[Federal Register Volume 79, Number 38 (Wednesday, February 26, 2014)]
[Proposed Rules]
[Pages 10754-10760]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-04031]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 414

[CMS-1460-ANPRM]
RIN 0938-AS05


Medicare Program; Methodology for Adjusting Payment Amounts for 
Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Using Information From Competitive Bidding Programs

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Advance notice of proposed rulemaking (ANPRM).

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SUMMARY: This advance notice of proposed rulemaking (ANPRM) solicits 
public comments on different methodologies we may consider using with 
regard to applying information from the durable medical equipment, 
prosthetics, orthotics, and supplies (DMEPOS) competitive bidding 
programs to adjust Medicare fee schedule payment amounts or other 
Medicare payment amounts for DMEPOS items and services furnished in 
areas that are not included in these competitive bidding programs. In 
addition, we are also requesting comments on a different matter 
regarding ideas for potentially changing the payment methodologies used 
under the competitive bidding programs for certain durable medical 
equipment and enteral nutrition.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on March 28, 2014.
    Customer Service Information: Individuals interested in obtaining 
information from the Centers for Medicare & Medicaid Services 
concerning current Medicare payment policies may call 1-800-MEDICARE 
(633-4227) or visit the Centers for Medicare & Medicaid Web site 
(http://www.cms.gov) or (http://www.medicare.gov).

ADDRESSES: In commenting, please refer to file code CMS-1460-ANPRM. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1460-ANPRM, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1460-ANPRM, 
Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are 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.)
    b. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Anita Greenberg, (410) 786-4601.
Karen Jacobs, (410) 786-2173.
Christopher Molling, (410) 786-6399.
Hafsa Vahora, (410) 786-7899.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments

[[Page 10755]]

received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will also 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 1-800-743-3951.

