Round 1 Rebid Competitive Bidding 
Areas and Their Comparator Areas, Third Quarter 2010 to Third Quarter 
2012: 

Medicare allowed charges comparing third quarter 2010 to third quarter 
2012: Suppliers with charges of $2,500 or more[A]; 

Round 1 rebid areas: Competitive bidding areas; 
Average percentage decrease in number of suppliers: 27%; 
Highest percentage decrease in number of suppliers: 32% (Miami); 
Lowest percentage decrease in suppliers: 19% (Cincinnati). 

Round 1 rebid areas: Comparator areas; 
Average percentage decrease in number of suppliers: 5%; 
Highest percentage decrease in number of suppliers: 11% (Houston, 
Tampa); 
Lowest percentage decrease in suppliers: 6% (San Diego). 

Medicare allowed charges comparing third quarter 2010 to third quarter 
2012: Suppliers with charges of $100,000 or more[A]; 

Round 1 rebid areas: Competitive bidding areas; 
Average percentage decrease in number of suppliers: 18%; 
Highest percentage decrease in number of suppliers: 32% (Cincinnati); 
Lowest percentage decrease in suppliers: 4% (Charlotte, Kansas City). 

Round 1 rebid areas: Comparator areas; 
Average percentage decrease in number of suppliers: 0%; 
Highest percentage decrease in number of suppliers: 17% (San Diego); 
Lowest percentage decrease in suppliers: 4% (Oklahoma City). 

Source: GAO analysis of Medicare claims data. 

[A] There are duplicate suppliers included in the number of supplier 
totals. For example, the same supplier may have submitted Medicare 
charges in more than one competitive bidding area or comparator area; 
the supplier is counted in each area in which it had a Medicare allowed 
charge. 

[End of table] 

The total Medicare allowed charges for the same time period also 
decreased for all nine competitive bidding areas and all nine 
comparator areas. (See appendix II.) The average decrease for the 
competitive bidding areas was 28 percent, and 7 percent for the 
comparator areas. (See table 5.) There were three competitive bidding 
areas with the highest total charge decrease of 32 percent, including 
for example, the Cincinnati area's charges that decreased about $4.2 
million from third quarter 2010 ($12.9 million) to third quarter 2012 
($8.7 million). The Orlando competitive bidding area had the lowest 
percentage decrease change--22 percent--a decrease in total charges of 
about $3.3 million. Among the comparator areas, the highest total 
charge decrease was San Diego--15 percent--a decrease of about $2 
million (from $13.7 million to $11.6 million), while Virginia Beach 
had the lowest decrease--0.1 percent--or $17,077 (from $12,603,542 to 
$12,586,465). 

Table 5: Percentage Decrease in Total Medicare Allowed Charges 
Comparing Round 1 Rebid Competitive Bidding Areas and Their Comparator 
Areas, Third Quarter 2010 to Third Quarter 2012: 

Round 1 rebid areas: Competitive bidding areas; 
Total Medicare Allowed Charges: 
Average percentage decrease: 28%; 
Highest percentage decrease: 32% (Cincinnati, Miami, Riverside); 
Lowest percentage decrease: 22% (Orlando). 

Round 1 rebid areas: Comparator areas; 
Total Medicare Allowed Charges: 
Average percentage decrease: 7%; 
Highest percentage decrease: 15% (San Diego); 
Lowest percentage decrease: 0.1% (Virginia Beach). 

Source: GAO analysis of Medicare claims data. 

[End of table] 

Concluding Observations: 

The CBP round 1 rebid's savings for both the Medicare program and the 
rebid-covered beneficiaries continued in the second year, with CMS 
reporting total savings of more than $400 million in the rebid's first 
two years due to its lower payments, decreased utilization, and lower 
beneficiary coinsurance. In the rebid's second year, beneficiary 
utilization of CBP-covered DME items continued to decrease--more in 
the rebid's competitive bidding areas than the comparator areas. CMS's 
monitoring activities, however, did not indicate beneficiary access 
issues. As we reported in 2012, we do not assume that all pre-CBP 
utilization was appropriate, and CBP may be continuing to reduce 
unnecessary utilization. CMS's fraud prevention efforts may also be 
affecting DME utilization. 

Continued monitoring of CBP experience is important to determine the 
full effects it may have on Medicare beneficiaries and DME suppliers. 
It will be important to determine whether the DME utilization trends 
in the round 1 rebid's first two years are similar to those in CBP's 
other rounds. With the CBP's 3-year round 1 rebid complete, the CBP's 
2013 round 2 expansion into an additional 100 competitive bidding 
areas, the 2013 implementation of the national mail-order diabetic 
testing supplies program, and the 2013 selection of the new contract 
suppliers in the original nine areas for the next 3-year contracts 
beginning in 2014, significant new data will soon be available to 
further assess the impact of the program. 

Agency Comments and Our Evaluation: 

HHS reviewed a draft of this report and provided written comments 
which are reprinted in appendix III. HHS also provided technical 
comments, which we incorporated as appropriate. In its general 
comments, HHS stated that CMS will continue monitoring the CBP to 
ensure Medicare beneficiaries are not adversely affected by the 
program, including continuing to use its real-time claims monitoring 
system. The monitoring activities are important as the CBP has 
expanded to include 100 additional competitive bidding areas and a 
national mail-order program for diabetic testing supplies. HHS also 
stated that it anticipates CBP will provide substantial savings for 
both the Medicare Part B Trust Fund and Medicare beneficiaries. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the Secretary of Health and Human Services and appropriate 
congressional committees. The report will also be available at no 
charge on our website at [Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix IV. 

Signed by: 

Kathleen M. King: 
Director, Health Care: 

[End of section] 

Appendix I: Number of Suppliers in the Round 1 Rebid Competitive 
Bidding Areas and Their Comparator Areas; 2010 and 2012: 

Round 1 rebid competitive bidding area and its comparator area: 1; 
Charlotte; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 301; 
Third quarter 2012: 218; 
Percentage change in number of suppliers: 28% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 28; 
Third quarter 2012: 27; 
Difference between third quarter 2010 and third quarter 2012: 1 fewer; 
Percentage change in number of suppliers: 4% decrease. 

