Establishment of DMEPOS market pricing program as replacement for competitive bidding program

(a)

In general

Part B of title XVIII of the Social Security Act is amended by inserting after section 1847B the following new section:

1847C.

DMEPOS market pricing program

(a)

Establishment

(1)

In general

The Secretary shall establish and implement a market pricing program (in this section referred to as market pricing program) under which auctions are conducted in eligible market areas (as defined in paragraph (3)) throughout the United States for the furnishing under this part of market priced items and services (as defined in subsection (b)) for which payment is made under this part. (2)

Roles of auction expert and market monitor

The elements of the market pricing program, including eligible market areas and auction design, shall be established and operated in consultation with, and after input and review by, the auction expert and the market monitor under subsection (g). In this section, the terms auction expert and market monitor refer to the respective auction expert and market monitor contracted with under paragraph (1) or (2), respectively, of subsection (g). (3)

Implementation

The market pricing program shall be implemented in eligible market areas consistent with the following: (A)Market pricing is applied to payments under this part in 20 percent of eligible market areas for market priced items and services furnished in 2014. (B)Market pricing is applied to payments under this part in an additional 10 percent of eligible market areas for market priced items and services furnished in 2015. (C)Market pricing is applied to payments under this part in an additional 10 percent of eligible market areas in each subsequent year until the market pricing program is applying to items and services furnished in 100 percent of eligible market areas throughout the United States. (D)Once the market pricing program is applied throughout the United States under subparagraph (C), the Secretary shall conduct auctions for different eligible market areas throughout the United States on an ongoing and rotating basis covering 10 percent of eligible market areas no later than March for each subsequent year. (E)The requirements of this section shall apply to each subsequent round of market-priced auctions in the same manner that such requirements apply to the initial market-priced auction. (4)

Eligible market areas

(A)

In general

In this section and section 1834, the term eligible market areas means areas of the United States established by the Secretary. (B)

Market areas must reflect economic interdependency

In determining and selecting eligible market areas, the Secretary shall choose, from among counties, aggregations of counties, or parts of counties, market areas that form an economically interdependent area reflecting standard econometric market models. Nothing in this subparagraph shall preclude the Secretary from subdividing a large county (as determined by the Secretary, taking into account population and geographic size) in establishing market areas in order to comply with this subparagraph. (C)

Selection of market areas

In selecting eligible market areas in which an auction will be conducted under this section, the Secretary shall ensure that several market areas of each econometric model for a market area specified in subparagraph (B) are chosen. (D)

Exclusion of certain areas

The Secretary shall not include as an eligible market area any area described in clause (iii) of section 1847(a)(1)(D) before the year specified in such clause. (5)

Application of certain policies applicable to competitive acquisition program

The following provisions of section 1847(a)(1) shall apply to the market pricing program in the same manner as they apply to the competitive acquisition program under such section except as otherwise provided: (A)Subparagraph (C) (relating to waiver of certain provisions). (B)Subparagraph (E) (relating to verification by OIG), except that the assessment shall be of market pricing and subsequent pricing determinations that are the basis for auction prices and single payment amounts for items and services in eligible market areas and shall be conducted in the first two years of the market pricing program and may continue in subsequent years of the program. (C)Subparagraph (F) (relating to feedback on missing financial documentation), except that any reference to a round of a program is deemed a reference to a year of the market pricing program. (b)

Market priced items and services defined

(1)

In general

In this section, subject to paragraph (2), the term market priced items and services means the following: (A)Oxygen supplies and equipment. (B)Standard power wheelchairs, power scooters and related accessories. (C)Manual wheelchairs. (D)Enteral nutrients, equipment, and supplies. (E)Continuous positive airway pressure devices, respiratory assistive devices, and related supplies. (F)Hospital beds and related accessories. (G)Walkers and related accessories. (H)Support services (Group 2 mattresses and overlays). (I)Negative pressure wound therapy pumps and related supplies and accessories. (J)Diabetic supplies. (K)Off-the-shelf orthotics described in section 1847(a)(2)(C). (L)Other items and services (other than those items and services specified in paragraph (2)) that could have been subject to participation in the competitive acquisition programs under section 1847(a)(1). (2)

