[Federal Register Volume 79, Number 102 (Wednesday, May 28, 2014)]
[Proposed Rules]
[Pages 30511-30531]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-12245]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405 and 414

[CMS-6050-P]
RIN 0938-AR85


Medicare Program; Prior Authorization Process for Certain Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Items

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish a prior authorization 
process for certain durable medical equipment, prosthetics, orthotics, 
and supplies (DMEPOS) items that are frequently subject to unnecessary 
utilization and would add a contractor's decision regarding prior 
authorization of coverage of DMEPOS items to the list of actions that 
are not initial determinations and therefore not appealable.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. Eastern Standard 
Time on July 28, 2014.

[[Page 30512]]


ADDRESSES: In commenting, please refer to file code CMS-6050-P. 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-6050-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    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-6050-P, 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:
Maria Ciccanti, (410) 786-3107.
Kristen Zycherman, (410) 786-6974.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments 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. General Overview

1. Durable Medical Equipment, Prosthetics, Orthotics and Supplies 
(DMEPOS)
    The term ``durable medical equipment (DME)'' is defined in section 
1861(n) of the Social Security Act (the Act). It is also referenced in 
the definition of ``medical and other health services'' in section 
1861(s)(6) of the Act. Furthermore, the term is defined in title 42 of 
the Code of Federal Regulations (42 CFR 414.202) as equipment furnished 
by a supplier or a home health agency (HHA) that--
     Can withstand repeated use;
     Effective with respect to items classified as DME after 
January 1, 2012, has an expected life of at least 3 years;
     Is primarily and customarily used to serve a medical 
purpose;
     Generally is not useful to an individual in the absence of 
an illness or injury; and
     Is appropriate for use in the home.
    Section 1861(s)(9) of the Act provides for the coverage of leg, 
arm, back, and neck braces, and artificial legs, arms, and eyes, 
including replacement if required because of a change in the patient's 
physical condition. As indicated by section 1834(h)(4)(C) of the Act, 
together with certain shoes described in section 1861(s)(12) of the 
Act, these items are often referred to as ``orthotics and 
prosthetics.'' Under section 1834(h)(4)(B) of the Act, the term 
``prosthetic devices'' does not include parenteral and enteral 
nutrition, supplies and equipment, and implantable items payable under 
section 1833(t) of the Act.
    Examples of durable medical equipment include hospital beds, oxygen 
tents, and wheelchairs. Prosthetic devices are included in the 
definition of ``medical and other health services'' in section 
1861(s)(8) of the Act. Prosthetic devices are defined as devices (other 
than dental) which replace all or part of an internal body organ, 
including replacement of such devices. Examples of prosthetic devices 
include cochlear implants, electrical continence aids, electrical nerve 
stimulators, and tracheostomy speaking valves.
2. DMEPOS Payment Rules--Advance Determination of Coverage
    Section 1834(a)(15) of the Act authorizes the Secretary to develop 
and periodically update a list of DMEPOS that the Secretary determines, 
on the basis of prior payment experience, are frequently subject to 
unnecessary utilization and to develop a prior authorization process 
for these items. This proposed rule would implement that authority by 
interpreting ``frequently subject to unnecessary utilization,'' by 
specifying a list of items that meet our proposed criteria, and by 
proposing a prior authorization process.

B. Improper Payments for DMEPOS Items

    Payment made for the furnishing of an item that does not meet one 
or more of Medicare's coverage, coding, and payment rules is an 
improper payment. The Comprehensive Error Rate Testing (CERT) program 
measures improper payments in the Medicare Fee-For-Service (FFS) 
program. CERT is designed to comply with the Improper Payments 
Elimination and Recovery Act of 2010 (IPERA) (Pub. L. 111-204). For the 
2012 reporting period, the CERT program determined that DMEPOS claims 
had an improper payment rate of 66 percent, accounting for 
approximately 20 percent of the overall Medicare FFS improper payment 
rate. This is significant since Medicare FFS DMEPOS expenditures 
represent approximately 3 percent of all Medicare FFS expenditures. The 
projected improper payment amount for DMEPOS during the 2012 reporting 
period was approximately $6.4 billion. It is important to note that the 
improper payment rate is not a ``fraud rate,'' but is a measurement of 
payments that did not meet Medicare requirements. The

[[Page 30513]]