Virginia Beach comparator; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 236; 
Third quarter 2012: 239; 
Difference between third quarter 2010 and third quarter 2012: 3 more; 
Percentage change in number of suppliers: 1% increase; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 29; 
Third quarter 2012: 29; 
Difference between third quarter 2010 and third quarter 2012: Same; 
Percentage change in number of suppliers: 0% no change. 

Round 1 rebid competitive bidding area and its comparator area: 2; 
Cincinnati; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 284; 
Third quarter 2012: 230; 
Difference between third quarter 2010 and third quarter 2012: 54 fewer; 
Percentage change in number of suppliers: 19% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 34; 
Third quarter 2012: 23; 
Difference between third quarter 2010 and third quarter 2012: 11 fewer; 
Percentage change in number of suppliers: 32% decrease. 

Indianapolis comparator; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 337; 
Third quarter 2012: 349; 
Number of suppliers with $2,500 or 
Difference between third quarter 2010 and third quarter 2012: 12 more; 
Percentage change in number of suppliers: 4% increase; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 23; 
Third quarter 2012: 20; 
Difference between third quarter 2010 and third quarter 2012: 3 fewer; 
Percentage change in number of suppliers: 13% decrease. 

Round 1 rebid competitive bidding area and its comparator area: 3; 
Cleveland; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 292; 
Third quarter 2012: 202; 
Difference between third quarter 2010 and third quarter 2012: 90 fewer; 
Percentage change in number of suppliers: 31% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 32; 
Third quarter 2012: 28; 
Difference between third quarter 2010 and third quarter 2012: 4 fewer; 
Percentage change in number of suppliers: 13% decrease. 

Columbus comparator; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 4: 269; 
Third quarter 2012: 4: 279; 
Number of suppliers with $2,500 or 
Difference between third quarter 2010 and third quarter 2012: 10 more; 
Percentage change in number of suppliers: 4% increase; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 19; 
Third quarter 2012: 21; 
Difference between third quarter 2010 and third quarter 2012: 2 more; 
Percentage change in number of suppliers: 11% increase. 

Round 1 rebid competitive bidding area and its comparator area: 4; 
Dallas; 
Number of suppliers with $2,500 or more in Medicare allowed charges per 
quarter: 
Third quarter 2010: 551; 
Third quarter 2012: 404; 
Difference between third quarter 2010 and third quarter 2012: 147 
fewer; 
Percentage change in number of suppliers: 27% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 86; 
Third quarter 2012: 67; 
Difference between third quarter 2010 and third quarter 2012: 19 fewer; 
Percentage change in number of suppliers: 22% decrease. 

Houston comparator; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 523; 
Third quarter 2012: 465; 
Difference between third quarter 2010 and third quarter 2012: 58 fewer; 
Percentage change in number of suppliers: 11% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 60; 
Third quarter 2012: 66; 
Difference between third quarter 2010 and third quarter 2012: 6 more; 
Percentage change in number of suppliers: 5: 10% increase. 

Round 1 rebid competitive bidding area and its comparator area: 5; 
Kansas City; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 251; 
Third quarter 2012: 182; 
Difference between third quarter 2010 and third quarter 2012: 69 fewer; 
Percentage change in number of suppliers: 27% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 24; 
Third quarter 2012: 23; 
Difference between third quarter 2010 and third quarter 2012: 1 fewer; 
Percentage change in number of suppliers: 4% decrease. 

Oklahoma City comparator; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 266; 
Third quarter 2012: 248; 
Difference between third quarter 2010 and third quarter 2012: 18 fewer; 
Percentage change in number of suppliers: 7% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 27; 
Third quarter 2012: 26; 
Difference between third quarter 2010 and third quarter 2012: 1 fewer; 
Percentage change in number of suppliers: 6: 4% decrease. 

Round 1 rebid competitive bidding area and its comparator area: 6; 
Miami; 
Number of suppliers with $2,500 or more in Medicare allowed charges per 
quarter: 
Third quarter 2010: 700; 
Third quarter 2012: 473; 
Difference between third quarter 2010 and third quarter 2012: 227 
fewer; 
Percentage change in number of suppliers: 32% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 74; 
Third quarter 2012: 57; 
Difference between third quarter 2010 and third quarter 2012: 17 fewer; 
Percentage change in number of suppliers: 23% decrease. 

Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 457; 
Third quarter 2012: 405; 
Difference between third quarter 2010 and third quarter 2012: 52 fewer; 
Percentage change in number of suppliers: 11% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 44; 
Third quarter 2012: 46; 
Difference between third quarter 2010 and third quarter 2012: 2 more; 
Percentage change in number of suppliers: 5% increase. 

Round 1 rebid competitive bidding area and its comparator area: 7; 
Orlando; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 316; 
Third quarter 2012: 229; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Difference between third quarter 2010 and third quarter 2012: 87 fewer; 
Percentage change in number of suppliers: 28% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 30; 
Third quarter 2012: 29; 
Difference between third quarter 2010 and third quarter 2012: 1 fewer; 
Percentage change in number of suppliers: 3% decrease. 

Jacksonville comparator; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 287; 
Third quarter 2012: 268; 
Difference between third quarter 2010 and third quarter 2012: 19 fewer; 
Percentage change in number of suppliers: 7% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 28; 
Third quarter 2012: 30; 
Difference between third quarter 2010 and third quarter 2012: 2 more; 
Percentage change in number of suppliers: 7% increase. 

Round 1 rebid competitive bidding area and its comparator area: 8; 
Pittsburgh; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 222; 
Third quarter 2012: 168; 
Difference between third quarter 2010 and third quarter 2012: 54 fewer; 
Percentage change in number of suppliers: 24% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 28; 
Third quarter 2012: 20; 
Difference between third quarter 2010 and third quarter 2012: 8 fewer; 
Percentage change in number of suppliers: 29% decrease. 

Detroit comparator; 
Number of suppliers with $2,500 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 637; 
Third quarter 2012: 584; 
Difference between third quarter 2010 and third quarter 2012: 53 fewer; 
Percentage change in number of suppliers: 8% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 79; 
Third quarter 2012: 80; 
Difference between third quarter 2010 and third quarter 2012: 1 more; 
Percentage change in number of suppliers: 9: 1% increase. 

