[Federal Register Volume 68, Number 163 (Friday, August 22, 2003)]
[Proposed Rules]
[Pages 50735-50739]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 03-21443]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 414
[CMS-1167-P]
RIN 0938-AL27
Medicare Program; Payment for Respiratory Assist Devices With Bi-
level Capability and a Back-up Rate
AGENCY: Center for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would clarify that respiratory assist
devices with bi-level capability and a back-up rate must be paid as
capped rental items and not paid as items requiring frequent and
substantial servicing (FSS), as defined in section 1834(a)(3) of the
Social Security Act. This action would correct coding and payment
errors, which began in 1994, when some Medicare contractors
misinterpreted our statutorily prescribed policy and allowed these
devices to be paid under the category for items requiring FSS.
DATES: Comment Date: Comments will be considered if we receive them at
the appropriate address, as provided below, no later than 5 p.m. on
October 21, 2003.
ADDRESSES: In commenting, please refer to file code CMS-1167-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission or e-mail.
Mail written comments (one original and two copies) to the
following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1167-P, P.O. Box 8017, Baltimore, MD
21244-1850.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) to one of the following
addresses:
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are
[[Page 50736]]
encouraged to leave their comments in the CMS drop slots located in the
main lobby of the building. A stamp-in clock is available for persons
wishing to retain a proof of filing by stamping in and retaining an
extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Joel Kaiser, (410) 786-4499.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received timely will be
available for public inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, at the
headquarters of the Centers for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view
public comments, phone (410) 786-7195.
Copies: This Federal Register document is available from the
Federal Register online database through GPO Access, a service of the
U.S. Government Printing Office. The web site address is: http://
www.access.gpo.gov/nara/index.html.
I. Background
A. DME Fee Schedule Payment Methodology
The Medicare Part B (Supplementary Medical Insurance) payment rules
for durable medical equipment (DME) are located in section 1834(a) of
the Social Security Act (the Act). In accordance with section 1834(a)
of the Act, payment for DME is made on a fee schedule basis with items
falling into several different payment categories, each with its own
unique payment rules. The respiratory assist devices with bi-level
capability would be placed in the category for other items of durable
medical equipment, or capped rental items, as defined in section
1834(a)(7) of the Act.
Section 1834(a) of the Act provides that Medicare payment for DME
is equal to 80 percent of the lesser of the actual charge for the item
or the fee schedule amount for the item. It classifies DME into the
following payment categories:
[sbull] Inexpensive or other routinely purchased DME.
[sbull] Items requiring frequent and substantial servicing (FSS).
[sbull] Customized items.
[sbull] Oxygen and oxygen equipment.
[sbull] Other covered items (other than DME).
[sbull] Other items of DME (capped rental items).
There are different payment rules for each category of DME. With
the exception of customized items, fee schedule amounts are calculated
for each item of DME, identified by codes in the Healthcare Common
Procedure Coding System (HCPCS). The Medicare payment amount for a
customized item of DME is based on the Medicare carrier's individual
consideration of that item.
In general, the fee schedule amounts for DME are calculated on a
statewide basis using average Medicare payments made in each State from
1986 and 1987 under the former reasonable charge payment methodology.
The fee schedule amounts are generally adjusted annually by the change
in the Consumer Price Index for all Urban Consumers (CPI-U) for the 12-
month period ending June 30 of the preceding year. The fee schedule
amounts are limited by a ceiling (upper limit) and floor (lower limit)
equal to 100 percent and 85 percent, respectively, of the median of the
statewide fee schedule amounts.
Section 13543 of the Omnibus Budget Reconciliation Act of 1993
(OBRA of 1993) (Pub. L. 103-66) amended section 1834(a)(3)(A) of the
Act to remove certain ventilators, namely ``intermittent assist devices
with continuous airway pressure devices,'' from the DME payment
category for items requiring FSS. Payment for an item in the FSS
category is made on a monthly rental basis, with rental payments
continuing as long as the item remains medically necessary. The
conference report for OBRA of 1993 states that ``this category is
intended to include items which require frequent servicing in order to
avoid imminent danger to a beneficiary's health.'' Those ventilators
which were excluded from the FSS category by OBRA of 1993 fall into the
payment category for capped rental (CR) items. Payment for items in the
CR category is made on a monthly rental basis, with rental payments
being capped at 15 months or 13 months, depending on whether the
beneficiary, based upon an option that must be offered by the supplier
in the 10th rental month, chooses to continue renting the item or take
over ownership of the item via the ``purchase option'' provided by the
statute. If the beneficiary chooses the ``purchase option,'' then
rental payments continue through the 13th month of use and the title
for the equipment transfers from the supplier to the beneficiary.