I. Background

A. Adjustments to DMEPOS Fee Schedule Amounts

    Medicare pays for most DMEPOS furnished after January 1, 1989, 
pursuant to fee schedule methodologies set forth in sections 1834 and 
1842 of the Social Security Act (the Act). Specifically, sections 
1834(a)(1)(A) and (B), and 1834(h)(1)(A) and (B) of the Act provide 
that Medicare payment for these items is equal to 80 percent of the 
lesser of the actual charge for the item or the fee schedule amount for 
the item. This payment methodology is set forth at 42 CFR part 414, 
Subpart D of our regulations. Section 1834(h)(1)(A) of the Act governs 
payment for prosthetic devices and orthotics and prosthetics, while 
sections 1834(a)(2) through (a)(5) and 1834(a)(7) of the Act set forth 
separate payment categories of durable medical equipment (DME) and 
describe how the fee schedule for each of the following categories is 
established: Inexpensive or other routinely purchased items; Items 
requiring frequent and substantial servicing; Customized items; Oxygen 
and oxygen equipment; and Other items of DME. Section 1842(s) of the 
Act, and 42 CFR part 414, Subpart C of the regulations, govern payment 
on a fee schedule basis for parenteral and enteral (PEN) nutrients, 
equipment and supplies.
    Section 1847 of the Act establishes a Medicare DMEPOS Competitive 
Bidding Program (``Competitive Bidding Program''). Under the 
Competitive Bidding Program, Medicare sets payment amounts for selected 
DMEPOS items and services furnished to beneficiaries in competitive 
bidding areas (CBAs) based on bids submitted by qualified suppliers and 
accepted by Medicare. For competitively bid items, these new payment 
amounts, referred to as ``single payment amounts,'' replace the fee 
schedule payment amounts. Section 1847(b)(5) of the Act provides that 
Medicare payment for these competitively bid items and services is made 
on an assignment-related basis equal to 80 percent of the applicable 
single payment amount, less any unmet Part B deductible. The fee 
schedule methodologies continue to set payment amounts for 
noncompetitively bid DMEPOS items and services.
    For DME covered items furnished or after January 1, 2011, sections 
1834(a)(1)(F)(ii) and (iii) of the Act authorizes the Secretary to use 
(and beginning January 1, 2016, requires use of) payment information 
under the competitive bidding program to adjust the fee schedule 
amounts for covered items of DME in all non-competitive bidding areas, 
and beginning January 1, 2016, continue to make such adjustments to the 
fee schedule amounts as additional covered items are phased in or 
information is updated as new contracts are awarded. Similarly, section 
1834(h)(1)(H)(ii) of the Act authorizes the Secretary to use payment 
information under the competitive bidding program to adjust the fee 
schedule amounts for off-the-shelf (OTS) orthotics in all non-
competitive bidding areas beginning January 1, 2011. Finally, section 
1842(s)(3)(B) of the Act provides authority to use payment information 
under the competitive bidding program to adjust payment amounts 
otherwise applicable for enteral nutrients, supplies, and equipment in 
areas where competitive bidding programs are not established for these 
items and services.
    Section 1834(a)(1)(G) of the Act requires that the methodology used 
in applying sections 1834(a)(1)(F)(ii) and 1834(h)(1)(H)(ii) of the Act 
be promulgated through notice and comment rulemaking. Section 
1834(a)(1)(G) of the Act also requires that we ``consider the costs of 
items and services in areas in which such provisions [sections 
1834(a)(1)(F)(ii) and 1834(h)(1)(H)(ii)] would be applied compared to 
the payment rates for such items and services in competitive 
acquisition areas.''
    The statute requires that the DMEPOS fee schedule amounts be based 
on average allowed charges from a base period, increased by annual 
covered item update factors set forth in the statute. The average 
allowed charges are average payments made in various areas of the 
country under the previous reasonable change payment methodology that 
based Medicare payments on supplier charges. The rules pertaining to 
the calculation of reasonable charges are located at 42 CFR part 405, 
Subpart E of our regulations. Under this general methodology, several 
factors were taken into consideration in determining the reasonable 
charge for an item. Each supplier's ``customary charge'' for an item, 
or the 50th percentile of charges for an item over a 12-month period, 
was one factor used in determining the reasonable charge. The 
``prevailing charge'' in a local area or locality, or the 75th 
percentile of suppliers' customary charges for the item in the 
locality, was also used in determining the reasonable charge. For 
parenteral and enteral nutrition (PEN) items and services only, the 
``lowest charge level'' (LCL) was also taken into consideration and was 
based on the 25th percentile of all charges for an item in a locality. 
For the purpose of calculating the LCL and prevailing charges, a 
``locality'' is defined at Sec.  405.505 and ``may be a State 
(including the District of Columbia, a territory, or a Commonwealth), a 
political or economic subdivision of a State, or a group of States''. 
The regulation at Sec.  405.505 further specifies that the locality 
``should include a cross section of the population with respect to 
economic and other characteristics.'' In accordance with regulations at 
Sec.  405.509, effective for items furnished on or after October 1, 
1985, an additional factor, the ``inflation-indexed charge'' or IIC, 
was added to the factors taken into consideration in determining the 
reasonable charge for an item. The IIC is equal to the lowest of the 
customary or prevailing charge from the previous year updated by an 
inflation adjustment factor was also used in determining the reasonable 
charge for an item. To summarize, the reasonable charges for each item 
that were used to calculate the fee schedule amounts are equal to the 
lower of:
     The supplier's actual charge on the claim;
     The supplier's customary charge for the item;
     The prevailing charge in the locality for the item;
     The LCL in the locality for the item, if applicable; or
     The IIC.
    Under the reasonable charge payment methodology, it is understood 
that suppliers took all of their costs of furnishing various DMEPOS 
items and services in various localities throughout the nation into 
account in setting the prices they charges for covered items