Excluded items

Such term does not include the following: (A)Adjustable skin protection cushions used in connection with a wheelchair. (B)Complex rehabilitative power wheelchairs and related accessories. (C)Manual wheelchairs billed using current HCPCS Codes K0005 or E1161, and related accessories for such wheelchairs. (c)

Market pricing program requirements

(1)

In general

The Secretary shall establish an auction design through the process described in paragraph (2), that meets the requirements of paragraph (3), and shall ensure that the first auction will be conducted for all eligible market areas no later than March 1, 2013. (2)

Auction process; input of stakeholders; design

(A)

Transparent process required

(i)

In general

In establishing such auction design, the Secretary shall utilize an open and transparent process that involves all relevant stakeholders (as defined in clause (ii)) in the market. (ii)

Relevant stakeholders

For purposes of clause (i), the term relevant stakeholders means suppliers of market priced items and services (and trade associations representing such suppliers), physicians, and individuals entitled to benefits under this title (or representatives of such individuals). (B)

Draft auction design

(i)

In general

Not later than 2 months after the date the auction expert first begins service under subsection (g)(1), the auction expert shall develop a draft auction design for all eligible areas and all market priced items and services. (ii)

Standards

In developing such auction design, the auction expert shall develop standards for eligible bidders, including— (I)the financial qualifications for an entity to participate in the market pricing program; and (II)the quality of products and related services. (iii)

Design used in expedited rulemaking process

Such design shall serve as the basis for an expedited rulemaking process for the publication of the proposed auction design and solicitation of public comments on such design. Section 1871(b)(1) shall not apply to such process. (C)

Design conference

(i)

In general

Not later than 4 months after the date the auction expert first begins service under subsection (g)(1), the auction expert shall convene a design conference (in this paragraph referred to as the design conference) for the auction process under this section. The auction expert shall chair the conference. (ii)

Participants

The participants at the design conference shall include at least the following: (I)

Suppliers of DMEPOS

Representatives of market priced items and services. (II)

Beneficiaries

Representatives of individuals entitled to benefits under this part. (III)

CMS

The Administrator of the Centers for Medicare & Medicaid Services and other appropriate Federal personnel. (IV)

Program advisory and oversight committee

The members of the committee referred to in paragraph (3). (iii)

Purpose of conference

The purpose of the design conference shall be to establish an efficient auction consistent with best practices and actuarial science. (iv)

Elements of conference

(I)At the design conference the auction expert shall provide a demonstration of the preliminary auction design. (II)Attendees at the conference will participate in a mock auction based upon the preliminary design. (III)The auction expert shall establish working committees on major issues. (IV)The design conference shall be recorded and made available over the Internet either through simultaneous Web cast or otherwise. (V)The Federal Advisory Committee Act shall not apply with respect to the working committee established under subclause (III). (D)

Recommendations

(i)

Working committees

Not later than 2 months after the last day of the design conference, each working committee established under subparagraph (C)(iv)(III) shall submit to the auction expert the committee’s recommendations on the final design for auctions under this section. (ii)

Final design recommendation

Not later than 3 months after the last day of the design conference, the auction expert shall submit to the Secretary final recommendations on the auction design. (3)

Requirements

In establishing the auction design, the Secretary shall ensure that rates of payment developed through the auction process— (A)are market-based and based on binding bids and clearing prices; and (B)do not result in a diminution of access to or quality of items of market priced items and services in the applicable market areas. (d)

Conduct of auction

(1)

Initial auction

No later than March 1 of each year (beginning with 2013), the Secretary shall conduct an auction (in this section referred to as a market-priced auction) from among entities supplying market priced items and services in an eligible market area that is selected in the auction design. The first such auction shall conclude no later than March 30, 2013. Market-based auctions shall be conducted in accordance with an auction design developed under subsection (c). (2)

Items and services subject to auction

(A)