Medicare would then make payments for any necessary maintenance and
servicing of the patient-owned equipment. If the beneficiary chooses to
continue renting the equipment, then rental payments continue through
the 15th month of use, and the supplier continues to own the equipment.
The supplier must continue to supply the rented item to the beneficiary
as long as medically necessary. The supplier is entitled to receive a
semi-annual maintenance and servicing payment in an amount not to
exceed 10 percent of the purchase price for the equipment as determined
by the statute. Total Medicare payments made through the 13th and 15th
months of rental equal 105 and 120 percent, respectively, of the
statutory purchase price for the equipment.
Suppliers of DME must meet the standards specified in 42 CFR
414.57. These standards specify that the supplier ``must maintain and
replace at no charge or repair directly, or through a service contract
with another company, Medicare-covered items it has rented to
beneficiaries.'' This requirement applies to items in both the FSS and
CR payment categories. Therefore, for rental items in either category,
the supplier is responsible for ensuring that the equipment is in good
working order. In the case of items for which the patient has selected
the purchase option, the patient arranges for the servicing and repair
of the patient-owned equipment. Medicare payments are made as needed
for maintenance and servicing of patient-owned equipment in the CR
category.
It is not necessary for a respiratory therapist to perform the
maintenance and servicing of respiratory assist devices. If DME
suppliers perform maintenance and servicing of equipment, they are paid
by Medicare for this service, regardless of whether the item is in the
FSS or CR category. We are confident that this change in payment
category will not result in a decrease in the current level of service
being provided to the beneficiaries.
B. HCPCS Coding for Respiratory Assist Devices
On January 1, 1992, code E0452 with the description of
``intermittent assist device with continuous positive airway pressure
device (CPAP)'' was added and became effective in the HCPCS. This code
was added to describe respiratory assist devices with bi-level air
pressure capability, with or without a back-up rate, and with the
ability to switch to CPAP mode. Bi-level pressure capability means that
the device can deliver a lower level of pressure when the patient
exhales than when the patient inhales, as opposed to CPAP, which is the
[[Page 50737]]
continuous delivery of a single level of positive air pressure. A back-
up rate feature enables the device to automatically switch between the
two levels of pressure at pre-determined intervals. The original
manufacturer of bi-level respiratory assist devices submitted
documentation to us as part of its HCPCS coding recommendation. The
manufacturer stated the following in the documentation:
[sbull] The word ``intermittent'' refers to devices that are
designed to be used by the patient for only part of the day, usually
during the hours of sleep.
[sbull] The bi-level equipment requires very little maintenance and
servicing.
[sbull] Other than monthly replacement of the air inlet filter on
the front of the system, there is no routine maintenance required.
[sbull] Recommends that a performance verification be performed
after each year of operation to ensure that the device is functioning
properly.
In accordance with OBRA of 1993, intermittent assist devices are
excluded from the FSS payment category and, therefore, fall into the CR
payment category.
On January 1, 1992, code E0453 with the description of
``therapeutic ventilator; suitable for use 12 hours or less per day''
was added and became effective in the HCPCS. This code was added to
describe ventilators that are used on a part time basis by patients who
are dependent on volume ventilators (HCPCS code E0450) for more than 12
hours a day. The premise behind the therapeutic ventilator (code E0453)
is similar to the portable oxygen equipment. The stationary volume
ventilator (E0450), like stationary oxygen equipment, would be the
primary equipment used by the patient. The portable therapeutic
ventilator, like portable oxygen equipment, would be used part of the
day by the patient to move about in order to exercise muscles, prevent
decubitus ulcers, and achieve other therapeutic goals. Therapeutic
ventilators were properly classified in the FSS payment category.
