42 U.S. Code § 1395w–3 - Competitive acquisition of certain items and services
(a) Establishment of competitive acquisition programs
(1) Implementation of programs
(A) In general
The Secretary shall establish and implement programs under which competitive acquisition areas are established throughout the United States for contract award purposes for the furnishing under this part of competitively priced items and services (described in paragraph (2)) for which payment is made under this part. Such areas may differ for different items and services.
(B) Phased-in implementation
(i) shall be phased in among competitive acquisition areas in a manner consistent with subparagraph (D) so that the competition under the programs occurs in—
(C) Waiver of certain provisions
In carrying out the programs, the Secretary may waive such provisions of the Federal Acquisition Regulation as are necessary for the efficient implementation of this section, other than provisions relating to confidentiality of information and such other provisions as the Secretary determines appropriate.
(D) Changes in competitive acquisition programs
(i) Round 1 of competitive acquisition program Notwithstanding subparagraph (B)(i)(I) and in implementing the first round of the competitive acquisition programs under this section—
(I) the contracts awarded under this section before July 15, 2008, are terminated, no payment shall be made under this subchapter on or after July 15, 2008, based on such a contract, and, 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 1395t of this title;
(II) the Secretary shall conduct the competition for such round in a manner so that it occurs in 2009 with respect to the same items and services and the same areas, except as provided in subclauses (III) and (IV);
(III) the Secretary shall exclude Puerto Rico so that such round of competition covers 9, instead of 10, of the largest metropolitan statistical areas; andNothing in subclause (I) shall be construed to provide an independent cause of action or right to administrative or judicial review with regard to the termination provided under such subclause.
(ii) Round 2 of competitive acquisition program In implementing the second round of the competitive acquisition programs under this section described in subparagraph (B)(i)(II)—
(I) the metropolitan statistical areas to be included shall be those metropolitan statistical areas selected by the Secretary for such round as of June 1, 2008;
(II) the Secretary shall include the next 21 largest metropolitan statistical areas by total population (after those selected under subclause (I)) for such round; and
(iii) Exclusion of certain areas in subsequent rounds of competitive acquisition programs In implementing subsequent rounds of the competitive acquisition programs under this section, including under subparagraph (B)(i)(III), for competitions occurring before 2015, the Secretary shall exempt from the competitive acquisition program (other than national mail order) the following:
(II) Metropolitan statistical areas not selected under round 1 or round 2 with a population of less than 250,000.
(E) Verification by OIG
The Inspector General of the Department of Health and Human Services shall, through post-award audit, survey, or otherwise, assess the process used by the Centers for Medicare & Medicaid Services to conduct competitive bidding and subsequent pricing determinations under this section that are the basis for pivotal bid amounts and single payment amounts for items and services in competitive bidding areas under rounds 1 and 2 of the competitive acquisition programs under this section and may continue to verify such calculations for subsequent rounds of such programs.
(F) Supplier feedback on missing financial documentation
(i) In general In the case of a bid where one or more covered documents in connection with such bid have been submitted not later than the covered document review date specified in clause (ii), the Secretary—
(I) shall provide, by not later than 45 days (in the case of the first round of the competitive acquisition programs as described in subparagraph (B)(i)(I)) or 90 days (in the case of a subsequent round of such programs) after the covered document review date, for notice to the bidder of all such documents that are missing as of the covered document review date; and
(II) may not reject the bid on the basis that any covered document is missing or has not been submitted on a timely basis, if all such missing documents identified in the notice provided to the bidder under subclause (I) are submitted to the Secretary not later than 10 business days after the date of such notice.
(ii) Covered document review date The covered document review date specified in this clause with respect to a competitive acquisition program is the later of—
(I) the date that is 30 days before the final date specified by the Secretary for submission of bids under such program; or
(iii) Limitations of process The process provided under this subparagraph—
(II) does not apply to any determination as to the accuracy or completeness of covered documents submitted or whether such documents meet applicable requirements;
(III) shall not prevent the Secretary from rejecting a bid based on any basis not described in clause (i)(II); and
(iv) Covered document defined In this subparagraph, the term “covered document” means a financial, tax, or other document required to be submitted by a bidder as part of an original bid submission under a competitive acquisition program in order to meet required financial standards. Such term does not include other documents, such as the bid itself or accreditation documentation.
(2) Items and services described
The items and services referred to in paragraph (1) are the following:
(A) Durable medical equipment and medical supplies
Covered items (as defined in section 1395m (a)(13) of this title) for which payment would otherwise be made under section 1395m (a) of this title, including items used in infusion and drugs (other than inhalation drugs) and supplies used in conjunction with durable medical equipment, but excluding class III devices under the Federal Food, Drug, and Cosmetic Act [21 U.S.C. 301 et seq.] and excluding certain complex rehabilitative power wheelchairs recognized by the Secretary as classified within group 3 or higher (and related accessories when furnished in connection with such wheelchairs).
