The final rule allows beneficiaries who own an item of DMEPOS that is part of the competitive bidding program to obtain maintenance and servicing from any Medicare supplier that has a valid billing number, and is not limited to seeking repairs from contract suppliers. However, if the standards for obtaining a total replacement of an owned item that is part of the competitive bidding program are met, the beneficiary will have to obtain the replacement item from a contract supplier, and payment will be made for the item at the single payment amount.

After reviewing comments on the proposed rule, CMS has included in the final rule a number of provisions that will modify the rule's impact on small suppliers, which are defined for purposes of this program as those suppliers having gross revenue of $3.5 million or less in annual receipts. CMS worked closely with the Small Business Administration to establish a new definition of small suppliers that is reflective of this area of the health care industry. The use of this new definition, in conjunction with policies established in the final regulation, will enhance the ability of small suppliers to participate in the competitive bidding program. As they did when CMS published the proposed competitive bidding rule, small suppliers account for approximately 85 percent of DMEPOS suppliers enrolled in the Medicare program.


The final rule provides for a 30 percent target number for small supplier participation. If CMS determines after the initial evaluation of bids that there are not enough small suppliers with winning bids to meet the target goal of 30 percent in each product category, then contracts will be offered to small suppliers that submitted bids higher than bug close to the winning bids. The small suppliers will have the option to accept the single payment amounts based on the winning bids until the 30 percent goal is met or there are no additional small suppliers.

The final rule also allows small suppliers to form networks in order to participate in the bidding process, provided that these networks comply with all federal and state laws including the federal antitrust laws. In addition, small suppliers will not be required to submit bids for all product categories. As a result, small suppliers will have the flexibility of deciding for which product categories to submit bids.

The Medicare law requires that CMS first implement the DMEPOS competitive bidding program in 10 of the largest MSAs. In selecting the specific MSAs for the program, CMS took into account allowed DMEPOS charges per beneficiary, the number of suppliers per beneficiary, the total population of the MSA, and the MSA's geographic location. CMS has the discretion to exempt from DMEPOS competitive bidding, rural areas and areas with low population density within urban areas that are not competitive unless there is a significant national market through mail order for a particular item or service.

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