In general

In each eligible market area in which a market-priced auction is conducted, the Secretary shall select 2 items and services from among the market priced items and services. (B)

All listed items and services to be subject to auction

The Secretary shall ensure in the market-priced auction that each lead product that is identified under paragraph (4) from among each market priced item and service is subject to auction among all eligible market areas. The Secretary shall ensure that each product category is auctioned in at least a sufficient number of eligible market areas to produce a sample of bids based on the percentages set forth in subsection (a)(3). (3)

Requirements to submit bid in auction

(A)

Submission of bids

Any supplier that complies with the requirements of subparagraph (B) and that is identified by the Secretary pursuant to paragraph (5)(C) as a supplier of a market priced item or service that is the subject of a market-priced auction in an eligible market area may submit a bid at such auction. (B)

Financial assurances

(i)

In general

In order to be eligible to participate in a market-priced auction, a supplier must submit a cash deposit in an amount determined by the Secretary. (ii)

Letter of credit in lieu of cash deposit

The Secretary may, in the Secretary’s sole discretion, accept a letter of credit from a financial institution acceptable to the Secretary instead of the cash deposit otherwise required under clause (i). (C)

Treatment of deposits submitted by suppliers

(i)

Successful bidders

The Secretary shall retain as a performance guarantee the deposit submitted under subparagraph (B)(i) of a supplier that has submitted a bid that is selected at a market-priced auction. (ii)

Unsuccessful bids

If a supplier submits a bid that is not accepted at the auction, any such deposit shall be returned to the supplier. (iii)

Deposit return requirements for partially successful suppliers

If a supplier submits a bid that is accepted at the auction, but the supplier is not awarded a contract for the full amount of the bid, the Secretary shall provide for a proportionate return of any such deposit. (4)

Lead product selection

(A)

In general

For each item and service that is the subject of a market-priced auction, the Secretary shall establish a lead product for each product category specified in subsection (b)(1). Such lead product shall be selected based upon cost and utilization of the product under this part. (B)

Lead product clearing price establishes clearing price for other products

(i)

Lead product as reference point for other products

The lead product selected under subparagraph (A) shall be used as a reference point for all other products (categorized by healthcare common procedure coding system code) in the same category as the lead product. Such lead product shall be assigned a weight of 100 percent. (ii)

Additional products in each product category

Every other product in the same product category as the lead product identified under subparagraph (A) shall be assigned based upon each auction a weight expressed as a percentage of the lead product. The Secretary shall establish a single capacity-weighted average for each such other product in the same product category based upon the relative price value submitted from eligible bidders in advance of the auction for such other product relative to the price of the lead product. The Secretary shall establish a price index that is the single capacity-weighted average for each product in a product category in a market area. (iii)

Establishing clearing price

The Secretary shall establish the clearing price for each market priced item and service that is subject to the auction based upon the data submitted under this subparagraph. Such clearing price shall be equal to the highest cost bid (or, in the case of a product described in clause (ii), such price bid weighted by the single capacity-weighted average established under clause (ii)) that will meet capacity targets in the eligible market area for such item and service. (5)

Conduct of auction

(A)

In general

The Secretary shall establish timelines for the conduct of the market-priced auction that are consistent with the provisions of this paragraph. (B)

Three months before auction date

Approximately three months before the scheduled auction date, the Secretary shall detail auction rules that are consistent with the auction plan developed under this section. These rules shall include— (i)financial and other qualification requirements for bidders; (ii)algorithms for determining winners and prices as a function of bids; (iii)performance obligations of contract suppliers, guarantees, and penalties for non-conformance; (iv)the product categories to be selected (and their related healthcare common procedure coding system codes) from within the market priced items and services; (v)the lead product for each product category selected under paragraph (4)(A); and (vi)the eligible market areas in which a market-priced auction will be conducted. (C)