[[Page 10756]]

and services. Under Sec.  414.104, the fee schedule amounts for enteral 
nutrients, supplies, and equipment are national fee schedule amounts 
based on the lesser of the reasonable charge from 1995 or the 
reasonable charge that would have been used in determining payment for 
2002, updated by the covered item update factors. Under Sec.  414.228, 
the fee schedule amounts for OTS orthotics are regional fee schedule 
amounts based on the weighted average of the statewide average allowed 
charges for items furnished from July 1, 1986 through June 30, 1987, 
updated by the covered item update factors. The regional fee schedule 
amounts are limited by a national fee schedule ceiling and floor. Under 
Sec.  414.220 and Sec.  414.222, the fee schedule amounts for 
inexpensive or routinely purchased DME and DME requiring frequent and 
substantial servicing are statewide fee schedule amounts based on the 
average allowed charges for items furnished from July 1, 1986 through 
June 30, 1987, updated by the covered item update factors, and limited 
by a national fee schedule ceiling and floor. Under Sec.  414.226, the 
fee schedule amounts for oxygen and oxygen equipment are statewide fee 
schedule amounts based on the average allowed charges for items 
furnished from January 1, 1986 through December 31, 1986, updated by 
the covered item update factors, and limited by a national fee schedule 
ceiling and floor. Under Sec.  414.229, the fee schedule amounts for 
capped rental DME are statewide fee schedule amounts based on the 
average allowed charges for items furnished from July 1, 1986 through 
December 31, 1986, updated by the covered item update factors, and 
limited by a national fee schedule ceiling and floor.
    DMEPOS competitive bidding pricing information is collected using 
current market prices represented by bids submitted by suppliers for 
furnishing items and services in certain competitive bidding areas 
(CBAs). In accordance with section 1847(a)(1)(B) and (D) of the Act, 
during Rounds 1 and 2 of the phase in of the competitive bidding 
programs, the CBAs have been either entire Metropolitan Statistical 
Areas (MSAs), MSAs excluding areas with low population density that are 
not competitive, or, in the case of New York, Los Angeles, and Chicago, 
MSAs subdivided into two or more CBAs. In accordance with sections 
1834(a)(1)(F)(i), 1834(h)(1)(H)(i), and 1842(s)(3)(A) of the Act, the 
competitive bidding prices, then, replace the fee schedule amounts in 
those MSAs. Currently, the program is active in 100 MSAs and 109 CBAs. 
The 109 CBAs where competitive bidding has been phased in include a 
wide range of different size urban areas and surrounding counties. They 
include one CBA (Honolulu, HI) that is not within the contiguous Unites 
States and CBAs that range in population size from approximately 300 
thousand to 10 million (see Table 1). There are 7 CBAs with a 
population of less than 500,000, 41 CBAs with a population of more than 
500,000, but less than 1 million, 27 CBAs with a population of more 
than 1 million, but less than 2 million, 19 CBAs with a population of 2 
to 4 million, and 14 CBAs with a population of over 4 million.

                      Table 1--CBA Population Size
------------------------------------------------------------------------
                           CBA                              Population
------------------------------------------------------------------------
Los Angeles County, CA..................................       9,862,049
New York Metro--West Long Island, NY....................       6,688,637
Dallas-Fort Worth-Arlington, TX.........................       6,447,615
Chicago Metro--Central, IL..............................       6,225,192
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD.............       5,968,252
Houston-Sugar Land-Baytown, TX..........................       5,867,489
Miami-Fort Lauderdale-Pompano Beach, FL.................       5,547,051
Washington-Arlington-Alexandria, DC-VA-MD-WV............       5,476,241
Atlanta-Sandy Springs-Marietta, GA......................       5,475,213
Boston-Cambridge-Quincy, MA-NH..........................       4,588,680
Detroit-Warren-Livonia, MI..............................       4,403,437
Phoenix-Mesa-Scottsdale, AZ.............................       4,364,094
San Francisco-Oakland-Fremont, CA.......................       4,317,853
Riverside-San Bernardino-Ontario, CA....................       4,143,113
Seattle-Tacoma-Bellevue, WA.............................       3,407,848
New York Metro--North New Jersey, NJ....................       3,390,339
Minneapolis-St. Paul-Bloomington, MN-WI.................       3,269,814
San Diego-Carlsbad-San Marcos, CA.......................       3,053,793
New York Metro--Bronx, Manhattan, NY....................       3,026,698
Orange County, CA.......................................       3,010,759
New York Metro--South New Jersey, NJ....................       2,977,504
St. Louis, MO-IL........................................       2,828,990
Tampa-St. Petersburg-Clearwater, FL.....................       2,747,272
Baltimore-Towson, MD....................................       2,690,886
Denver-Aurora, CO.......................................       2,552,195
Pittsburgh, PA..........................................       2,354,957
Portland-Vancouver-Beaverton, OR-WA.....................       2,241,841
Cincinnati-Middletown, OH-KY-IN.........................       2,171,896
Sacramento--Arden-Arcade--Roseville, CA.................       2,127,355
Cleveland-Elyria-Mentor, OH.............................       2,091,286
Orlando-Kissimmee, FL...................................       2,082,421
San Antonio, TX.........................................       2,072,128
Kansas City, MO-KS......................................       2,067,585
Las Vegas-Paradise, NV..................................       1,902,834
San Jose-Sunnyvale-Santa Clara, CA......................       1,839,700
Columbus, OH............................................       1,801,848
Charlotte-Gastonia-Concord, NC-SC.......................       1,745,524
Indianapolis-Carmel, IN.................................       1,743,658
Austin-Round Rock, TX...................................       1,705,075