CERT program cannot label a claim fraudulent. The CERT program develops 
improper payment rates for those items for which at least 30 claims are 
included in their sample. Since the CERT program uses random samples to 
select claims across providers and suppliers, reviewers are often 
unable to see provider billing patterns that indicate potential fraud 
when making payment determinations.
    The CERT program uses the following categories for improper payment 
determinations:
     No Documentation: Claims are placed into this category 
when either the provider or supplier fails to respond to repeated 
requests for the medical records or the provider or supplier responds 
that they do not have the requested documentation.
     Insufficient Documentation: Claims are placed into this 
category when the medical documentation submitted is inadequate to 
support payment for the services billed. In other words, the medical 
reviewers could not conclude that some of the allowed services were 
actually provided, provided at the level billed, and/or that the 
services were medically necessary. Claims are also placed into this 
category when a specific documentation element that is required as a 
condition of payment is missing, such as a physician signature on an 
order, or a form that is required to be completed in its entirety.
     Medical Necessity: Claims are placed into this category 
when the medical reviewers receive adequate documentation from the 
medical records submitted and can make an informed decision that the 
services billed were not medically necessary based upon Medicare 
coverage policies.
     Incorrect Coding: Claims are placed into this category 
when the provider or supplier submits medical documentation supporting 
one of the following:
    ++ A different code than that billed.
    ++ That the service was performed by someone other than the billing 
provider or supplier.
    ++ That the billed service was unbundled.
    ++ That a beneficiary was discharged to a site other than the one 
coded on a claim.
     Other: Claims are placed into this category if they do not 
fit into any of the other categories (for example, a duplicate payment 
error or a non-covered or unallowable service).
    Medicare pays for DMEPOS items only if the beneficiary's medical 
record contains sufficient documentation of the beneficiary's medical 
condition to support the need for the type and quantity of items 
ordered. In addition, all required documentation elements outlined in 
Medicare policies must be present for the claim to be paid. For the 
2012 reporting period, approximately 94 percent of DMEPOS improper 
payments were due to insufficient documentation.\1\ Without sufficient 
documentation, Medicare is unable to determine if the item is medically 
necessary for the beneficiary or whether unnecessary utilization is 
occurring.
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    \1\ Medicare Fee-for-Service 2012 Improper Payments Report. 
Retrieved February 2014 from http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/CERT/Downloads/Medicare-Fee-for-Service-2012-Improper-Payments-Report.pdf.
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II. Provisions of the Proposed Regulations

A. Proposed Prior Authorization for Certain DMEPOS Items

    We strive to ensure access to care for beneficiaries while also 
protecting the solvency of the Medicare Trust Funds. Given the 
unnecessary utilization of DMEPOS items and the corresponding high 
DMEPOS improper payment rate, we propose to establish a prior 
authorization process for DMEPOS items that are frequently subject to 
unnecessary utilization. Prior authorization is already used in other 
health care programs to ensure proper payment, such as in TRICARE, 
certain Medicaid programs, and the private sector. We believe a prior 
authorization process would ensure beneficiaries receive medically 
necessary care while minimizing the risk of improper payments and 
therefore protecting the Medicare Trust Fund.
    We propose to define ``unnecessary utilization'' as the furnishing 
of items that do not comply with one or more of Medicare's coverage, 
coding and payment rules, as applicable. In accordance with section 
1834(a)(15)(A) of the Act we propose to use ``prior payment 
experience'' to establish which items are ``frequently'' subject to 
unnecessary utilization. The Government Accountability Office (GAO), 
the Department of Health and Human Services' (HHS) Office of Inspector 
General (OIG), and CMS through CERT reports publish analyses of prior 
payment data and identify Medicare DMEPOS items that have high improper 
payment rates. As discussed in greater detail later in this proposed 
rule, since the findings in these reports are the result of analysis of 
prior payment experience, we propose to use these reports to establish 
which items are frequently subject to unnecessary utilization.
    We believe using a prior authorization process would help to ensure 
items frequently subject to unnecessary utilization are furnished in 
compliance with applicable Medicare coverage, coding and payment rules 
before they are delivered. This would safeguard against unnecessary 
utilization while also ensuring beneficiaries' access to medically 
necessary items. We believe this is an effective way to reduce or 
prevent improper payments for unnecessary DMEPOS items.