Two weeks before auction date

Approximately 2 weeks before the scheduled auction date, the Secretary shall identify the qualified suppliers eligible to submit bids. In carrying out this subparagraph, the Secretary shall specify— (i)bidder capacity; (ii)bidder eligibility by eligible market area; (iii)for each market area, the lead price for the lead product established under paragraph (4)(A); (iv)the price index (described in paragraph (4)(B)(ii)) in each market area; and (v)for each eligible bidder, its historic capacity for each item and service that will be subject to auction pursuant to paragraph (1) in the eligible market area. (D)

Pre-auction bidders outreach

Before each auction, the Secretary shall provide an open meeting or other form of outreach at which prospective bidders in eligible market areas in which the auction will be conducted are provided information concerning the auction and have the opportunity to have the auction expert respond to questions concerning the conduct of the auction. (E)

During auction

During the conduct of the auction, the Secretary shall announce— (i)the time of the end of the round of auctioning; and (ii)the history of prior rounds including the aggregate supply at the end of the round price for each product area by round. (F)

Immediately after each auction round

Not later than 15 minutes after the end of each auction, the Secretary shall announce— (i)the aggregate supply for each item and service that is the subject of the auction at the price established during the auction; (ii)for each supplier who has participated in the auction, its own supply for all prices (from the initial starting price to the end of round price) for each item and service that is the subject of the auction; and (iii)revised schedule of rounds for the next bidding day. (G)

At conclusion of final auction round

Not later than 15 minutes after the end of the final auction round, the Secretary shall announce— (i)a list of winning suppliers; (ii)the market clearing price for each item and service that is the subject of the auction; and (iii)for each bidder and in each eligible market area, the bidder’s supply for all prices (from the initial starting price to the end of round price). (H)

Final actions

Not later than one week after the end of the final auction round, the Secretary shall enforce the performance guarantees received from each winning bidder (including a list of bidders who failed to provide performance guarantees in accordance with paragraph (3)(B) within one week after the end of the auction). (6)

Conditions of awarding contract

(A)

In general

The Secretary shall award a contract to any entity in an eligible market area in which an auction is conducted and whose bid submitted pursuant to paragraph (3)(A) is below the clearing price established pursuant to paragraph (4)(B)(iii). (B)

Terms of contract

(i)

Mandatory acceptance of contract

A supplier that submits a bid below such clearing price shall be treated as having agreed to and accept the contract awarded pursuant to subparagraph (A). (ii)

Contract terms

A contract awarded pursuant to subparagraph (A) shall be valid for 2 years, with the first such contract for the period beginning on July 1, 2013. (iii)

No requirement to supply up to bid amount

Nothing in this subsection shall require a supplier that is awarded a contract pursuant to subparagraph (A) to supply a marked priced item or service that is the subject of an auction in the eligible market area beyond the level of demand for such item or service in the eligible market area, even if such level is below the level that the supplier assumed in its bid. (C)

Ensuring adequate selection of contractors

The Secretary may not award a contract to any entity under the auction to furnish such items or services unless the Secretary finds that the conditions described in section 1847(b)(2)(A) apply with respect to an entity receiving a contract under this paragraph. (D)

Sufficient capacity

The Secretary shall establish a process to ensure that a supplier has sufficient capacity to supply and fulfill the patient demand for the item or service involved in the market area involved. Such process shall be based upon the historic capacity of the supplier. For purposes of the preceding sentence, the term historic capacity means the capacity of the supplier in the market area in the preceding year. (E)

Limits on suppliers

Each bidding supplier who has no historic capacity in the market area subject to an auction shall be assigned a base capacity for each item and service made available under the auction of 1 percent of the total dollar value of that item or service made available in the eligible market area. (7)

Payment amount shall equal auction clearing price

(A)

In general

With respect to market priced items or services that are provided in an eligible market area in which— (i)a market-priced auction is conducted, the auction price determined at such auction for such item in such eligible market area; or (ii)such an auction is not conducted, the auction price determined at an auction for those items that is conducted in another eligible market area, as adjusted by the factor described in subparagraph (B)(iv),

shall constitute the payment amount under section 1834(a)(1)(H)(i)(I) or section 1842(s), as the case may be.