[[Page 10757]]

 
Virginia Beach-Norfolk-Newport News, VA-NC..............       1,674,498
Providence-New Bedford-Fall River, RI-MA................       1,600,642
Nashville-Davidson--Murfreesboro--Franklin, TN..........       1,582,264
Milwaukee-Waukesha-West Allis, WI.......................       1,559,667
New York Metro--Suffolk County, NY......................       1,512,224
Chicago Metro--South, IL................................       1,446,415
New York Metro--North New York, NY......................       1,351,732
Jacksonville, FL........................................       1,328,144
Memphis, TN-MS-AR.......................................       1,304,926
Louisville/Jefferson County, KY-IN......................       1,258,577
Richmond, VA............................................       1,238,187
Oklahoma City, OK.......................................       1,227,278
Hartford-West Hartford-East Hartford, CT................       1,195,998
Chicago Metro--North, IL-WI.............................       1,195,559
New Orleans-Metairie-Kenner, LA.........................       1,189,981
Birmingham-Hoover, AL...................................       1,131,070
Salt Lake City, UT......................................       1,130,293
Raleigh-Cary, NC........................................       1,125,827
Buffalo-Niagara Falls, NY...............................       1,123,804
Rochester, NY...........................................       1,035,566
Tucson, AZ..............................................       1,020,200
Tulsa, OK...............................................         929,015
Fresno, CA..............................................         915,267
Honolulu, HI............................................         907,574
Bridgeport-Stamford-Norwalk, CT.........................         901,208
Albuquerque, NM.........................................         857,903
Albany-Schenectady-Troy, NY.............................         857,592
Omaha-Council Bluffs, NE-IA.............................         849,517
New Haven-Milford, CT...................................         848,006
Dayton, OH..............................................         835,063
Allentown-Bethlehem-Easton, PA-NJ.......................         816,012
Bakersfield, CA.........................................         807,407
Worcester, MA...........................................         803,701
Oxnard-Thousand Oaks-Ventura, CA........................         802,983
Baton Rouge, LA.........................................         786,947
Grand Rapids-Wyoming, MI................................         778,009
El Paso, TX.............................................         751,296
Columbia, SC............................................         744,730
McAllen-Edinburg-Mission, TX............................         741,152
Greensboro-High Point, NC...............................         714,765
Chicago Metro--Indiana, IN..............................         702,458
Akron, OH...............................................         699,935
Knoxville, TN...........................................         699,247
Springfield, MA.........................................         698,903
Bradenton-Sarasota-Venice, FL...........................         688,126
Little Rock-North Little Rock-Conway, AR................         685,488
Poughkeepsie-Newburgh-Middletown, NY....................         677,094
Stockton, CA............................................         674,860
Toledo, OH..............................................         672,220
Charleston-North Charleston-Summerville, SC.............         659,191
Syracuse, NY............................................         646,084
Greenville-Mauldin-Easley, SC...........................         639,617
Colorado Springs, CO....................................         626,227
Wichita, KS.............................................         612,683
Boise City-Nampa, ID....................................         606,376
Cape Coral-Fort Myers, FL...............................         586,908
Lakeland-Winter Haven, FL...............................         583,403
Youngstown-Warren-Boardman, OH-PA.......................         562,963
Scranton--Wilkes-Barre, PA..............................         549,454
Jackson, MS.............................................         540,866
Augusta-Richmond County, GA-SC..........................         539,154
Palm Bay-Melbourne-Titusville, FL.......................         536,357
Chattanooga, TN-GA......................................         524,303
Deltona-Daytona Beach-Ormond Beach, FL..................         495,890
Visalia-Porterville, CA.................................         429,668
Flint, MI...............................................         424,043
Asheville, NC...........................................         412,672
Beaumont-Port Arthur, TX................................         378,477
Ocala, FL...............................................         328,547
Huntington-Ashland, WV-KY-OH............................         285,624
------------------------------------------------------------------------
Source: U.S. Census Bureau, Population Division, 2009 Population
  Estimates.