Round 1 rebid competitive bidding area and its comparator area: 9; 
Riverside; 
Third quarter 2010: 414; 
Third quarter 2012: 286; 
Difference between third quarter 2010 and third quarter 2012: 128 
fewer; 
Percentage change in number of suppliers: 31% decrease; 
Number of suppliers with $100,000 or more in Medicare allowed charges 
per quarter: 
Third quarter 2010: 35; 
Third quarter 2012: 24; 
Difference between third quarter 2010 and third quarter 2012: 11 fewer; 
Percentage change in number of suppliers: 31% decrease. 

San Diego comparator; 
Number of suppliers with $2,500 or more in Medicare allowed 
charges per quarter: 
Third quarter 2010: 289; 
Third quarter 2012: 271; 
Difference between third quarter 2010 and third quarter 2012: 18 fewer; 
Percentage change in number of suppliers: 6% decrease; 
suppliers with $100,000 or more in Medicare allowed charges per 
quarter: 
Third quarter 2010: 35; 
Third quarter 2012: 29; 
Difference between third quarter 2010 and third quarter 2012: 6 fewer; 
Percentage change in number of suppliers: 17% decrease. 

Source: GAO analysis of Medicare claims data. 

Notes: For this analysis, we compared the number of suppliers with 
Medicare allowed charges in the 18 areas using the allowed charge data 
for the third quarter 2010--the most recent quarter before the round 1 
rebid contract suppliers were announced in November 2010, and for the 
third quarter 2012--in the round 1 rebid's second year. The suppliers 
included had at least one allowed charge for a beneficiary residing in 
any of the 9 round 1 rebid areas and their 9 comparator areas for any 
Medicare DMEPOS fee-for-service Healthcare Common Procedure Coding 
System (HCPCS) codes, excluding the prosthetic and orthotic codes as 
this category generally represents more individualized items needing to 
be fitted to a beneficiary, and including the parenteral--intravenous 
nutrition--codes. 

Source: GAO analysis of Medicare claims data. 

[End of table] 

[End of section] 

Appendix II: Medicare Allowed Charges for Round 1 Rebid Competitive 
Bidding Areas and Their Comparator Areas; 2010 and 2012: 

Round 1 rebid competitive bidding areas and their comparator areas: 1; 
Charlotte; 
Third quarter 2010: $15,148,336; 
Third quarter 2012: $11,373,360; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$3,774,976; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 25%. 

Virginia Beach comparator; 
Third quarter 2010: $12,603,542; 
Third quarter 2012: $12,586,465; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$17,077; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 0.1%. 

Round 1 rebid competitive bidding areas and their comparator areas: 2; 
Cincinnati; 
Third quarter 2010: $12,899,494; 
Third quarter 2012: $8,714,392; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$4,185,102; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 32%. 

Indianapolis comparator; 
Third quarter 2010: $13,625,894; 
Third quarter 2012: $12,714,630; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$911,264; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 7%. 

Round 1 rebid competitive bidding areas and their comparator areas: 3; 
Cleveland; 
Third quarter 2010: $16,429,149; 
Third quarter 2012: $12,186,145; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$4,243,004; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 26%. 

Columbus comparator; 
Third quarter 2010: $10,021,862; 
Third quarter 2012: $9,845,307; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$176,555; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 2%. 

Round 1 rebid competitive bidding areas and their comparator areas: 4; 
Dallas; 
Third quarter 2010: $38,387,712; 
Third quarter 2012: $28,002,782; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$10,384,930; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 27%. 

Houston comparator; 
Third quarter 2010: $27,728,595; 
Third quarter 2012: $26,370,487; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$1,358,108; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 5%. 

Round 1 rebid competitive bidding areas and their comparator areas: 5; 
Kansas City; 
Third quarter 2010: $13,851,306; 
Third quarter 2012: $10,648,079; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$3,203,227; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 23%. 

Oklahoma City comparator; 
Third quarter 2010: $11,239,073; 
Third quarter 2012: $10,280,836; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$958,237; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 9%. 

Round 1 rebid competitive bidding areas and their comparator areas: 6; 
Miami; 
Third quarter 2010: $35,765,663; 
Third quarter 2012: $24,399,299; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$11,366,364; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 32%. 

Tampa comparator; 
Third quarter 2010: $21,147,496; 
Third quarter 2012: $19,582,931; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$1,564,565; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 7%. 

Round 1 rebid competitive bidding areas and their comparator areas: 7; 
Orlando; 
Third quarter 2010: $15,202,738; 
Third quarter 2012: $11,868,894; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$3,333,844; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 22%. 

Jacksonville comparator; 
Third quarter 2010: $12,278,514; 
Third quarter 2012: $11,482,182; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$796,332; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 6%. 

Round 1 rebid competitive bidding areas and their comparator areas: 8; 
Pittsburgh; 
Third quarter 2010: $11,305,345; 
Third quarter 2012: $7,973,134; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$3,332,211; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 29%. 

Detroit comparator; 
Third quarter 2010: $41,510,133; 
Third quarter 2012: $37,106,154; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$4,403,979; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 11%. 

Round 1 rebid competitive bidding areas and their comparator areas: 9; 
Riverside; 
Third quarter 2010: $18,332,526; 
Third quarter 2012: $12,412,464; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$5,920,062; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 32%. 

San Diego comparator; 
Third quarter 2010: $13,756,963; 
Third quarter 2012: $11,686,078; 
Decreases from third quarter 2010 compared to third quarter 2012: 
$2,070,885; 
Percentage decreases from third quarter 2010 compared to third quarter 
2012: 15%. 

Source: GAO analysis of Medicare claims data. 