(B)

Supplying items or services

(i)

In general

No entity other than a supplier of a market priced item or service that is the subject of a market-priced auction in an eligible market area and that has been selected as the winning bidder in that eligible market area shall be eligible to receive a contract under paragraph (6)(A) in such market area. (ii)

Supplying items in economically equivalent markets

A supplier of a market priced item or service that has not been selected as the winning bidder in the eligible market area described in clause (i) shall, subject to clauses (iii) and (iv), be eligible to supply any other market priced item or service that was not the subject of an auction in that eligible market area but that was the subject of a market-priced auction in another economically similar eligible market area (as determined by the Secretary). (iii)

Supplier must accept auction price

Clause (ii) shall only apply to a supplier that agrees to accept the price determined at an auction in another eligible market area for a market priced item or service. (iv)

Appropriate adjustments

The Secretary shall develop an adjustment factor to reflect economic differences between the market area that was the subject of the market-priced auction for the item or service and the market area in which the supplier is located. The Secretary shall use such adjustment factor to adjust the payment amount made to a supplier pursuant to clause (iii). The Secretary, auction expert, and market monitor shall consult with relevant stakeholders in developing such factor. (8)

Monitoring of access and quality

(A)

In general

The Secretary shall work with stakeholders to develop performance measures for suppliers that are awarded a contract pursuant to paragraph (6)(A) to ensure compliance with the requirements of this subsection and the measures developed by the auction expert under subsection (c)(2)(B)(ii) and to monitor the performance of suppliers. (B)

Enforcement

If the Secretary determines that there has been a material failure of a supplier that has been awarded a contract under paragraph (6)(A) to comply with such requirements and measures, the Secretary shall implement enforcement measures. Such enforcement measures may include— (i)a formal warning letter; (ii)forfeiture of amounts submitted as a performance deposit pursuant to paragraph (3)(B)(i) or paragraph (8); (iii)termination of a contract awarded pursuant to paragraph (6)(A); or (iv)termination of the supplier’s agreement to participate in the program established under this title for a period not to exceed 2 years. (C)

Appeals mechanism

The Secretary shall ensure that, prior to the imposition of an enforcement measure under subparagraph (B), a supplier subject to such measure has an opportunity to appeal imposition of the measure. (e)

Application of competitive acquisition program provisions

In implementing the market pricing program under this section, the provisions of section 1847(b) shall be applied as follows: (1)Paragraph (3) shall apply, except that, for purposes of contracts awarded under the market pricing program, subparagraph (B) of such paragraph shall be applied by substituting 2 years for 3 years. (2)Subject to subsection (d)(7)(B), paragraph (4) shall apply. (3)Paragraph (5) shall apply, except that— (A)the reference in subparagraph (A) of such paragraph to subsection (a)(2) is deemed a reference to subsection (b)(1) of this section; and (B)the reference in subparagraph (B)(i) of such paragraph to subparagraph (A) is deemed a reference to subsection (d)(4) of this section. (4)Paragraph (6) shall apply, except that in applying subparagraph (D)— (A)the term small suppliers shall mean an entity with a gross revenue that does not exceed $3,500,000; and (B)the Secretary shall ensure that at least 30 percent of the number of contractors that are awarded contracts pursuant to subsection (d)(6) of this section for each product category in an eligible market area are small suppliers (as defined in subparagraph (A)). (5)Paragraph (7) shall not apply. (6)Paragraph (8) shall apply. (7)Paragraph (9) shall apply, except that such paragraph shall be applied as if a reference to a bidding program includes a reference to the market pricing program. (8)Paragraph (10) shall apply, except that such paragraph shall be applied as if a reference to a competitive acquisition program includes a reference to the market pricing program. (9)Paragraph (11) shall not apply, except that— (A)the pendency of any claim for review under this section shall not delay any auction round conducted pursuant to subsection (a)(3) or (d)(1); and (B)there shall be no administrative or judicial review of any claim to enjoin the operation of a market-priced auction conducted. (f)

