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In 2007, Medicare spent $8.3 billion for durable medical equipment (DME) and related supplies. To reduce spending, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) required that the Centers for Medicare & Medicaid Services (CMS) phase in, with several rounds of bidding, a large-scale competitive bidding program (CBP) for certain DME and other items. DME suppliers began bidding in round 1 of the CBP on May 15, 2007. After contracts were awarded, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), was enacted on July 15, 2008. Because of numerous concerns MIPPA delayed the program, terminated supplier contracts, and required CMS to begin the CBP round 1 rebid in 2009. GAO was asked to report on (1) the results of CBP round 1, (2) the major challenges CMS had in conducting CBP round 1, and (3) the steps CMS has taken to improve future CBP rounds. GAO reviewed CMS data and relevant laws and regulations, and interviewed officials from CMS and its contractors, and DME suppliers and professional associations.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare and Medicaid Services 1. To improve future rounds of the competitive bidding program for DME, and if CMS decides to conduct a review of disqualification decisions during the round 1 rebid and future rounds, CMS should notify all suppliers of any such process, give suppliers equal opportunity for such reviews, and clearly indicate how they can request a review.
Closed - Implemented
The Centers for Medicare & Medicaid Services' (CMS) Medicare Durable Medical Equipment Competitive Bidding Program (CBP) implemented the round 1 rebid on January 1, 2011. As part of the Medicare Improvements for Patients and Providers Act of 2008, GAO is mandated to study certain issues concerning the round 1 rebid. The mandate study will review how CMS informed suppliers with disqualified bids of the opportunity to raise issues or questions about their disqualifications, and to understand that if an error was found, that the suppliers might be able to have their bid disqualification overturned and might be offered a competitive bidding program contract./CMS provided us with documentation showing that letters to all disqualified bidders in subsequent rounds of the CBP include language inviting those bidders to discuss bidding issues, including disqualification decisions, by calling the customer support center at the number listed.

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