CMS competitive bidding process: unintended consequences

On the surface, the CMS competitive bidding process (CBP) has good intentions – lowering Medicare spending on durable medical equipment (DME). Forcing suppliers to bid low for contracts, with only winners getting paid, could possibly have negative and lasting effects on the nursing home industry.

What are the unintended consequences of the CBP?

Previously, a nursing home might choose to use boutique or a local mom-and-pop shop for supplies. Under the new rules (finalized Dec2025), they’ll likely be forced to choose from a few large-scale national distributors that won the remote item delivery contract.

Some of the unintended consequences can include:

• Supply chain issues: Implementing CBP could lead to shortages and delivery issues that can cause delayed or diminished care.

• Reduced choice: Fewer suppliers means less choice for facilities and residents, potentially leading to regional monopolies.
• Quality and service concerns: Artificially lowering prices can force suppliers to cut services, limit product options or hire less experienced staff, which can affect care quality.
• Access issues: Disruption or loss of local suppliers can create problems during emergencies (like power outages, wildfires, earthquakes and catastrophic weather events) or when specialized equipment is needed.
• Financial strain: Nursing homes and their suppliers already face tight margins; CBP can exacerbate cash flow, making it harder to invest in innovation or provide robust support.

What will happen to suppliers who don’t win CMS contracts?

This means some established smaller suppliers may go out of business or choose to adjust their business models.

• Non-bid items: Sell and be reimbursed for DMEPOS items not included in competitive bidding product categories.
• Non-CBA areas: Serve beneficiaries who live outside of the designated competitive bidding areas.
• Retail/cash sales: Focus on private-pay customers or those with commercial insurance that don’t follow CMS's restricted network.
• Subcontracting: Winning suppliers may hire non-contract suppliers to perform services like delivery or maintenance, though the contract supplier remains legally responsible for claims.

Is the government picking winners and losers?

The program does create a winner-take-all scenario for specific geographic areas and product categories. While this can achieve massive savings for taxpayers (billions of dollars), it undeniably changes the landscape from a free-access market to a contract-limited market.

What categories are affected?

For most standard medical supplies billed under Medicare Part B, nursing homes and their residents will be restricted to a specific list of contract winners. At this time, the categories include:

• Class II continuous glucose monitors (CGMs) and insulin pumps
• Urological supplies
• Ostomy supplies
• Hydrophilic urinary catheters
• Off-the-shelf (OTS) back braces
• OTS knee braces
• OTS upper extremity braces

Our opinion

In its rush to establish the CBP, like many, we’re concerned that the administration may not have fully considered some ramifications. The CBP could increase financial strain as nursing homes and their suppliers face even tighter margins. Significantly diminishing the number of suppliers can lead to regional monopolies as smaller, mom-and-pop and niche providers get squeezed out. Artificially lowering prices can affect care quality as suppliers are forced to cut services, limit product options or hire less-experienced staff to generate competitive bids. Nursing homes may face potential access issues, especially in emergency situations.

While we understand the CMS’s goal to lower spending on DME, the unintended consequences of the CBP can potentially have negative effects on the industry in 2026 and beyond.