(B) Other equipment and supplies
(C) Off-the-shelf orthotics
Orthotics described in section 1395x (s)(9) of this title for which payment would otherwise be made under section 1395m (h) of this title which require minimal self-adjustment for appropriate use and do not require expertise in trimming, bending, molding, assembling, or customizing to fit to the individual.
(3) Exception authority
In carrying out the programs under this section, the Secretary may exempt—
(A) 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; and
(4) Special rule for certain rented items of durable medical equipment and oxygen
In the case of a covered item for which payment is made on a rental basis under section 1395m (a) of this title and in the case of payment for oxygen under section 1395m (a)(5) of this title, the Secretary shall establish a process by which rental agreements for the covered items and supply arrangements with oxygen suppliers entered into before the application of the competitive acquisition program under this section for the item may be continued notwithstanding this section. In the case of any such continuation, the supplier involved shall provide for appropriate servicing and replacement, as required under section 1395m (a) of this title.
(5) Physician authorization
(A) In general
With respect to items or services included within a particular HCPCS code, the Secretary may establish a process for certain items and services under which a physician may prescribe a particular brand or mode of delivery of an item or service within such code if the physician determines that use of the particular item or service would avoid an adverse medical outcome on the individual, as determined by the Secretary.
For each competitive acquisition area in which the program is implemented under this subsection with respect to items and services, the payment basis determined under the competition conducted under subsection (b) of this section shall be substituted for the payment basis otherwise applied under section 1395m (a) of this title, section 1395m (h) of this title, or section 1395u (s) of this title, as appropriate.
(7) Exemption from competitive acquisition
The programs under this section shall not apply to the following:
(A) Certain off-the-shelf orthotics
Items and services described in paragraph (2)(C) if furnished—
(i) by a physician or other practitioner (as defined by the Secretary) to the physician’s or practitioner’s own patients as part of the physician’s or practitioner’s professional service; or
(B) Certain durable medical equipment
Those items and services described in paragraph (2)(A)—
(i) that are furnished by a hospital to the hospital’s own patients during an admission or on the date of discharge; and
(b) Program requirements
(1) In general
The Secretary shall conduct a competition among entities supplying items and services described in subsection (a)(2) of this section for each competitive acquisition area in which the program is implemented under subsection (a) of this section with respect to such items and services.
(2) Conditions for awarding contract
(A) In general
The Secretary may not award a contract to any entity under the competition conducted in an  competitive acquisition area pursuant to paragraph (1) to furnish such items or services unless the Secretary finds all of the following:
(i) The entity meets applicable quality standards specified by the Secretary under section 1395m (a)(20) of this title.
(ii) The entity meets applicable financial standards specified by the Secretary, taking into account the needs of small providers.
(iii) The total amounts to be paid to contractors in a competitive acquisition area are expected to be less than the total amounts that would otherwise be paid.
(B) Timely implementation of program
Any delay in the implementation of quality standards under section 1395m (a)(20) of this title or delay in the receipt of advice from the program oversight committee established under subsection (c) of this section shall not delay the implementation of the competitive acquisition program under this section.
(3) Contents of contract
(A) In general
A contract entered into with an entity under the competition conducted pursuant to paragraph (1) is subject to terms and conditions that the Secretary may specify.
(B) Term of contracts
The Secretary shall recompete contracts under this section not less often than once every 3 years.
(C) Disclosure of subcontractors
(i) Initial disclosure Not later than 10 days after the date a supplier enters into a contract with the Secretary under this section, such supplier shall disclose to the Secretary, in a form and manner specified by the Secretary, the information on—
(I) each subcontracting relationship that such supplier has in furnishing items and services under the contract; and
(4) Limit on number of contractors
(A) In general
The Secretary may limit the number of contractors in a competitive acquisition area to the number needed to meet projected demand for items and services covered under the contracts. In awarding contracts, the Secretary shall take into account the ability of bidding entities to furnish items or services in sufficient quantities to meet the anticipated needs of individuals for such items or services in the geographic area covered under the contract on a timely basis.
(A) In general
Payment under this part for competitively priced items and services described in subsection (a)(2) of this section shall be based on bids submitted and accepted under this section for such items and services. Based on such bids the Secretary shall determine a single payment amount for each item or service in each competitive acquisition area.