Beginning as early as May 25, 1992, some Medicare carriers issued
erroneous guidance to suppliers that intermittent assist devices with a
back-up rate should be billed for using the HCPCS code E0453 for
therapeutic ventilators (FSS payment category) instead of the HCPCS
code E0452 for intermittent assist devices (CR payment category). We
are not certain to what degree carriers and suppliers were using code
E0453 as opposed to code E0452 to bill for intermittent assist devices
with a back-up rate. However, this practice continued to some extent
through 1993 and 1994, the respective years in which the OBRA of 1993
change in payment categories for intermittent assist devices was
enacted and implemented. Responsibility for processing DME claims was
transferred during this time from 34 local carriers to 4 regional
carriers known as Durable Medical Equipment Regional Carriers (DMERCs).
The DMERCs also issued erroneous guidance to suppliers that the
intermittent assist devices with a back-up rate should be billed for
using code E0453 instead of code E0452.
The classification of intermittent assist devices with a back-up
rate under the FSS payment category versus the CR payment category
results in a substantial increase in Medicare payments. For example,
comparing cost of E0453 over 5 years using the 2000 fee schedule
ceiling of $612.52, total Medicare payments under the FSS payment
category would be $36,751.20 after 5 years as opposed to $7,778.99 if
the device was classified under the CR payment category.\1\ Based on
retail prices we obtained, we determined for the year 2000, that the
purchase prices for intermittent assist devices with a back-up rate
range from approximately $3,000 to $6,000. This highlights the fact
that the correct classification of these devices for Medicare payment
purposes is a significant issue in terms of safeguarding the Medicare
trust fund. That is, placing these devices in the FSS payment category
instead of the CR category results in Medicare paying every 5 years
approximately $36,700 rather than $7,700 for an item that can be
purchased for $6,000 or less.
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\1\ The CR payment of $7,778.99 includes the 15 monthly rental
payments plus 7 payments of $61.25 for maintenance and servicing
that can be billed every 6 months beginning 6 months after the 15th
rental payment has been made.
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In 1998, for the first time, the DMERCs conducted an in-depth
review of the use of intermittent assist devices with CPAP. As a
result, in July 1998, the DMERCs issued proposed medical review
policies on intermittent assist devices with CPAP, which called for a
revision to the HCPCS codes for these devices and the adoption of more
specific nomenclature to describe respiratory assistance technology.
The term ``respiratory assist device, bi-level pressure capability''
was proposed to replace the HCPCS wording of ``intermittent assist
device with CPAP,'' and separate HCPCS codes were proposed to
differentiate between devices with a back-up rate and devices without a
back-up rate.
C. Public Meeting on Payment for Respiratory Assist Devices
During the course of reviewing the DMERC medical review policies on
respiratory assist devices, we became aware that the carriers and
DMERCs had been allowing HCPCS code E0453 to be used primarily for the
billing of respiratory assist devices with a back-up rate. As a result,
we intended to take action to clarify that these devices belonged in
the CR payment category. Because of concerns raised by the industry on
the appropriate coding and payment classification for these devices, we
announced in the Federal Register on June 4, 1999 that a public meeting
would be held on June 25, 1999 to get input from the supplier community
regarding the appropriate DME payment category for respiratory assist
devices with a back-up rate. We made presentations at the June 25, 1999
public meeting, in addition to the Food and Drug Administration, the
National Institutes of Health, respiratory assist device manufacturers,
suppliers, clinicians, beneficiaries, and others.
The testimony at the public meeting that was given to support the
claim that there is a need for FSS of respiratory devices with bi-level
capability and a back-up rate described the need to have a respiratory
therapist visit the beneficiary to make sure that the device is being
used appropriately by the beneficiary and that the beneficiary is
complying with the treatment. After the respiratory therapist performs
an assessment of the beneficiary and has consulted with the
beneficiary's physician, it may be determined that the pressure setting
on the equipment needs to be adjusted. However, no information was
presented at the public meeting that would indicate that the equipment
itself requires FSS as required by section 1834(a)(3)(A) of the Act.
