CMS announced last week that starting January 1, 2011, its competitive bidding program will cut reimbursement for oxygen supplies and equipment by an average of 29% in nine cities. The cuts mark the first round of Medicare’s competitive bidding program, which will be used to determine the price Medicare pays for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).

The program replaces Medicare’s existing fee schedule amounts with market-based prices.

The first round of cuts will go into effect for beneficiaries in Charlotte, Cincinnati, Cleveland, Dallas, Kansas City, Miami, Orlando, Pittsburgh, and Riverside.

Beneficiaries living in the nine first round communities who use certain medical equipment and supplies may have to choose a new Medicare contract supplier if they want to have Medicare help pay for an item. According to CMS, Medicare will work with local partners and health care providers to inform beneficiaries about the changes.

Currently, CMS is mailing contract offers to winning bidders and expects to complete the contracting process in time to announce the contract suppliers in September. Small suppliers—those with gross revenues of $3.5 million or less—make up about 48% of the suppliers that will be offered contracts.

The competition for round two of the competitive bidding program, which will expand the program to an additional 70 metropolitan statistical areas, will begin in 2011. Additional areas of the country will be added after 2011.

More information on single payment amounts for oxygen sup[plies and equipment can be found here.