[[Page 10758]]

    Under section 1847(a)(1)(D)(iii) of the Act, competitions occurring 
before 2015 for items and services other than national mail order for 
diabetic supplies, may not include rural areas or MSAs with a 
population of less than 250,000. Therefore, at this time, we do not 
have competitive bidding pricing information from rural areas or 
smaller MSAs. As required by section 1834(a)(1)(G) of the Act, we must 
specify by regulation the methodology to be used for adjusting fee 
schedule amounts using competitive bidding information.

B. Changes to the Payment Methodologies and Rules for Durable Medical 
Equipment and Enteral Nutrition Furnished Under Competitive Bidding 
Programs

    Section 1847 of the Act provides CMS with flexibility and 
discretion with regard to the payment rules for items furnished under 
competitive bidding programs. We are considering proposing new payment 
rules for DME and enteral nutrients, supplies, and equipment furnished 
under competitive bidding programs and request public comments on the 
issue before we decide whether to conduct notice and comment 
rulemaking. We believe that bundling payment for all items and services 
associated with furnishing enteral nutrition or DME into one monthly 
payment based on supplier bids for furnishing all items needed for a 
month would greatly simplify the program, improve beneficiary access to 
quality items and services, and contribute to greater savings 
associated with implementation of the DMEPOS competitive bidding 
program.
    The current Medicare payment rules and payment classes for DME 
mandated by section 1834(a) of the Act were implemented in 1989, and, 
depending on the item or payment class the item falls under, generally 
allow payment on a lump sum purchase basis, a capped rental basis, or a 
continuous monthly rental basis where the monthly payments are not 
capped and continue for as long as medical necessity and Part B 
coverage continues. The continuous monthly rental payment amounts 
include payment for all necessary maintenance and servicing of the 
equipment and replacement of all essential accessories, whereas payment 
on a purchase or capped rental basis results in the need to process and 
pay separately for numerous items that are not DME but are related to 
furnishing DME, such as repair of equipment or replacement of supplies 
and accessories used with patient-owned equipment. In the case of 
enteral nutrition, there are separate billing codes for categories of 
nutrients, three different daily supply allowances, feeding tubes, and 
enteral nutrition infusion pumps and IV poles.
    The current payment rules that apply to fee schedule DMEPOS items 
and competitive bid items were developed in the 1980s to reduce 
expenditures and prevent prolonged rental payments for certain DME and 
enteral infusion pumps. However, now that Medicare allowed amounts can 
be established under the competitive bidding program based on supplier 
bids to account for the average costs of furnishing all covered items 
and services, we believe it may be appropriate to modify the Medicare 
payment structure for certain DME and enteral nutrition under the 
competitive bidding program by requesting a single bid for furnishing 
all related items and services needed on a monthly basis (that is, 
rented equipment, replacement of supplies and accessories, repair or 
rented equipment, etc.). Bids from suppliers could then be used to 
establish a monthly payment for the equipment and all related items and 
services. We believe that capping rentals and paying for purchase of 
equipment may no longer be necessary to achieve savings for these items 
and services. Suppliers could bid and be awarded contracts for meeting 