The DMERC medical review policies on respiratory assist devices
were implemented on October 1, 1999. The following HCPCS codes were
added as part of these new policies:
K0532 Respiratory Assist Device, Bi-Level Pressure Capability, Without
Back-up Rate Feature, Used With Noninvasive Interface, E.G., Nasal Or
Facial Mask (Intermittent Assist Device With Continuous Positive Airway
Pressure Device)
K0533 Respiratory Assist Device, Bi-Level Pressure Capability, With
Back-up Rate Feature, Used With Noninvasive Interface, E.G., Nasal Or
Facial Mask (Intermittent Assist Device With Continuous Positive Airway
Pressure Device)
[[Page 50738]]
K0534 Respiratory Assist Device, Bi-Level Pressure Capability, With
Back-up Rate Feature, Used With Invasive Interface, E.G., Tracheostomy
Tube (Intermittent Assist Device With Continuous Positive Airway
Pressure Device)
These codes were added to better describe those respiratory assist
devices, or intermittent assist devices with CPAP, that had been coded
under codes E0452 and E0453 of the HCPCS since 1992. Code K0532
describes those intermittent assist devices with CPAP that did not have
a back-up rate and were previously coded under code E0452 (CR payment
category). Codes K0533 and K0534 describe those intermittent assist
devices with CPAP that did have a back-up rate but had been coded under
code E0453 (FSS payment category). It was also decided that no code was
needed for therapeutic ventilators, the devices originally intended to
fall under code E0453. Although the DMERC medical review policies were
implemented on October 1, 1999, the decision regarding the appropriate
DME payment category for devices with the back-up rate (codes K0533 and
K0534) was delayed until now to allow more time for consideration of
comments made at the June 25, 1999 public meeting.
After reviewing all of the information presented at the June 25,
1999 public meeting, we conclude that respiratory assist devices with
bi-level pressure capability and a back-up rate do not require FSS
payment. We also conclude that these devices are a type of intermittent
assist device with CPAP and are therefore excluded from the FSS payment
category by section 1834(a)(3)(A) of the Act. We conclude that all
payments made for these devices in the past under the FSS payment
category were erroneous.
D. Office of Inspector General (OIG) Report on Respiratory Assist
Devices
In 1999, the OIG began an inspection to determine if respiratory
assist devices with a back-up rate receive FSS. During the course of
their inspection, the OIG conducted surveys of beneficiaries,
suppliers, manufacturers, and accreditation agencies. In June 2001
(OEI-07-99-00440), the OIG issued their report on respiratory assist
devices with a back-up rate, recommending that these devices be moved
from the FSS payment category to the CR payment category. This
recommendation is based on information gathered from the surveys
conducted by the OIG that resulted in the following findings listed in
the report:
[sbull] Supplier services consist primarily of routine maintenance
and patient monitoring.
[sbull] For most beneficiaries, visits (from suppliers) do not meet
supplier protocols for frequency.
[sbull] Contrary to supplier protocols, the number of beneficiaries
receiving visits declines over time.
[sbull] Covering the respiratory assist device with back-up rate
under capped rental would have saved Medicare $11.5 million annually.
Therefore, the OIG, after conducting a detailed inspection, has
determined that respiratory assist devices with a back-up rate do not
receive FSS.
II. Provisions of the Proposed Regulations
For the reasons stated above, we propose to include respiratory
assist devices billed using HCPCS codes K0533 and K0534 in the DME fee
schedule payment category for other items of DME, or capped rental
items, as defined in section 1834(a)(7) of the Act. Rental claims
received on or after the effective date of this provision would be
claims considered for the initial month of rental for capped rental
payment purposes.
III. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, if we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
IV. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995.
V. Regulatory Impact Statement
We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) directs agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
We estimate that the reductions in annual expenditures that would occur
as a result of moving respiratory assist devices with a back-up rate to
the CR payment category will be approximately $10 million, based on the
payment differential between the CR and FSS payment categories. This
estimate is based on estimated annual savings of $11.5 million from the
OIG report, rounded to the nearest $10 million. The OIG found that the
average number of months a beneficiary used the device between January
1996 and September 1999 was 16 months. We estimate that Medicare
beneficiaries utilize 10,000 to 12,000 devices each year. Since this
rule would result in reductions in total expenditures of less than $100
million per year, this rule is not a major rule as defined in Title 5,
United States Code, section 804(2) and is not an economically
significant rule under Executive Order 12866.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and government agencies.