Transparency requirements for market pricing program

(1)

In general

In implementing the market pricing program, the Secretary shall provide for publication, on an Internet Web site operated by the Secretary, of the following information: (A)The qualifications necessary to submit a bid pursuant to subsection (d)(3). (B)The financial requirements and ratios of such requirements necessary for an entity described in subparagraph (A) that are applicable for purposes of subsection (d)(3)(B)(i). (C)The quality standards and the performance standards developed by the auction expert pursuant to subsection (c)(2)(B)(ii). (D)The calculation of the total market capacity of an eligible market area for purposes of subsection (d)(5)(C)(i). (E)The methodology developed for an adjustment factor applied pursuant to subsection (d)(7)(B)(iv). (F)The process for soliciting and accepting bids for purposes of paragraphs (3) and (5) of subsection (d). (G)For purposes of subsection (d)(5)— (i)the number of bidders at the auction; (ii)the number of bids accepted and rejected at the auction; and (iii)with respect to rejected bidders, the specific reasons for rejections of any bid, and, with respect to any such rejection, a means of ensuring the availability of the process described in paragraph (2) to a rejected bidder. (H)The calculation of and compliance with the requirement of section 1847(b)(6)(D), as made applicable to the market pricing program by subsection (e)(4). (2)

Transparent appeals process

(A)

In general

For purposes of complying with paragraph (1)(G)(iii), the Secretary shall develop an appeals process under which an entity that submits a bid under subsection (d)(3)(A) that is rejected for participation in an auction may challenge such rejection. (B)

Timely response to appeal

The process established pursuant to subparagraph (A) shall include a requirement that the Secretary respond to the rejected entity within 45 days of submission of an appeal by the entity. (g)

Reliance on auction expert and market monitor in establishing and operating market pricing program; advisory committee report and monitoring

(1)

Auction expert

(A)

In general

The Secretary shall, not later than 3 months after the date of the enactment of this section, through the Office of the Assistant Secretary for Planning and Evaluation, enter into a contract with an individual to serve as the auction expert to assist in the design, development, implementation and functioning of the auction to be conducted pursuant to subsection (b). The auction expert shall report and be accountable to the Secretary. (B)

Selection of auction expert; term; access to information

(i)

Competitive process

The selection of the individual to serve as the auction expert under subparagraph (A) shall be undertaken through a competitive process. (ii)

Qualifications

An individual may not be selected as the auction expert unless the individual— (I)has appropriate educational credentials; and (II)has experience in implementing auctions of similar complexity in government programs. (iii)

Disqualifications

An individual may not be selected as the auction expert if such individual— (I)is a current government employee; (II)is a former employee of the Centers for Medicare & Medicaid Services who had any responsibilities with respect to the program under section 1847; or (III)is a current or former contractor for the Centers for Medicare & Medicaid Services that participated in the implementation of the competitive acquisition program under section 1847(a). (iv)

Term of contract

The contract for the initial auction expert under this paragraph shall be for a period of 4 years and thereafter such contract may be renewed for additional periods of 4 years or another auction expert selected. (v)

Access to information

The Secretary shall make available to the auction expert all applicable information (including confidential information) on the relevant markets. (2)

Market monitor

(A)

In general

The Secretary shall, not later than 3 months after the date of the enactment of this section, through the Office of the Assistant Secretary for Planning and Evaluation, enter into a contract with an individual to serve as the market monitor to monitor the design, development, and functioning of the auction to be conducted under subsection (b). The market monitor shall report and be accountable to the Secretary. (B)

Selection of market monitor; term of contract; access to information

The provisions of subparagraph (B) of paragraph (1) shall apply with respect to the market monitor in the same manner as they apply with respect to the auction expert. (C)

Functions of market monitor

(i)

Public comments on auction design

The market monitor shall provide public comments on the auction design developed under subsection (c) within one month of the date of its publication. (ii)

Participate in design conference

The market monitor shall participate in the design conference and, at the conference, provide a presentation on the auction design. (iii)