(B) Reduced beneficiary cost-sharing
(i) Application of coinsurance Payment under this section for items and services shall be in an amount equal to 80 percent of the payment basis described in subparagraph (A).
(C) Payment on assignment-related basis
Payment for any item or service furnished by the entity may only be made under this section on an assignment-related basis.
(6) Participating contractors
(A) In general
Except as provided in subsection (a)(4) of this section, payment shall not be made for items and services described in subsection (a)(2) of this section furnished by a contractor and for which competition is conducted under this section unless—
(B) Bid defined
In this section, the term “bid” means an offer to furnish an item or service for a particular price and time period that includes, where appropriate, any services that are attendant to the furnishing of the item or service.
(C) Rules for mergers and acquisitions
In applying subparagraph (A) to a contractor, the contractor shall include a successor entity in the case of a merger or acquisition, if the successor entity assumes such contract along with any liabilities that may have occurred thereunder.
(D) Protection of small suppliers
In developing procedures relating to bids and the awarding of contracts under this section, the Secretary shall take appropriate steps to ensure that small suppliers of items and services have an opportunity to be considered for participation in the program under this section.
(7) Consideration in determining categories for bids
The Secretary may consider the clinical efficiency and value of specific items within codes, including whether some items have a greater therapeutic advantage to individuals.
(8) Authority to contract for education, monitoring, outreach, and complaint services
The Secretary may enter into contracts with appropriate entities to address complaints from individuals who receive items and services from an entity with a contract under this section and to conduct appropriate education of and outreach to such individuals and monitoring quality of services with respect to the program.
(9) Authority to contract for implementation
The Secretary may contract with appropriate entities to implement the competitive bidding program under this section.
(10) Special rule in case of competition for diabetic testing strips
(A) In general
With respect to the competitive acquisition program for diabetic testing strips conducted after the first round of the competitive acquisition programs, if an entity does not demonstrate to the Secretary that its bid covers types of diabetic testing strip products that, in the aggregate and taking into account volume for the different products, cover 50 percent (or such higher percentage as the Secretary may specify) of all such types of products, the Secretary shall reject such bid. The volume for such types of products may be determined in accordance with such data (which may be market based data) as the Secretary recognizes.
(B) Study of types of testing strip products
Before 2011, the Inspector General of the Department of Health and Human Services shall conduct a study to determine the types of diabetic testing strip products by volume that could be used to make determinations pursuant to subparagraph (A) for the first competition under the competitive acquisition program described in such subparagraph and submit to the Secretary a report on the results of the study. The Inspector General shall also conduct such a study and submit such a report before the Secretary conducts a subsequent competitive acquistion  program described in subparagraph (A).
(11) No administrative or judicial review
There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of—
(C) the designation of competitive acquisition areas under subsection (a)(1)(A) and the identification of areas under subsection (a)(1)(D)(iii);
(D) the phased-in implementation under subsection (a)(1)(B) and implementation of subsection (a)(1)(D);
(E) the selection of items and services for competitive acquisition under subsection (a)(2) of this section;
(c) Program Advisory and Oversight Committee
The Secretary shall establish a Program Advisory and Oversight Committee (hereinafter in this section referred to as the “Committee”).
(2) Membership; terms
The Committee shall consist of such members as the Secretary may appoint who shall serve for such term as the Secretary may specify.
The Committee shall provide advice to the Secretary with respect to the following functions:
(ii) The establishment of financial standards for purposes of subsection (b)(2)(A)(ii) of this section.
(iii) The establishment of requirements for collection of data for the efficient management of the program.
(iv) The development of proposals for efficient interaction among manufacturers, providers of services, suppliers (as defined in section 1395x (d) of this title), and individuals.
(4) Inapplicability of FACA
The provisions of the Federal Advisory Committee Act (5 U.S.C. App.) shall not apply.
Not later than July 1, 2011, the Secretary shall submit to Congress a report on the programs under this section. The report shall include information on savings, reductions in cost-sharing, access to and quality of items and services, and satisfaction of individuals.
(f) Competitive acquisition ombudsman
The Secretary shall provide for a competitive acquisition ombudsman within the Centers for Medicare & Medicaid Services in order to respond to complaints and inquiries made by suppliers and individuals relating to the application of the competitive acquisition program under this section. The ombudsman may be within the office of the Medicare Beneficiary Ombudsman appointed under section 1395b–9 (c) of this title. The ombudsman shall submit to Congress an annual report on the activities under this subsection, which report shall be coordinated with the report provided under section 1395b–9 (c)(2)(C) of this title.
 So in original. Probably should be “a”.
 So in original. Probably should be “acquisition”.