Notes: For this analysis, we compared the number of suppliers with 
Medicare allowed charges in the 18 areas using the allowed charge data 
for the third quarter 2010--the most recent quarter before the round 1 
rebid contract suppliers were announced in November 2010, and for the 
third quarter 2012--in the round 1 rebid's second year. The suppliers 
included had at least one allowed charge for a beneficiary residing in 
any of the 9 round 1 rebid areas and their 9 comparator areas for any 
Medicare DMEPOS fee-for-service Healthcare Common Procedure Coding 
System (HCPCS) codes, excluding the prosthetic and orthotic codes as 
this category generally represents more individualized items needing to 
be fitted to a beneficiary, and including the parenteral--intravenous 
nutrition--codes. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of Health and Human 
Services: 

DEPARTMENT OF HEALTH & HUMAN SERVICES: 
OFFICE OF THE SECRETARY: 
Assistant Secretary for Legislation: 
Washington, DC 20201: 

February 20, 2014: 

Kathleen King: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street NW: 
Washington, DC 20548: 

Dear Ms, King: 

Attached are comments on the U.S. Government Accountability Office's 
(GAO) report entitled, "Medicare: Second Year Update for CMS's Durable 
Medical Equipment Competitive Bidding Program Round 1 Rebid" (GAO-14-
156). 

The Department appreciates the opportunity to review this report prior 
to publication. 

Sincerely, 

Signed by: 

Jim R. Esquea: 
Assistant Secretary for Legislation: 

Attachment: 

The Department Of Health And Human Services' (HHS) General Comments To 
The Government Accountability Office (GAO) Draft Report: "Medicare 
Second Year Update For CMS's Durable Medical Equipment Competitive 
Bidding Program Round I Rebid" (GAO-14-156): 

HHS appreciates the opportunity to review and comment on the above 
subject GAO draft report. We are pleased that GAO found that the 
program has continued to be successful. As discussed in the draft 
report, CMS has implemented a comprehensive monitoring program to 
ensure that the competitive bidding program achieves its goals of 
quality and savings. We recognize that the draft report addresses 
Round 1 Rebid results through 2012 and are pleased to inform GAO that 
our monitoring data continue to show a smooth implementation to date. 
In particular, our sophisticated real-time claims monitoring system 
has continuously found that beneficiary access to all necessary and 
appropriate competitively bid items has been preserved since the 
program began.[Footnote 1] 

As indicated in the draft report, the program expanded substantially 
in 2013 with the implementation of Round 2 and National Mail-Order 
Program contracts and prices. This expansion is expected to yield 
significant savings for taxpayers and Medicare beneficiaries. HIIS 
estimates that the program will save the Medicare Part B Trust Fund 
$25.8 billion and beneficiaries $17.2 billion over ten years through 
reduced coinsurance and the downward effect on premiums. HHS will 
continue to monitor the program carefully through all phases of 
implementation to ensure that Medicare savings are achieved without 
negative consequences to Medicare beneficiaries. 

Footnote: 

[1] Examples of real-time claims monitoring tracking can be found on 
the CMS website at: [hyperlink, http://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/DMEPOSCompetitiveBid/Monitoring.html]. 

[End of section] [End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Kathleen M. King, (202) 512-7114 or k [Hyperlink, kingk@gao.gov] 
ingk@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, key contributors to this 
report were Martin T. Gahart, Assistant Director; Yesook Merrill, 
Assistant Director; Todd Anderson; Dan Lee; Drew Long; Michelle 
Paluga; Hemi Tewarson; and Opal Winebrenner. 

[End of section] 

Related GAO Products: 

Medicare: Review of the First Year of CMS's Durable Medical Equipment 
Competitive Bidding Program's Round 1 Rebid. [Hyperlink, 
http://www.gao.gov/products/GAO-12-693]. Washington, D.C.: May 9, 2012. 

Medicare: The First Year of the Durable Medical Equipment Competitive 
Bidding Program Round 1 Rebid. [Hyperlink, 
http://www.gao.gov/products/GAO-12-733T]. Washington, D.C.: May 9, 
2012. 

Medicare: Issues for Manufacturer-level Competitive Bidding for 
Durable Medical Equipment. [Hyperlink, http://www.gao.gov/products/GAO-
11-337R]. Washington, D.C.: May 31, 2011. 

Medicare: CMS Has Addressed Some Implementation Problems from Round 1 
of the Durable Medical Equipment Competitive Bidding Program for the 
Round 1 Rebid. [Hyperlink, http://www.gao.gov/products/GAO-10-1057T]. 
Washington, D.C.: Sept. 15, 2010. 

Medicare: CMS Working to Address Problems from Round 1 of the Durable 
Medical Equipment Competitive Bidding Program. [Hyperlink, 
http://www.gao.gov/products/GAO-10-27]. Washington, D.C.: Nov. 6, 2009. 

Medicare: Covert Testing Exposes Weaknesses in the Durable Medical 
Equipment Supplier Screening Process. [Hyperlink, 
http://www.gao.gov/products/GAO-08-955]. Washington, D.C.: July 3, 
2008. 

Medicare: Competitive Bidding for Medical Equipment and Supplies Could 
Reduce Program Payments, but Adequate Oversight Is Critical. 
[Hyperlink, http://www.gao.gov/products/GAO-08-767T]. Washington, 
D.C.: May 6, 2008. 

Medicare: Improvements Needed to Address Improper Payments for Medical 
Equipment and Supplies. [Hyperlink, http://www.gao.gov/products/GAO-07-
59]. Washington, D.C.: Jan. 31, 2007. 

Medicare Payment: CMS Methodology Adequate to Estimate National Error 
Rate. [Hyperlink, http://www.gao.gov/products/GAO-06-300]. Washington, 
D.C.: March 24, 2006. 

Medicare Durable Medical Equipment: Class III Devices Do Not Warrant a 
Distinct Annual Payment Update. [Hyperlink, 
http://www.gao.gov/products/GAO-06-62]. Washington, D.C.: March 1, 
2006. 

Medicare: More Effective Screening and Stronger Enrollment Standards 
Needed for Medical Equipment Suppliers. [Hyperlink, 
http://www.gao.gov/products/GAO-05-656]. Washington, D.C.: Sept. 22, 
2005. 

Medicare: CMS's Program Safeguards Did Not Deter Growth in Spending 
for Power Wheelchairs. [Hyperlink, http://www.gao.gov/products/GAO-05-
43]. Washington, D.C.: Nov. 17, 2004. 

Medicare: Past Experience Can Guide Future Competitive Bidding for 
Medical Equipment and Supplies. [Hyperlink, 
http://www.gao.gov/products/GAO-04-765]. Washington, D.C.: Sept. 7, 
2004. 

