Healthcare associations comment on Medicare proposal to reshore PPE supply chain

The American Hospital Association (AHA) and Healthcare Supply Chain Association (HSCA) last week published responses to a federal proposal to reshore the U.S. healthcare PPE supply chain.

The Centers for Medicare & Medicaid Services (CMS) is exploring ways to reduce reliance on foreign-made medical supplies and enhance U.S. readiness for future emergencies while supporting American workers and manufacturers.

Response to PPE shortages during COVID-19 pandemic

CMS took action in response to essential PPE shortages during the COVID-19 pandemic caused by lockdowns that limited production and sudden demand spikes across multiple industries. 

Shortages included NIOSH-approved surgical N95 respirators - a specific type of filtering facepiece respirator (FFR) that is a subset of N95 respirators used in some clinical settings under conditions requiring respiratory protection from airborne pathogens and splash protection from exposure to fluids.

During the pandemic, “just-in-time” supply chains that minimize stockpiling - in addition to reliance on overseas production - left U.S. hospitals unable to obtain enough PPE to protect healthcare workers.

“The COVID-19 public health emergency exposed the dangers of depending on foreign countries for critical PPE and essential medicines, highlighting the need for domestic emergency preparedness,” said Mehmet Oz, CMS administrator.

Feedback requested from hospitals, suppliers

On Jan. 26, CMS issued an Advance Notice of Proposed Rulemaking (ANPRM) seeking public feedback on potential approaches to strengthen the American-made supply chain for PPE.

The ANPRM sought comments on new avenues the agency may consider to promote domestic purchasing by hospitals that participate in the Medicare program, including the potential creation of a new “Secure American Medical Supplies” designation for hospitals committed to American-made purchasing, and streamlined payment approaches to help offset the resource costs of domestic procurement.

“We want to hear from hospitals, manufacturers, suppliers, and the public on practical ways Medicare can support a stronger, more reliable domestic supply chain,” said Chris Klomp, CMS deputy administrator and director of the center for Medicare.

The 60-day public comment period closed March 30.

American Hospital Association calls for rule to cover all patients

In its response, the AHA said it supported CMS’ reshoring goals.

The group said incentives for purchasing domestically-made PPE should be voluntary, not mandatory. AHA raised concerns about administrative burden outweighing potential benefits, compounded by hospitals’ already limited visibility into their supply chains.

The Association cautioned against adding a structural measure within the Hospital Inpatient Quality Reporting (IQR) Program related to domestic PPE sourcing because it would add unnecessary administrative costs outweighing its value to hospital staff and patients.

AHA also noted domestic PPE production remains insufficient to consistently meet demand, with Chinese suppliers providing the majority of plastic gloves, respirators, and non-disposable face masks used in the U.S. The Association encouraged CMS to re-evaluate what percentage of PPE needs to be sourced from U.S. suppliers to qualify for incentives, including establishing exemptions during extraordinary circumstances.

The group said it supports CMS including payment adjustment for a broad scope of domestically-made PPE, including gowns, hairnets, beard covers, bouffant caps, shoe covers, face shields, ASTM Level II and III surgical masks, powered air-purifying respirators (PAPRs), and elastomeric respirators. 

AHA said to best incentivize domestic purchasing, payments should extend beyond Medicare fee-for-service (FFS) patients to all patients because hospitals make no distinction by payer when purchasing supplies.

Healthcare Supply Chain Association encourages multifaceted supply chain

The HSCA, a healthcare group purchasing organization (GPO), said it supported CMS’ reshoring goals.

The Association said during the COVID-19 pandemic, several HSCA member GPOs launched programs to invest in domestic manufacturing, entering into strategic partnership agreements with a number of domestic suppliers and bringing products to market through long-term contracting.

But HSCA noted upstream supply chain disruptions caused by natural disasters and weather events stress healthcare providers, including in markets with strong domestic manufacturing bases. 

The group called for a “multifaceted” approach comprising redundancies, reshored production, and varied geographic sourcing to help prevent supply chain disruptions. These techniques can help scale production quickly if demand spikes and reduce bottlenecks during regional disruptions or manufacturing challenges.

Like AHA, HSCA said hospitals do not usually have control over their produce manufacturing locations or supply chain structures, and decisions on where to locate production facilities are often made by manufacturers and their investors. The group recommended CMS work with other parts of the government to directly support domestic manufacturing outside the Medicare program.

HSCA also cautioned against imposing administrative burdens through voluntary domestic procurement incentives, and encouraged a scaled framework of incentives rather than a single target percentage.