Review of final design

The market monitor shall review the final auction design recommendations submitted under subsection (c)(2)(D) and, within one month of the release of such recommendations, provide public comment on them. (iv)

Annual report

The market monitor shall provide an annual report to Congress on the operation and functioning of the market pricing program. Each such report shall include information on— (I)potential problems with the program; (II)recommended solutions to problems identified pursuant to subclause (I); (III)the appropriateness of HCPCS codes selected for auctions; (IV)an evaluation on the ability of individuals eligible for benefits under this part to obtain items and services subject to the market pricing program; (V)any adverse health effects resulting from implementation of the program; (VI)any material deterioration in the quality of items and services provided under the program; (VII)the costs of any preventable hospitalizations for market priced items and services; (VIII)any negative business consequences to the supplier of any market priced items and services occurring as a result of errors made in the conduct of the program; and (IX)any other effects identified by the market monitor. (3)

Reconstitution of and report by program advisory committee

(A)

In general

With respect to the Program Advisory and Oversight Committee established under section 1847(c), notwithstanding paragraphs (4) and (5) of such section and for the purposes of preparing the report under subparagraph (B) of this paragraph, the Secretary shall reconstitute the Committee and extend the terms of its members (and its termination date) through December 31, 2014, and the provisions of the Federal Advisory Committee Act (5 U.S.C. App.) shall apply to the reconstituted Committee. (B)

Report

Not later than December 31, 2014, such Committee shall submit to the Congress a report on the market pricing program. The report shall include information on the design of the market pricing program and access to and quality of market priced items and services. (4)

Ongoing monitoring by Secretary

The Secretary shall monitor the effects of the market pricing program to guard against the occurrence of any negative effects specified in paragraph (2)(C)(iv). Such monitoring shall include public availability of the number of suppliers providing market priced items and services in an eligible market area during each year of the operation of the market pricing program.

Termination and transition from DMEPOS competitive bidding program

(a)

Termination of competitive acquisition program

Section 1847(a)(1) of the Social Security Act (42 U.S.C. 1395w–3(a)(1)) is amended— (1)in subparagraph (B), by striking The programs and inserting Subject to subparagraph (G), the programs; and (2)by adding at the end the following new subparagraph:

(G)

Termination of program; transition

(i)

No additional competition rounds

Notwithstanding subparagraph (B), the competition under this section shall end with round 1. The Secretary shall take no further action to implement round 2 of the competitive acquisition program, the national mail order competitive acquisition program, or any subsequent round of the competitive acquisition program under this section. (ii)

Contract termination

The contracts awarded under this section before the date of the enactment of this subparagraph shall terminate on June 30, 2013, and no payment shall be made under this title after such date based on such a contract. To the extent that any damages may be applicable as a result of the termination of such contracts, such damages shall be payable from the Federal Supplementary Medical Insurance Trust Fund under section 1841. Nothing in this clause shall be construed to provide an independent cause of action or right to administrative or judicial review with regard to the termination provided under this clause.

(b)

Transitional payment rules

(1)

Payment for durable medical equipment

Section 1834(a)(1)(F) of the Social Security Act (42 U.S.C. 1395m(a)(1)(F)) is amended— (A)in clause (i)— (i)by inserting and before July 1, 2013, after January 1, 2011,; and (ii)by adding and at the end; (B)in clause (ii)— (i)by striking (and, in the case of covered items and all that follows through subject to clause (iii) shall); and (ii)by striking ; and at the end and inserting a period; and (C)by striking clause (iii). (2)

Awards to qualified suppliers not selected in competitive acquisition program

Section 1847(b)(4) of such Act (42 U.S.C. 1395w–3(b)(4)) is amended— (A)by striking The Secretary may limit and inserting Subject to subparagraph (C), the Secretary may limit; and (B)by adding at the end thereof the following new subparagraph:

(C)

Non-contracted suppliers in competitive acquisition program

Beginning on the date of the enactment of this subparagraph and until the date of implementation of the market pricing program under section 1847C, the limit under subparagraph (A) shall not apply and the Secretary shall award a contract to any entity that— (i)submitted a bid in the competitive acquisition program; (ii)meets financial and quality standards and is otherwise qualified but was not awarded a contract under such program because the entity’s bid was above the pricing threshold to provide such items and services in a competitive acquisition area; and (iii)accepts the price established under such program as payment in full.