Medicare: CMS Did Not Control Rising Power Wheelchair Spending. 
[Hyperlink, http://www.gao.gov/products/GAO-04-716T]. Washington, 
D.C.: April 28, 2004. 

[End of section] 

Footnotes: 

[1] Medicare is for individuals aged 65 and older, individuals under 
age 65 with certain disabilities, and individuals diagnosed with end-
stage renal disease. 

[2] Collectively, DME, prosthetics, and orthotics, and related 
supplies are referred to as DMEPOS. DME is equipment that serves a 
medical purpose, can withstand repeated use, is generally not useful 
in the absence of an illness or injury, and is appropriate for use in 
the home including, for example, wheelchairs and hospital beds. 
Prosthetic devices (other than dental) are defined as devices needed 
to replace body parts or functions such as artificial limbs and 
cardiac pacemakers. Orthotic devices are defined as providing rigid or 
semi-rigid support for weak or deformed body parts or restricting or 
eliminating motion in a diseased or injured part of the body, such as 
leg, arm, back, and neck braces. Medicare-reimbursed supplies are 
items that are used and consumed with DME, such as drugs used for 
inhalation therapy, or that need to be replaced frequently (usually 
daily), such as surgical dressings. For this report, the term DME 
refers to the DMEPOS items included in the Medicare competitive 
bidding program (CBP). 

[3] Medicare Part B helps pay for certain physician, outpatient 
hospital, laboratory, and other services, and medical equipment and 
supplies. Medicare beneficiaries are required to pay a monthly premium 
for Part B coverage and an annual deductible. In general, 
beneficiaries also pay 20 percent--the coinsurance--of the Medicare 
fee schedule payment rate after reaching their annual Medicare Part B 
deductible. 

[4] In addition to CBP, CMS has implemented other Medicare fraud 
prevention efforts affecting DMEPOS suppliers including strengthening 
the enrollment process, such as by requiring suppliers to submit 
either their Social Security number or their employer identification 
number, and state licensing information; requiring all suppliers be 
accredited by a CMS-approved accrediting organization to ensure they 
meet certain quality standards; requiring suppliers to purchase surety 
bonds; making unannounced site visits for high risk suppliers; 
requiring fingerprint-based criminal history checks; and providing 
enhanced oversight for initial claims of suppliers. In 2012, CMS also 
implemented the Prior Authorization of Power Mobility Devices 
Demonstration in seven states to help ensure that a Medicare 
beneficiary's medical condition warrants a power wheelchair or scooter 
before it is furnished. 

[5] Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, Pub. L. No. 108-173, § 302(b), 117 Stat. 2066, 2224-30 (2003) 
(codified, as amended, at 42 U.S.C. § 1395w-3). 

[6] A product category is a grouping of related items used to treat a 
similar medical condition. 

[7] A competitive bidding area is either a metropolitan statistical 
area (MSA) or a part thereof. MSAs are designated by the Office of 
Management and Budget and include major cities and the suburban areas 
surrounding them. 

[8] Grandfathered suppliers are suppliers that were not awarded a CBP 
contract but chose to continue to furnish certain CBP-covered rental 
items to beneficiaries who were their customers when CBP began in 
2011, and who reside in the competitive bidding areas. Once the 
relevant rental period expires or the beneficiary involved decides to 
select a contract supplier, the grandfathered supplier can no longer 
provide the CBP-covered items and services to the beneficiary. 
Subcontractor suppliers enter into agreements with contract suppliers 
to furnish limited services to CBP-covered beneficiaries on behalf of 
the contract suppliers. 

[9] The round 1 rebid's nine competitive bidding areas were: (1) 
Charlotte (Charlotte-Gastonia-Concord, North Carolina and South 
Carolina); (2) Cincinnati (Cincinnati-Middletown, Ohio, Kentucky, and 
Indiana); (3) Cleveland (Cleveland-Elyria-Mentor, Ohio); (4) Dallas 
(Dallas-Fort Worth-Arlington, Texas); (5) Kansas City (Kansas City, 
Missouri and Kansas); (6) Miami (Miami-Fort Lauderdale-Pompano Beach, 
Florida); (7) Orlando (Orlando-Kissimmee, Florida); (8) Pittsburgh 
(Pittsburgh, Pennsylvania); and (9) Riverside (Riverside-San 
Bernardino-Ontario, California). 

[10] The round 1 rebid's nine product categories were: (1) complex 
power wheelchairs (complex rehabilitative power wheelchairs and 
related accessories--limited to group 2--power wheelchairs with power 
options); (2) CPAP/RAD (continuous positive airway pressure devices, 
respiratory assist devices, and related supplies and accessories); (3) 
enteral (enteral nutrients, equipment, and supplies--to provide 
feeding through a tube into the stomach or small intestine); (4) 
hospital beds (hospital beds and related accessories); (5) mail-order 
diabetic supplies; (6) oxygen (oxygen supplies and equipment); (7) 
standard power wheelchairs (standard power wheelchairs, scooters, and 
related accessories); (8) walkers (walkers and related accessories); 
and (9) support surfaces (support surfaces limited to group 2 
mattresses and overlays--pressure reducing support surfaces for 
persons with or at high risk for pressure ulcers--in the Miami 
competitive bidding area only.) 

[11] Beginning in 2007, CMS conducted a competition and awarded 
contracts effective July 1, 2008 to suppliers, referred to as the CBP 
round 1. The Medicare Improvements for Patient and Providers Act of 
2008, however, terminated the contracts awarded during CBP round 1 on 
July 15, 2008, and required CMS to repeat the competition in 2009--
referred to as the round 1 rebid. To compensate for the loss of the 
projected Medicare savings due to the termination and to ensure budget 
neutrality, the act also reduced Medicare payments for the DME items 
that had been included in the round 1 by 9.5 percent nationally. Pub. 
L. No. 110-275, § 154(a), 122 Stat. 2494, 2560-3 (2008) (codified, as 
amended, at 42 U.S.C. § § 1395w-3, 1395m(a)(14)). 