all of the beneficiary's needs for each month of service, including 
rental and servicing of necessary equipment as well as the ongoing 
replacement of supplies and accessories used in conjunction with the 
equipment and any repairs needed for the equipment. Such an approach 
could reduce excessive payments for furnishing necessary accessories 
and items, provided the continuous monthly rental payment amounts were 
reasonable for all the monthly items and services that would be 
furnished. In submitting bids under the competitive bidding programs, 
suppliers would take a number of things into account to develop bids 
for these monthly items and services, such as the costs of all items 
and services needed by the beneficiary during each rental month, the 
typical duration of need by Medicare beneficiaries for the rented 
items, and the money the supplier saves by replacing inventory less 
frequently if the title to the equipment remains with the supplier and 
is not transferred to the beneficiary after the capped rental period. 
We believe these changes could have a number of positive effects on 
suppliers. The suppliers would no longer have to worry about counting 
rental months to determine when they might be losing title to certain 
items in their inventory. These changes could also benefit patients who 
would no longer have to arrange for repair of patient-owned equipment 
or worry about servicing patient-owned equipment for which a 
manufacturer no longer makes replacement parts available. We believe 
that suppliers would have an incentive to furnish more durable and 
dependable equipment to reduce the number of service calls they make. 
If a beneficiary owns equipment that needs to be serviced, they are 
responsible for locating a supplier and making arrangements for the 
servicing, and the beneficiary incurs a separate charge for the 
service. By contrast, if a beneficiary is renting equipment, and the 
rented equipment needs to be serviced, the beneficiary would simply 
call the supplier of the rented equipment and the supplier would be 
responsible for servicing the equipment at no additional charge. From a 
program standpoint, the payment rules for capped rental items are 
complicated and onerous to administer. The program must keep track of 
separate payment, coverage, medical necessity, and other rules for 
hundreds of related codes for replacement supplies and accessories used 
with the base equipment as well as labor and parts associated with 
repairing patient-owned equipment. In addition, claims processing 
systems must count rental months and contractors must identify when 
legitimate breaks in continuous use occur and can result in the start 
of new capped rental periods. This leads to costly and complicated 
claims processing systems and edits for processing millions of claims 
for these items and services.
    The current payment rules that allow separate payment for supplies 
and accessories used with DME in addition to the payment for the DME 
itself also significantly complicate the competitive bidding process as 
special grandfathering payment rules must be implemented, item weights 
and composite bids must be developed, hundreds or thousands of bid 
amounts must be entered, and, in turn, thousands of bids and bid 
amounts must be evaluated and screened and single payment amounts 
established. In the case of beneficiary-owned wheelchairs, the rules 
regarding when one of the hundreds of accessories or component must be 
furnished by a contract supplier or non-contract supplier based on 
whether the base wheelchair is competitively bid or whether the service 
constitutes a repair of the base wheelchair are extremely complicated. 
A simple, straightforward payment

[[Page 10759]]