B. Proposed Criteria for Inclusion on the Master List of DMEPOS Items 
Frequently Subject to Unnecessary Utilization (Master List)

    In Table 4, we provide our proposed Master List of initial items 
that, based on our criteria, are frequently subject to unnecessary 
utilization, hereafter referred to as the ``Master List''. We welcome 
comments on these criteria. We propose to include an item on the 
initial Master List if the item appears on the DMEPOS Fee Schedule 
list, meets one of the two criteria described in the paragraphs that 
follow, and has an average purchase fee of $1,000 or greater or an 
average rental fee schedule of $100 or greater. We refer to these 
dollar amounts as the payment threshold. The two criteria for inclusion 
on the list, either of which must be met, are as follows:
     The item has been identified in a GAO or HHS OIG report 
that is national in scope and published in 2007 or later as having a 
high rate of fraud or unnecessary utilization. We are using reports 
dated from 2007 or later because the GAO and OIG do not always repeat 
analysis of specific items annually. It is necessary to look back a 
number of years to capture findings on a variety of DMEPOS items. The 
GAO audits agency operations to determine whether federal funds are 
being spent efficiently and effectively as well as identifies areas 
where Medicare may be vulnerable to fraud and/or improper payments. 
Section 1834(a)(15) of the Act directs the Secretary to use prior 
payment experience as a basis for identifying DMEPOS items frequently 
subject to unnecessary utilization. We believe utilizing GAO 
evaluations that identify DMEPOS items as having a high rate of fraud 
or unnecessary utilization accomplishes this directive because GAO's 
analysis includes an evaluation of paid claims history.
    The OIG provides independent and objective oversight that promotes 
economy, efficiency, and effectiveness in the programs and operations 
of HHS. OIG's mission to protect the integrity of HHS programs is 
carried out through a

[[Page 30514]]

network of audits, investigations, and inspections. The OIG audits and 
evaluates the performance of HHS programs and their participants. In 
some cases, OIG reports disclose aberrant billing utilization data or 
high incidences of improper payments for particular items or services. 
We have concluded that nationwide findings by OIG or by GAO of 
potentially high rates of fraud, unnecessary utilization, or aberrant 
or improper billings, combined with the payment thresholds established 
here, are good indicators that an item is ``frequently subject to 
unnecessary utilization'' as set out in section 1834(a)(15) of the Act.
     The item is listed in the 2011 or later Comprehensive 
Error Rate Testing (CERT) program's Annual Medicare FFS Improper 
Payment Rate Report DME Service Specific Overpayment Rate Appendix 
(hereafter referred to as CERT DME Appendix). This report describes the 
background of the Medicare FFS and CERT programs, the incidence and 
rates of improper payments and the common causes of these errors. 
Because the CERT program reviews a representative random sample of 
claims each year, we are using the most recent published report at the 
time of the writing of this proposed rule. We believe limiting this 
criterion to items listed in the 2011 or later CERT DME Appendix (and 
also meeting the payment threshold) accomplishes the intent of section 
1834(a)(15) of the Act. Interested parties can access the CERT reports 
at http://cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/CERT/CERT-Reports.html.
    As noted previously, in addition to these two criteria, we propose 
to use a payment threshold. This threshold would allow us to focus our 
limited resources on items for which prior authorization will result in 
the largest potential savings for the Medicare Trust Fund. The DMEPOS 
Fee Schedule is updated annually and lists Medicare allowable pricing 
for DMEPOS, including the full payment amount for capped rental items. 
For administrative simplicity, we would not annually adjust the average 
purchase fee of $1,000 or greater or the average monthly rental fee 
schedule of $100 or greater threshold for inflation. Any changes to 
this threshold would be proposed through notice and comment rulemaking. 
We welcome comment on this threshold.
    We propose that the Master List be self-updating annually. That is, 
items on the DMEPOS Fee Schedule that meet the payment threshold are 
added to the list when the item is listed in a future OIG and/or GAO 
report of a national scope or a future CERT DME Appendix. We propose 
that items remain on the Master List for 10 years from the date the 
item was added to the Master List. Based on our prior payment history, 
we believe 10 years is an appropriate length of time for an item to 
remain on the list. We selected a 10-year timeframe because we believe 
that 10 years without a finding that the item has a potentially high 
rate of fraud, unnecessary utilization or aberrant or improper billing 
makes the original placement no longer current. For example, DMEPOS 
items may evolve as a result of emerging technology making the item on 
the Master List obsolete after 10 years. In addition, we propose items 
be removed from the Master List and replaced by their equivalent when 
the Healthcare Common Procedure Coding System (HCPCs) codes 
representing the item has been discontinued and cross-walked to an 
equivalent item. We further propose that an item would be removed from 
the list sooner than 10 years if the purchase amount drops below the 
payment threshold (an average purchase fee of $1,000 or greater or an 
average monthly rental fee schedule of $100 or greater). DMEPOS items 
aging off the Master List because they have been on the list for 10 
years can remain on or be added back to the Master List if a subsequent 
GAO, OIG, or CERT DME Appendix report identifies the item to be 
frequently subject to unnecessary utilization. If an item on the Master 
List is identified by a GAO, OIG, or CERT DME Appendix report while on 
the Master List, we will follow the update process and the item will 
remain on the list for 10 years from the update. We propose to notify 
the public annually of any additions and deletions from the Master List 
by posting the notification in the Federal Register and on the CMS 
Prior Authorization Web site.
    We believe these criteria would balance our responsibilities to 
ensure beneficiary access to care and protect the Medicare Trust Fund 
while not placing an undue burden on practitioners and suppliers. All 
covered DMEPOS items, regardless of whether they are on the Master 
List, would remain subject to Medicare payment, documentation, 
coverage, and coding rules.