[12] A beneficiary's permanent residence, which is the address 
provided by the individual to the Social Security Administration, 
determines whether the person is residing in a CBP competitive bidding 
area and is a CBP-covered beneficiary. Medicare beneficiaries who 
reside in CBP competitive bidding areas but are enrolled in Medicare 
Advantage plans, which are operated by private companies, are not 
covered by CBP. Beneficiaries who reside within a competitive bidding 
area are CBP-covered beneficiaries even if they travel outside their 
area. When CBP-covered beneficiaries travel outside their area, for 
example, to a non-CBP area, they may get CBP-covered DME items from 
any Medicare supplier, but the supplier will be paid the CBP single 
payment amount for the CBP-covered item. 

[13] CMS told us that it derived the total savings by comparing 2010 
to 2011 Medicare Part B allowed charges, which include Medicare 
program expenditures and beneficiary cost sharing, and is the actual 
change in Medicare expenditures. 

[14] GAO, Medicare: Review of the First Year of CMS's Durable Medical 
Equipment Competitive Bidding Program's Round 1 Rebid, [hyperlink, 
http://www.gao.gov/products/GAO-12-693] (Washington, D.C.: May 9, 
2012). 

[15] We analyzed Medicare durable medical equipment claims for 2010, 
2011, and 2012. We assigned these services to a month and year based 
on the claim "through date," which indicates the last date on the 
billing statement covering services rendered to the beneficiary. 

[16] We did not include three round 1 rebid product categories in this 
analysis: (1) the mail-order diabetic testing supplies category 
because data are limited due to some beneficiaries switching to non-
mail-order sources; (2) the complex power wheelchair category due to 
potential data reliability concerns reported by CMS; and (3) the 
support surfaces category because it was limited to only the Miami 
competitive bidding area in the round 1 rebid. 

[17] Suppliers use a standardized coding system to submit claims for 
Medicare payments--the Healthcare Common Procedure Coding System 
(HCPCS). HCPCS codes identify a category of like DMEPOS items, for 
example, walkers, but can encompass a broad range of items that serve 
the same general purpose but vary in price and characteristics. 
Medicare claims data include the HCPCS code, but do not identify the 
specific item's manufacturer, or brand or trade name. We included all 
CBP-covered HCPCS codes in five of the six product categories we 
analyzed. For the standard power wheelchair product category, our 
analysis includes only the 20 HCPCS codes that are unique to the 
standard power wheelchair product category. We did not include the 
other 86 HCPCS codes that are related to wheelchair accessories and 
repairs because they are also included in the complex wheelchair 
product category and CMS told us that data for that product category 
are unreliable. 

[18] CMS selected the nine comparator areas as control groups for the 
nine competitive bidding areas for CMS's health outcomes real-time 
claims monitoring system and to conduct its round 1 rebid beneficiary 
satisfaction surveys. CMS chose comparator areas that have similar 
demographic profiles as the competitive bidding areas: (a) estimated 
total population size; (b) a proxy for the number of Medicare 
beneficiaries; and (c) the percentage of the population who are 
Medicare beneficiaries. The round 1 rebid's competitive bidding areas 
and their respective comparator areas were: (1) Charlotte and Virginia 
Beach (Virginia Beach, Virginia and North Carolina), (2) Cincinnati 
and Indianapolis (Indianapolis, Indiana), (3) Cleveland and Columbus 
(Columbus, Ohio), (4) Dallas and Houston (Houston, Texas), (5) Kansas 
City and Oklahoma City (Oklahoma City, Oklahoma), (6) Miami and Tampa 
(Tampa, Florida), (7) Orlando and Jacksonville (Jacksonville, 
Florida), (8) Pittsburgh and Detroit (Detroit, Michigan), and (9) 
Riverside and San Diego (San Diego, California.) 

[19] For purposes of this report, a Medicare allowed charge is the 
full amount that Medicare will pay for the item or service furnished 
under the fee schedule--the 80 percent to the supplier and the 20 
percent the Medicare beneficiary is responsible for paying--as 
coinsurance. For the CBP round 1 rebid competitive bidding areas, the 
Medicare allowed charge is the single payment amount that Medicare 
pays for the CBP-covered item in the particular competitive bidding 
area--80 percent to the supplier and 20 percent as the beneficiary's 
responsibility. 

[20] Because some contract suppliers won a contract in one or more 
competitive bidding areas, while other contract suppliers won 
contracts in all nine competitive bidding areas, the four top contract 
suppliers for a product category may be different in each competitive 
bidding area. For example, the top four contract suppliers with the 
highest percentages of Medicare total allowed charges for the hospital 
bed product category may be different in the Orlando competitive 
bidding area than the top four contract suppliers in the Riverside 
competitive bidding area. 

[21] For CBP, subcontractor suppliers may include a supplier that did 
not bid, that bid and lost, or that won a CBP contract and is also 
subcontracting with a contract supplier for a product category for 
which it did not win. 

[22] There is also a wide range of payments under the Medicare fee-for-
service schedule for the prosthetic and orthotic category--from an 
inexpensive item at $0.31 to an expensive item at $99,584.93. In 
comparison, the most expensive item included in the CBP round 1 rebid 
is $8,514.12 in the Cleveland competitive bidding area for a new group 
2 complex rehabilitative wheelchair (HCPCS code K0840.) 

[23] The fee schedules are adjusted for each state, reflecting the 
geographic price differences that are subject to national floor and 
ceiling payment limits. The fee schedule payment is generally equal to 
80 percent of the lesser of either the supplier's actual charge or the 
Medicare fee schedule for a particular item or service. In general, 
Medicare beneficiaries are responsible for paying the supplier the 
remaining 20 percent referred to as the coinsurance. 

[24] Palmetto GBA is also referred to as the competitive bidding 
implementation contractor or CBIC. 

[25] For a general explanation of the CBP process for bidding and 
selecting winning suppliers, see [hyperlink, 
http://www.gao.gov/products/GAO-12-693]; for a detailed explanation of 
the CBP bidding process steps, see GAO, Medicare: CMS Working to 
Address Problems from Round 1 of the Durable Medical Equipment 
Competitive Bidding Program, [hyperlink, 
http://www.gao.gov/products/GAO-10-27] (Washington, D.C., Nov. 6, 
2009). 

[26] The CBP single payment amounts are required to be less than or 
equal to the Medicare fee-for-service payments for the same items. 