system could significantly reduce billing and payment errors.
    Under competitive bidding programs established in accordance with 
section 1847(a) of the Act, we believe CMS has discretion to implement 
different payment rules for the items and services subject to 
competitive bidding, including certain DME and enteral nutrition. 
Suppliers compete for contracts based on bids representing their costs 
for furnishing the DME item or enteral nutrition. Regardless of whether 
suppliers compete based on submitting one bid for furnishing, for 
example, continuous positive airway pressure (CPAP) devices and all 
related supplies, accessories, and services needed for one month versus 
separate, piecemeal bids for the various individual items, contracts 
are offered to the suppliers that meet all program requirements and 
offer the best value in terms of bids submitted. In addition, contract 
suppliers are responsible for furnishing what the beneficiary needs and 
this does not change based on how the items are billed and paid for 
under Medicare. The supplier costs generally do not change based on the 
method of payment used. Therefore, competitive bidding provides a means 
to simplify and streamline complicated payment rules, resulting in a 
more efficient program.
    By simplifying the payment rules for certain DME and enteral 
nutrition under the Competitive Bidding Program, the process of 
competitive bidding could be greatly simplified. For example, suppliers 
could submit one bid that reflects the costs of furnishing the DME and 
supplies, accessories, and maintenance and servicing costs associated 
with furnishing the DME. Under competitive bidding, bid limits for the 
DME could be developed based on average monthly expenditures per 
beneficiary in an area for the bundle of items and services related to 
furnishing the DME (for example, CPAP device rental, masks, tubing, 
humidifier, maintenance and servicing). Similarly, bid limits for 
enteral nutrition could be developed based on average monthly 
expenditures per beneficiary in an area for the bundle of items and 
services related to furnishing enteral nutrition (nutrients, supplies, 
rental of infusion pumps and IV poles, and maintenance and servicing of 
equipment). These are some possibilities we are exploring with regard 
to modifications that could be made to current payment rules and 
methodologies under the CBP in future rulemaking. Whether we would 
proceed with proposing this would depend on several factors, including 
issues such as administrative burden and feasibility, as well as other 
potential issues raised in the public comments we receive.

II. Questions for Generating Public Comments

A. Methodology for Adjusting Medicare Payment Amounts for DMEPOS Items 
and Services Based on Information From Competitive Bidding Programs

    We are aware that there continues to be a range of aspects to 
consider in the development of the methodology used to adjust fee 
schedule amounts for DMEPOS using information from the competitive 
bidding programs. Again, we are required by section 1834(a)(1)(G) of 
the Act, to specify by regulation the methodology to be used for 
adjusting fee schedule amounts using competitive bidding information. 
However, prior to proposing the methodology, we are soliciting public 
comments on a variety of topics for CMS to consider. We are interested 
in receiving comments on several aspects that we would consider in 
developing a methodology to adjust DMEPOS fee schedule amounts or other 
payment amounts in non-competitive areas based on DMEPOS competitive 
bidding payment information. We are soliciting comments on the 
following list of questions to assist us in developing potential 
proposals regarding the methodology for adjusting Medicare payment 
amounts for DMEPOS items and services based on information from 
competitive bidding programs.
     Do the costs of furnishing various DMEPOS items and 
services vary based on the geographic area in which they are furnished? 
If so, how should the bidding information obtained from programs 
established in different regions of the nation be grouped together for 
the purpose of adjusting current Medicare payment amounts? Should 
bidding information from programs established in certain regions of the 
country be used to adjust the payment amounts that currently apply to 
those regions? Are there certain areas of the country that have unique 
costs and how should those costs be considered? Is there valid and 
reliable information that can be used to measure the relative costs of 
furnishing items and services in these unique areas?
     Do the costs of furnishing various DMEPOS items and 
services vary based on the size of the market served in terms of 
population and/or distance covered or other logistical or demographic 
reasons? Section 1847(a)(1)(D)(iii) of the Act prohibits establishing 
competitive bidding programs in MSAs with a population of less than 
250,000 or in areas outside MSAs prior to 2015. Given the mandate to 
use information on the payment determined under competitive bidding 
programs to adjust payment amounts in areas that are not competitive 
bidding areas by no later than January 1, 2016, what alternative 
information, if any, should we rely on to determine the relative costs 
of furnishing items and services in these areas compared to areas where 
competitive bidding programs have already been implemented?
     How should any future adjustments or payment methodology 
treat payment amounts for items that have not been included in all 
competitive bidding programs (for example, items such as transcutaneous 
electrical nerve stimulation (TENS) devices that have only been phased 
into the nine Round 1 areas thus far)?
     Should competitive bidding programs be established in all 
areas of the country for a few high volume items in order to gather 
information regarding the costs of furnishing DMEPOS items, in general, 
in different areas of the country (for example, rural areas as well as 
urban areas)?
     For payment adjustments or competitive bidding programs in 
rural areas, what factors should be used in determining a competitive 
service area in terms of Medicare revenue available and logistical 
costs of serving the area? Are there ways to determine which rural 
counties should be served by which suppliers?
     What additional factors should be considered and why?

