CMS Pub. 100-04, ch. 36, § 40.12

Bidding Program

(Rev. 1532, Issued: 06-11-08, Effective: 07-01-08, Implementation: 07-07-08)

The following downcoding guidelines describe situations where Medicare reduces the level of

payment for the prescribed item based on a medical necessity partial denial of coverage for the

additional, not medically necessary, expenses associated with the prescribed item. For

beneficiaries who reside in a CBA and for whom Medicare determines that the prescribed item

should be downcoded to an item that is reasonable and necessary under Medicare’s coverage

requirements, the subsequent scenarios and chart detail the type of supplier that can furnish the

item and the payment for the item.

• Downcodes from a non-bid item to a bid item

In this situation, Medicare payment will be made to any Medicare enrolled supplier on an

assigned or unassigned basis. Medicare payment will be equal to 80 percent of the single

payment amount for the medically necessary bid item.

• Downcodes from a bid item to a non-bid item

Medicare payment in this downcoding scenario will be made to a contract supplier on an

assignment-related basis. Medicare payment will be equal to 80 percent of the lower of

the actual charge or the fee schedule amount for the medically necessary non-bid item.

• Downcodes from a bid item in one product category (category “U”) to a bid item in

another product category (category “S”)

In this case, Medicare payment will be made to a contract supplier for the product

category “U” on an assignment-related basis. Medicare payment would be equal to 80

percent of the single payment amount for the medically necessary bid item in product

category “S”.

Downcoding Scenarios for Beneficiaries Residing in a CBA

From a

Higher

Level of

Service Item

To a

Medically

Necessary

Item

Must be

Furnished by

Assignment

Mandatory

(Y/N)

Medicare Payment Based

Upon

Non-Bid

Item

Bid Item Any

Medicare

Enrolled

Supplier

N Single Payment Amount

for the Medically

Necessary Item

Bid Item Non-Bid

Item

Contract

Supplier

Y Lower of the Actual

Charge or Fee Schedule

Amount for the Medically

Necessary Item

Bid Item in

Product

Category

“U”

Bid Item in

Product

Category

“S”

Contract

Supplier for

Category

“U”

Y Single Payment Amount

for Category “S” for the

Medically Necessary Item

The following scenarios and chart describe situations where the prescribed item for a beneficiary

that does not reside in a CBA, but travels to a CBA is downcoded to an item that is reasonable

and necessary under Medicare’s coverage requirements.

• Downcodes from a non-bid item to a bid item

In this situation, Medicare payment will be made to any Medicare enrolled supplier on an

assigned or unassigned basis. Medicare payment will be equal to 80 percent of the lower

of the actual charge or the fee schedule amount for the medically necessary bid item.

• Downcodes from a bid item to a non-bid item

Medicare payment in this downcoding scenario will only be made to a contract supplier

on an assignment-related basis. Medicare payment will be equal to 80 percent of the

lower of the actual charge or the fee schedule amount for the medically necessary non-bid

item.

• Downcodes from a bid item in one product category (category “U”) to a bid item in

another product category (category “S”)

In this case, Medicare payment will only be made to a contract supplier for the product

category “U” on an assignment-related basis. Medicare payment will be equal to 80

percent of the lower of the actual charge or the fee schedule amount for the medically

necessary bid item in product category “S”.

Downcoding Scenarios for Beneficiaries Who Do Not Reside In a CBA, But Travel to a

CBA

From a

Higher

Level of

Service Item

To a

Medically

Necessary

Item

Must be

Furnished by

Assignment

Mandatory

(Y/N)

Medicare Payment Based

Upon

Non-Bid

Item

Bid Item Any

Medicare

Enrolled

Supplier

N Lower of the Actual

Charge or Fee Schedule

Amount for the Medically

Necessary Item

Bid Item Non-Bid

Item

Contract

Supplier

Y Lower of the Actual

Charge or Fee Schedule

Amount for the Medically

Necessary Item

Bid Item in

Product

Category

“U”

Bid Item in

Product

Category

“S”

Contract

Supplier for

Category

“U”

Y Lower of the Actual

Charge or Fee Schedule

Amount for the Medically

Necessary Item