[27] For non-CBP suppliers, Medicare assignment--accepting Medicare's 
payment amount for an item as payment in full and limiting the amount 
the Medicare beneficiary can be billed for that item--is optional. If 
a supplier agrees to assignment, then Medicare generally pays 80 
percent of the amount to the supplier and beneficiary is responsible 
for paying the supplier the remaining 20 percent or the coinsurance 
payment, once the beneficiary's annual Medicare deductible is met. If 
the supplier does not accept assignment, the supplier is not limited 
to charging the beneficiary 20 percent of the Medicare payment for the 
item or service, and the beneficiary can be billed for whatever 
balance is due. 

[28] For CBP, CMS has defined a small supplier as one that generates 
gross revenue of $3.5 million or less in annual receipts including 
both Medicare and non-Medicare revenue. A qualified supplier is a 
bidder that has met certain requirements, including having been found 
financially sound, and its bids will be used to determine the single 
payment amounts and to select the contract suppliers. 

[29] If there are fewer than five suppliers with qualified bids, CMS 
must award contracts to at least two suppliers if the suppliers have 
sufficient capacity to satisfy beneficiary demand in the relevant 
product category in the competitive bidding area. 

[30] NPWT uses pumps that apply controlled negative or subatomspheric 
pressure to care for ulcers or wounds that have not responded to 
traditional wound treatment methods. 

[31] Support surfaces are pressure-reducing support surfaces for 
persons with or at high risk for pressure ulcers. In the round 1 
rebid, the support surfaces product category was limited to only the 
Miami competitive bidding area. 

[32] During the round 1 rebid, CMS awarded 2-year contracts to mail-
order diabetic testing supplies suppliers, which expired December 31, 
2012. CMS expanded the mail-order competition nationally, as permitted 
under federal law. 

[33] 42 U.S.C. § 1395w-3(b)(10). As part of their CBP bid submissions, 
bidding suppliers complete a National Mail-Order 50 Percent Compliance 
form to indicate that the testing strip brands they intend to furnish 
meet the 50 percent requirement. For information on the Medicare 
market shares by type of mail-order diabetic testing strips, see HHS 
OIG report, Medicare Market Shares of Mail Order Diabetic Testing 
Strips, OEI-04-10-00130 (Washington, D.C.; Dec. 2, 2010). 

[34] Under the American Taxpayer Relief Act of 2012, diabetic testing 
supplies included in the CBP's national mail-order diabetes supplies 
program will be paid at the same CBP single payment amounts for both 
mail-order and non-mail-order (retail) supplies. This provision is 
effective for the supplies furnished on or after July 1, 2013, the 
implementation date for the program. Pub. L. No. 112-240, § 636, 126 
Stat. 2313, 2356 (2013). 

[35] The round 1 recompete's six product categories are: (1) enteral 
nutrients, equipment, and supplies; (2) external infusion pumps and 
supplies; (3) general home equipment and related supplies and 
accessories (includes hospital beds and related accessories, group 1 
and 2 support surfaces, transcutaneous electrical nerve stimulation--
TENS--devices, commode chairs, patient lifts, and seat lifts); (4) 
NPWT pumps and related supplies and accessories; (5) respiratory 
equipment and related supplies and accessories (includes oxygen, 
oxygen equipment, and supplies; CPAP devices and RADs and related 
supplies and accessories; and standard nebulizers); and (6) standard 
mobility equipment and related accessories (includes walkers, standard 
power and manual wheelchairs, scooters, and related accessories.) 

[36] Mail-order diabetic testing supplies were not included in the 
round 1 recompete because CBP's national mail-order diabetic supplies 
program was implemented before the recompete. 

[37] In general, a contract supplier enters into a single contract 
with CMS for the relevant CBP round, which covers all of the product 
category and competitive bidding area combinations awarded to and 
accepted by the contract supplier. Accordingly, if the contract is 
terminated, the contract supplier can no longer participate in CBP as 
individual product category and competitive bidding area combinations 
cannot be severed from the CBP contract. 

[38] The tool is located at [hyperlink, 
http://www.medicare.gov/supplier/]. 

[39] One phone call between a caller and a 1-800-MEDICARE CSR could 
result in one or more inquiries, since an inquiry is counted by the 
number of scripts that a CSR uses to respond to the call. As such, the 
number of inquiries could be higher than the number of distinct 
beneficiaries who called. 

[40] Scripts address topics that may arise during a beneficiary call 
to 1-800-MEDICARE regarding CBP, and cover issues such as urgent needs 
for new supplies, and beneficiaries who are unable to locate a 
contract supplier in their area. The scripts instruct CSRs how to 
assist beneficiaries; for example, when a CSR conducts a three-way 
call with a beneficiary and a contract supplier, the CSR will read a 
script that says, "My name is [CSR NAME] from 1-800-MEDICARE. I have a 
beneficiary on the line who is looking for [Name The Supply]. His/her 
name is [Beneficiary Name] and he/she called us because [REASON]. We 
are calling you because [Explain The Issue And What The Supplier Can 
Do To Help]." 

[41] According to CMS officials, the National Supplier Clearinghouse 
investigates supplier standards violations and accreditation 
organizations investigate quality standards violations. 

[42] Information about the CBP is located on Palmetto GBA's website at 
[hyperlink, 
http://dmecompetitivebid.com/palmetto/cbic.nsf/DocsCat/Home]. 

[43] The CAO, in coordination with the CMS Office of the Medicare 
Beneficiary Ombudsman, is required to submit an annual report to 
Congress that includes the CAO's findings and if appropriate, 
recommendations for improvements to the implementation of CBP. As of 
February 24, 2014, the CAO had issued an annual report to Congress 
only for 2009 and 2010. 

[44] The health outcomes are available at: [hyperlink, 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/DMEPOSCompetitiveBid/Monitoring.html]. 

[45] Contract suppliers are required to submit a Form C each quarter 
that describes every combination of competitive bidding area and 
product category covered by their contract. Failure to submit Form Cs 
may be considered a breach of contract and could result in CMS 
terminating a supplier's contract. According to Palmetto GBA, the 
contract supplier locator tool is posted with updated Form C product 
information within 30 days after the Form C submission deadline. 