B. Changes to the Payment Methodologies and Rules for Durable Medical 
Equipment and Enteral Nutrition Furnished Under Competitive Bidding 
Programs

    We are requesting comments on testing or phasing in bundled 
payments under competitive bidding programs whereby suppliers would 
submit one bundled bid for the delivery of all enteral nutrients, 
supplies, and equipment needed for one month by a beneficiary as well 
as one bundled bid for furnishing certain DME, including all related 
supplies, accessories, and services on a monthly basis. Under such an 
approach, monthly rental payments for DME or enteral nutrition 
equipment would no longer reach a cap, while separate payment for 
supplies, accessories, enteral nutrients, or maintenance and servicing 
would no longer be made. Suppliers would retain title to all equipment 
regardless of length of need and beneficiaries would be able to switch 
from supplier to supplier on a monthly basis. The monthly payments for 
DME and enteral

[[Page 10760]]

nutrition would continue for as long as medical necessity and Part B 
coverage continues and the bid limits would be based on the average 
monthly costs per beneficiary for the bundle of items and services. We 
are soliciting comments on the following list of questions regarding 
proposals we may make to change the payment rules and other rules for 
DME and enteral nutrition under the DMEPOS competitive bidding program.
     Are lump sum purchases and capped rental payment rules for 
DME and enteral nutrition equipment that were implemented to prevent 
prolonged rental payments still needed now that monthly payment amounts 
can be established under competitive bidding programs for furnishing 
everything the beneficiary needs each month related to the covered DME 
item or enteral nutrition?
     Are there reasons why beneficiaries need to own expensive 
DME or enteral nutrition equipment rather than use such equipment as 
needed on a continuous monthly basis?
     Would there be any negative impacts associated with 
continuous bundled monthly payments for enteral nutrients, supplies, 
and equipment or for certain DME? If so, please explain.
     Certain DME items such as speech generating devices and 
specialized wheelchairs may be adjusted or personalized to address 
individual patient needs. Would payment on a bundled, continuous rental 
basis adversely impact access to these items and services? If so, 
please provide a detailed explanation regarding how this method of 
payment would create a negative impact on access to these items and 
services or other items and services currently subject to competitive 
bidding.
     If payment on a capped rental, rent-to-own basis or lump 
sum purchase basis is maintained for certain items under the 
competitive bidding program, should a requirement be added to the 
regulations specifying that the supplier that transfers title to the 
equipment to the beneficiary is responsible for all maintenance and 
servicing of the beneficiary-owned equipment for the remainder of the 
equipment's reasonable useful lifetime with no additional payment for 
these services? The cost of such a mandatory supplier warranty would be 
factored into the bids submitted by the suppliers and the payment 
amounts established based on the bids for the items. If such a 
requirement was established, should the term maintenance and servicing 
be defined to include all necessary maintenance, servicing and repairs 
that are currently paid for separately under the Medicare program in 
addition to any additional adjustments or personalization of the 
equipment that may be needed once title transfers to the patient? We 
believe these requirements may be necessary to safeguard the 
beneficiary and access to necessary services related to beneficiary-
owned DME.
     Would payment on a bundled, continuous rental basis for 
certain items adversely impact the beneficiary's ability to direct 
their own care, follow a plan of care outlined by a physician, nurse 
practitioner or other medical provider (for example, occupational, 
physical or speech therapist), or provide for appropriate care 
transitions? If so, please explain.
     What are the advantages or disadvantages for beneficiaries 
and suppliers of bundled bidding and payments for enteral nutrients, 
supplies, and equipment or DME?
     Should competitive bidding programs utilizing bundled 
payments be established throughout the entire United States so that all 
beneficiaries are included under programs where suppliers have an 
obligation to furnish covered items and all related items and services?
     Is a continuous bundled monthly payment used by commercial 
payers or State Medicaid programs for enteral nutrients, supplies, and 
DME and do these approaches inform this potential new payment 
arrangement for Medicare.

    Dated: January 31, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: February 4, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-04031 Filed 2-24-14; 4:15 pm]
BILLING CODE 4120-01-P