(3)

Payment for off-the-shelf orthotics

Section 1834(h)(1) (42 U.S.C. 1395m(h)(1)) is amended by adding at the end the following new subparagraph:

(I)

Application of market pricing program; limitation of inherent reasonableness authority

In the case of orthotics described in subsection (b)(1)(K) of section 1847C furnished on or after July 1, 2013, in an eligible market area, that are included in a market pricing program under such section— (i)the payment basis under this subsection for such orthotics furnished in such area shall be the payment basis determined under such market pricing program; and (ii)paragraphs (8) and (9) of section 1842(b) shall not be applied.

(c)

Conforming amendments to market pricing policy

(1)

In general

Section 1834(a)(1) of the Social Security Act (42 U.S.C. 1395m(a)(1)) is amended by adding at the end the following new subparagraph:

(H)

Application of market pricing program; limitation of inherent reasonableness authority

(i)

In general

In the case of covered items or off-the-shelf orthotics furnished on or after January 1, 2014, subject to subparagraph (G), that are included in a market pricing program in an eligible market area under section 1847C— (I)the payment basis under this subsection in an eligible market area for the 2 items and services described in section 1847C(b)(1) that are selected for auction in such area pursuant to section 1847C(d)(2) shall be the amount determined under the auction conducted in such eligible market area; (II)the payment basis under this subsection in an eligible market area for the items and services described in section 1847C(b)(1) that are not selected for auction in such area pursuant to section 1847C(d)(2) shall be the amount determined pursuant to an auction for those items that is conducted in another eligible market area, and adjusted by the factor described in section 1847C(d)(7)(B)(iv); (III)during the term of any contract awarded pursuant to section 1847C(d)(6) for an item and service described in subclause (I), the Secretary may not adjust the payment rate determined in section 1847(b)(13)(G) to take into account the effects of a later-conducted auction during that two-year contract period; (IV)at the termination of a contract awarded under section 1847C(d)(6) for an item or service described in subclause (I), the Secretary shall adjust the payment rate applicable under such contract to take into account the effects of a later-conducted auction; and (V)with respect to payment amounts applicable pursuant to subclause (II), the Secretary shall adjust the payment rate annually. (ii)

Use of additional information

The Secretary, after consultation with the auction expert under section 1847C, may (and, in the case of covered items furnished on or after January 1, 2016, shall) use information on the payment determined under such market pricing program to adjust the payment amount otherwise recognized under subparagraph (B)(ii) for an area in which an auction has not been conducted pursuant to section 1847C(a) and in the case of such adjustment, paragraph (10)(B) shall not be applied. (iii)

Continued use of additional information

In the case of covered items furnished on or after January 1, 2016, the Secretary shall continue to make such adjustments described in clause (ii) as, under such market pricing program, additional covered items are phased in or information is updated as contracts are renewed under such program.

(2)

Regulatory authority

Section 1834(a)(1)(G) of such Act (42 U.S.C. 1395w–3(a)(1)(G)) is amended— (A)by inserting

or market pricing

before

rates

in the subparagraph heading; (B)by striking subparagraph (F)(ii) and inserting subparagraph (F)(ii), subparagraph (H)(iii),; and (C)by inserting or eligible market areas in which an auction has been conducted, on or after the first day of the year specified in section 1847C(a)(3)(A) after competitive acquisition areas. (d)

Negative pressure wound therapy standards

The Secretary of Health and Human Services, in consultation with relevant stakeholders (as defined in section 1847C(c)(2)(A)(ii) of the Social Security Act, as added by section 1) shall develop standards for coverage and quality of negative pressure wound therapy items and services (within the meaning of section 1847(a)(1)(D)(i)(IV) of such Act).