[46] Our analysis used the 2010 utilization data for comparison 
because it was the year immediately prior to January 2011 when the CBP 
round 1 rebid began operating, but does not assume that 2010's 
utilization was the appropriate level for any of the CBP product 
categories. 

[47] The analysis shown in Figure 6 includes only the 20 HCPCS codes 
that are distinct to the standard power wheelchair product category. 
We excluded the other 86 HCPCS codes that are related to wheelchair 
accessories and repairs because they are also related to the complex 
wheelchair product category and CMS told us that data for that product 
category are unreliable. 

[48] CMS officials told us they believe that the increase in 
utilization for the CPAP/RAD product category is not related to the 
CBP round 1 rebid because the increase also occurred in the comparator 
areas. Instead, they said that the increase may be related to an 
increase in the number of diagnoses for diseases that can be treated 
with CPAP/RAD product category items. 

[49] As we previously reported, some of CMS's monitoring efforts have 
limitations, but in the aggregate, they provide useful information to 
CMS regarding beneficiary access and satisfaction. See [hyperlink, 
http://www.gao.gov/products/GAO-12-693]. 

[50] According to CMS officials, each beneficiary may make more than 
one call to 1-800-MEDICARE and each call would be classified as at 
least one inquiry. The ratio does not represent the percentage of 
beneficiaries who called 1-800-MEDICARE. 

[51] CMS's definitions of an inquiry and a complaint may be an 
optimistic characterization of beneficiary calls. According to CMS 
officials, CSRs are able to address most beneficiary inquiries; 
therefore, the definition of inquiry covers the majority of calls to 1-
800-MEDICARE. However, it is possible that CMS's definition of a 
complaint may not fully capture dissatisfaction and problems with CBP. 
For example, CMS would consider it an inquiry if a beneficiary called 
1-800-MEDICARE to complain about a contract supplier, but was 
subsequently helped by the CSR to locate another contract supplier. 
Conversely, CMS would consider it a complaint if a contract supplier 
called 1-800-MEDICARE and asked a question about a CBP supplier's 
contract obligations that the CSR could not answer and had to refer to 
another entity. 

[52] HCPCS code E0147 is described as a heavy-duty, multiple-braking 
system, variable wheel resistance walker and is covered for 
beneficiaries who meet coverage criteria for a standard walker and who 
are unable to use a standard walker due to a severe neurologic 
disorder or other condition causing the restricted use of one hand. 

[53] Under the terms of their contracts, if a physician or other 
treating practitioner orders a specific brand and model to avoid an 
adverse medical outcome for a beneficiary, the contract supplier must 
provide that specific item, consult with the physician for a suitable 
alternative and obtain a revised prescription, or assist the 
beneficiary in locating a contract supplier who will furnish the 
needed item. If a supplier cannot obtain a revised prescription or 
locate another contract supplier to furnish an item, the contract 
supplier must furnish the item as prescribed. 

[54] See [hyperlink, http://www.gao.gov/products/GAO-12-693]. 

[55] The survey design had limitations because it did not capture 
responses from beneficiaries living in those locations who may have 
needed, but did not obtain, DME during the period; that is, if a 
beneficiary's access problems resulted in not receiving DME, that 
beneficiary would not be included in the survey. In addition, the 
survey's sampling methodology also did not ensure that all socio-
economic groups were represented, so it does not confirm that all 
beneficiaries within an area had equal access. For more information 
about the CMS beneficiary satisfaction survey methodology and results, 
see [hyperlink, http://www.gao.gov/products/GAO-12-693]. 

[56] Because some contract suppliers may have won a contract for only 
one product category and competitive bidding area combination, while 
other contract suppliers may have won a contract with multiple 
category and area combinations, the contract suppliers for the same 
product category may differ in each competitive bidding area. For 
example, the top 4 contract suppliers with the highest percentages of 
Medicare total allowed charges for the hospital bed product category 
may be different in the Orlando competitive bidding area than the top 
4 contract suppliers in the Riverside competitive bidding area. 

[57] CBP's enteral nutrition product category cannot be grandfathered. 
CMS announced in December 2011 that Medicare claims submitted for 
maintenance and servicing of enteral nutrition pumps during 2011 would 
be paid if the non-contract supplier furnished the pump to a 
beneficiary in a competitive bidding area and the pump had been rented 
for at least 15 continuous months at the time of CBP's implementation 
on January 1, 2011. The supplier that provided the pump in the 15th 
month of the rental period is responsible for furnishing, maintaining, 
and servicing the pump--whether it is a contract supplier or not--
until the pump is no longer medically necessary for the beneficiary or 
reaches the end of its reasonable useful lifetime. 

[58] Besides The Scooter Store, there was a range of between 7 and 27 
other contract suppliers in each of the nine competitive bidding areas 
for the standard power wheelchair product category. 

[59] In February 2013, it was publicly reported that The Scooter Store 
was under investigation by the HHS Office of Inspector General, the 
Federal Bureau of Investigation, and the Texas Attorney General. The 
Scooter Store declared bankruptcy in April 2013. 

[60] These pending Medicare claims totaled more than $43 million, but 
CMS estimated that the actual payments The Scooter Store would have 
received was approximately $13 million. 

[61] A subcontractor supplier may perform three services: (1) purchase 
inventory and fill orders, fabricate or fit items from its own 
inventory or contract with other companies to purchase items necessary 
to fill an order, (2) deliver CBP-covered items to beneficiaries, and 
(3) repair rented equipment. The contract supplier involved is 
responsible for billing Medicare for any CBP-covered items and 
services furnished by the subcontractor supplier. 

[62] See [hyperlink, http://www.gao.gov/products/GAO-12-693]. 

[63] As we previously reported in [hyperlink, 
http://www.gao.gov/products/GAO-12-693], when CBP's round 1 rebid 
began January 1, 2011, there were 1,364 grandfathered suppliers, or 58 
percent of the 2,363 suppliers that had billed for beneficiaries with 
CBP-covered items that they had been serving as of December 31, 2010. 

[64] Because suppliers can have Medicare allowed charges in more than 
one area, some suppliers were counted more than once in our analysis. 

[End of section] 

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