Source(Aug. 14, 1935, ch. 531, title XVIII, § 1847, as added Pub. L. 105–33, title IV, § 4319(a),Aug. 5, 1997, 111 Stat. 392; amended Pub. L. 106–113, div. B, § 1000(a)(6) [title III, § 321(c)], Nov. 29, 1999, 113 Stat. 1536, 1501A–366; Pub. L. 108–173, title III, § 302(b)(1),Dec. 8, 2003, 117 Stat. 2224; Pub. L. 110–275, title I, §§ 145(a)(1), 154(a)(1), (b)(2), (3), (c)(2)(A), (B), (d)(1), (3), (4),July 15, 2008, 122 Stat. 2547, 2560, 2565–2568; Pub. L. 111–148, title VI, § 6410(a),Mar. 23, 2010, 124 Stat. 773.)
References in Text
The Federal Food, Drug, and Cosmetic Act, referred to in subsec. (a)(2)(A), is act June 25, 1938, ch. 675, 52 Stat. 1040, as amended, which is classified generally to chapter 9 (§ 301 et seq.) of Title 21, Food and Drugs. For complete classification of this Act to the Code, see section 301 of Title 21 and Tables.
The Federal Advisory Committee Act, referred to in subsec. (c)(4), is Pub. L. 92–463, Oct. 6, 1972, 86 Stat. 770, as amended, which is set out in the Appendix to Title 5, Government Organization and Employees.
A prior section 1395w–3, act Aug. 14, 1935, ch. 531, title XVIII, § 1847, as added July 1, 1988, Pub. L. 100–360, title II, § 202(j), 102 Stat. 719; amended Oct. 13, 1988, Pub. L. 100–485, title VI, § 608(d)(5)(I), 102 Stat. 2414, provided for appointment of Prescription Drug Payment Review Commission by Director of Congressional Office of Technology Assessment, prior to repeal by Pub. L. 101–234, title II, § 201(a), (c),Dec. 13, 1989, 103 Stat. 1981, effective Jan. 1, 1990.
2010—Subsec. (a)(1)(B)(i)(II). Pub. L. 111–148, § 6410(a)(1), substituted “91” for “70”.
Subsec. (a)(1)(D)(ii)(II), (III). Pub. L. 111–148, § 6410(a)(2), added subcl. (II) and redesignated former subcl. (II) as (III).
2008—Subsec. (a)(1)(B)(i). Pub. L. 110–275, § 154(a)(1)(A)(i), inserted “consistent with subparagraph (D)” after “in a manner” in introductory provisions.
Subsec. (a)(1)(B)(i)(II). Pub. L. 110–275, § 154(a)(1)(A)(ii), substituted “an additional 70” for “80” and “in 2011” for “in 2009”.
Subsec. (a)(1)(B)(i)(III). Pub. L. 110–275, § 154(a)(1)(A)(iii), substituted “after 2011 (or, in the case of national mail order for items and services, after 2010)” for “after 2009”.
Subsec. (a)(1)(D) to (F). Pub. L. 110–275, § 154(a)(1)(A)(iv), added subpars. (D) to (F).
Subsec. (a)(2)(A). Pub. L. 110–275, § 154(a)(1)(B), which directed amendment of par. (2)(A) of subsec. (a)(1) by inserting “and excluding certain complex rehabilitative power wheelchairs recognized by the Secretary as classified within group 3 or higher (and related accessories when furnished in connection with such wheelchairs)” before period at end, was executed by making the insertion in subsec. (a)(2)(A), to reflect the probable intent of Congress.
Subsec. (a)(7). Pub. L. 110–275, § 154(d)(1), added par. (7).
Subsec. (b)(3)(C). Pub. L. 110–275, § 154(b)(2), added subpar. (C).
Subsec. (b)(10). Pub. L. 110–275, § 154(d)(3)(B), added par. (10). Former par. (10) redesignated (11).
Subsec. (b)(11). Pub. L. 110–275, § 154(d)(3)(A), redesignated par. (10) as (11).
Subsec. (b)(11)(C). Pub. L. 110–275, § 154(d)(4)(A), inserted “and the identification of areas under subsection (a)(1)(D)(iii)” after “(a)(1)(A)”.
Subsec. (b)(11)(D). Pub. L. 110–275, § 154(d)(4)(B), inserted “and implementation of subsection (a)(1)(D)” after “(a)(1)(B)”.
Subsec. (b)(11)(G). Pub. L. 110–275, § 154(d)(4)(C)–(E), added subpar. (G).
Subsec. (c)(5). Pub. L. 110–275, § 154(c)(2)(A), substituted “December 31, 2011” for “December 31, 2009”.