Most hospitals and most other providers and suppliers are small
entities either by nonprofit status or by having revenues of $6 million
to $29 million or less in any 1 year. For purposes of the RFA,
approximately 98 percent of suppliers of DME and prosthetic devices are
considered small businesses according to the Small Business
Administration's (SBA) size standards. Individuals and States are not
included in the definition of a small entity. We estimate that 106,000
entities bill Medicare for DME, prosthetics, orthotics, surgical
dressings, and other equipment and supplies each year. We believe the
impact on the DME industry and small businesses in general would be
minimal because most companies supply many different types of
equipment. Total Medicare expenditures for DME are approximately $7
billion per year.
The OIG estimates that moving respiratory assist devices with a
back-up rate to the CR payment category would result in payment
reductions of
[[Page 50739]]
approximately $11.5 million per year. Therefore, the overall impact on
the total industry annual receipts would be small, that is, less than 1
percent reduction in Medicare revenue. However, while the overall
impact is small, some suppliers would be seriously affected as a result
of the mix of DME that they furnish to Medicare beneficiaries. Namely,
suppliers who specialize in furnishing respiratory assist devices would
be seriously affected by this rule. To estimate how many suppliers
could be seriously affected by this rule, we analyzed data for the top
30 suppliers of RADs with a back-up rate, which account for
approximately 50 percent of Medicare expenditures for code K0533. Total
allowed charges for code K0533 were $77 million in 2002. Therefore, a
$10 million reduction in annual expenditures resulting from this
proposed rule equates to a 13 percent reduction in revenue for
suppliers for code K0533. These top 30 suppliers were ranked in terms
of total allowed charges attributed to them for claims received for
HCPCS code K0533 from October 1, 2002 through December 31, 2002. Five
of the top 30 suppliers would not be considered small entities by SBA
standards. These 5 suppliers account for approximately 40 percent of
total expenditures for K0533. Twenty-five suppliers in the top 30 could
be considered small entities if such a determination was based solely
on Medicare expenditures (data on revenue attributed to sources other
than Medicare has not been obtained for these companies as part of this
analysis). Therefore, the total reduction in revenue for potential
small entities as a result of this proposed rule would be approximately
$6 million. The percentage of Medicare DME business that K0533 devices
represent for 9 of the 25 potential small entities is 5 percent or
less. For the remaining 16 potential small entities, the percentage of
Medicare DME business that K0533 devices represent ranges from 17 to 98
percent. Therefore, these 16 suppliers would be seriously affected by
this rule. Other K0533 suppliers not in the list of top 30 suppliers
could also be small entities and could be seriously affected by this
rule. The total allowed charges per year for these suppliers for code
K0533 are less than $250,000.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. We are not preparing a
rural impact analysis since we have determined that this rule would not
have a significant economic impact on the operation of a substantial
number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditure in any 1 year by State,
local, or tribal government, in the aggregate, or by the private sector
of $110 million. This rule would not have an effect on the governments
mentioned, and private sector costs would be less than the $110 million
threshold.
Executive Order 13132 establishes certain requirements that an
agency must meet when it publishes a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We have determined that this rule does not significantly
affect State or local governments.
In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 414
Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medicare, Reporting and recordkeeping
requirements, Rural areas, X-rays.
For the reasons stated in the preamble, the Centers for Medicare &
Medicaid Services proposes to amend 42 CFR part 414 as follows:
PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES
1. The authority citation for part 414 continues to read as
follows:
Authority: Secs. 1102, 1871, and 1881(b)(1) of the Social
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr (b)(1)).
2. In Sec. 414.222 paragraph (a)(1) is revised to read as follows:
Sec. 414.222 Items requiring FSS.
(a) Definition. * * *
(1) Ventilators (except those that are either continuous airway
pressure devices or respiratory assist devices with bi-level pressure
capability with or without a back-up rate, previously referred to as
intermittent assist devices with continuous airway pressure devices).
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.774,
Medicare--Supplementary Medical Insurance Program).
Dated: April 15, 2003.
Thomas A Scully,
Administrator, Centers for Medicare & Medicaid Services.
Dated: April 24, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-21443 Filed 8-21-03; 8:45 am]
BILLING CODE 4120-01-P