Subsec. (d). Pub. L. 110–275, § 154(c)(2)(B), substituted “July 1, 2011” for “July 1, 2009”.
Subsec. (e). Pub. L. 110–275, § 145(a)(1), struck out subsec. (e) which related to a demonstration project on the application of competitive acquisition to clinical diagnostic laboratory tests, terms and conditions of the project, and reporting requirement.
Subsec. (f). Pub. L. 110–275, § 154(b)(3), added subsec. (f).
2003—Pub. L. 108–173amended section catchline and text generally, substituting provisions relating to competitive acquisition of certain items and services for provisions relating to demonstration projects for competitive acquisition of items and services.
1999—Subsec. (b)(2). Pub. L. 106–113inserted “and” after “specified by the Secretary”.
Effective Date of 2008 Amendment
Amendment by section 154 ofPub. L. 110–275effective June 30, 2008, see section 154(e) ofPub. L. 110–275, set out as a note under section 1395m of this title.
Effective Date of 1999 Amendment
Amendment by Pub. L. 106–113effective as if included in the enactment of the Balanced Budget Act of 1997, Pub. L. 105–33, except as otherwise provided, see section 1000(a)(6) [title III, § 321(m)] of Pub. L. 106–113, set out as a note under section 1395d of this title.
GAO Report on Impact of Competitive Acquisition on Suppliers
Pub. L. 108–173, title III, § 302(b)(3),Dec. 8, 2003, 117 Stat. 2230, as amended by Pub. L. 110–275, title I, § 154(c)(1),July 15, 2008, 122 Stat. 2565, provided that:
“(A) Study.—The Comptroller General of the United States shall conduct a study on the impact of competitive acquisition of durable medical equipment under section 1847 of the Social Security Act [42 U.S.C. 1395w–3], as amended by paragraph (1) and as amended by section 2 of the Medicare DMEPOS Competitive Acquisition Reform Act of 2008 [probably should refer to section 154 of the Medicare Improvements for Patients and Providers Act of 2008, Pub. L. 110–275], on suppliers and manufacturers of such equipment and on patients. Such study shall specifically examine the impact of such competitive acquisition on access to, and quality of, such equipment and service related to such equipment and the topics specified in subparagraph (C).
“(B) Report.—Not later than 1 year after the first date that payments are made under section 1847 of the Social Security Act, the Comptroller General shall submit to Congress a report on the study conducted under subparagraph (A) and shall include in the report such recommendations as the Comptroller General determines appropriate.
“(C) Topics.—The topics specified in this subparagraph, for the study under subparagraph (A) concerning the competitive acquisition program, are the following:
“(i) Beneficiary access to items and services under the program, including the impact on such access of awarding contracts to bidders that—
“(I) did not have a physical presence in an area where they received a contract; or
“(II) had no previous experience providing the product category they were contracted to provide.
“(ii) Beneficiary satisfaction with the program and cost savings to beneficiaries under the program.
“(iii) Costs to suppliers of participating in the program and recommendations about ways to reduce those costs without compromising quality standards or savings to the Medicare program.
“(iv) Impact of the program on small business suppliers.
“(v) Analysis of the impact on utilization of different items and services paid within the same Healthcare Common Procedure Coding System (HCPCS) code.
“(vi) Costs to the Centers for Medicare & Medicaid Services, including payments made to contractors, for administering the program compared with administration of a fee schedule, in comparison with the relative savings of the program.
“(vii) Impact on access, Medicare spending, and beneficiary spending of any difference in treatment for diabetic testing supplies depending on how such supplies are furnished.
“(viii) Such other topics as the Comptroller General determines to be appropriate.”
Report on Activities of Suppliers
Pub. L. 108–173, title III, § 302(e),Dec. 8, 2003, 117 Stat. 2233, as amended by Pub. L. 110–275, title I, § 154(c)(2)(C),July 15, 2008, 122 Stat. 2566, provided that: “The Inspector General of the Department of Health and Human Services shall conduct a study to determine the extent to which (if any) suppliers of covered items of durable medical equipment that are subject to the competitive acquisition program under section 1847 of the Social Security Act [42 U.S.C. 1395w–3], as amended by subsection (a) [probably should be (b)(1)], are soliciting physicians to prescribe certain brands or modes of delivery of covered items based on profitability. Not later than July 1, 2011, the Inspector General shall submit to Congress a report on such study.”
Study by GAO
Pub. L. 105–33, title IV, § 4319(c),Aug. 5, 1997, 111 Stat. 394, provided that: “The Comptroller of the United States shall study the effectiveness of the establishment of competitive acquisition areas under section 1847(a) of the Social Security Act [42 U.S.C. 1395w–3 (a)], as added by this section.”