C. Proposed List of DMEPOS Items Frequently Subject to Unnecessary 
Utilization (Master List)

1. Proposed Initial Master List of DMEPOS Items Frequently Subject to 
Unnecessary Utilization (Master List)
    There have been several reports, national in scope, published by 
the HHS OIG since 2007 identifying DMEPOS items that meet the payment 
threshold and are frequently subject to questionable utilization. They 
are as follows:
     An August 2011 report titled ``Questionable Billing by 
Suppliers of Lower Limb Prostheses'' found that between 2005 and 2009, 
Medicare spending for lower limb prostheses increased 27 percent, from 
$517 million to $655 million. The number of Medicare beneficiaries 
receiving lower limb prostheses decreased by 2.5 percent, from almost 
76,000 to about 74,000. The report cited several examples of 
unnecessary utilization. One finding, billing for prostheses when the 
beneficiary had no claims from the referring physician, raised 
questions about whether the physician ever evaluated the beneficiary 
and whether the billed devices were medically necessary. Another 
finding related to billing for a high percentage of beneficiaries with 
no history of an amputation or missing limb also raised questions about 
medical necessity. These findings based on prior payment history 
indicate that certain lower limb prostheses are frequently subject to 
questionable utilization.
     A July 2011 report titled ``Most Power Wheelchairs in the 
Medicare Program Did Not Meet Medical Necessity Guidelines'' found that 
61 percent of power wheelchairs provided in the first half of 2007 were 
medically unnecessary or lacked sufficient documentation to determine 
medical necessity. This accounted for $95 million of the $189 million 
allowed DMEPOS claims in that period of time. There were two previous 
OIG OEI reports based on the same sample of claims that found 
noncompliance problems with documentation requirements and coding 
requirements (``Medicare Power Wheelchair Claims Frequently Did Not 
Meet Documentation Requirements'' and ``Miscoded Claims for Power 
Wheelchairs in the Medicare Program.'') Across all three reports, it 
was found that 80 percent of claims did not meet Medicare requirements 
for the sample period in 2007.
     An August 2009 report titled ``Inappropriate Medicare 
Payment for Pressure Reducing Support Surfaces'' found that 86 percent 
of claims for

[[Page 30515]]

group 2 pressure reducing support surfaces did not meet Medicare 
coverage criteria for the first half of 2007. This amounted to an 
estimated $33 million in improper payments during that time.
     A June 2007 report titled ``Medicare Payments for Negative 
Pressure Wound Therapy Pumps in 2004'' found that 24 percent of 
negative pressure wound therapy pumps did not meet Medicare coverage 
criteria in 2004. This amounted to an estimated $21 million in improper 
payments. Further the report found that in 44 percent of the claims 
with medical records and supplier prepared statement, the information 
on the supplier prepared statement was not supported by the medical 
record.
    There have not been any GAO reports on any specific DMEPOS item(s) 
since 2007.
    The 2011 CERT DME Appendix is set forth in Table 1.

                      Table 1--2011 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
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                                                          Number of       Number of        Dollars
            Service billed to DME (HCPCS)                 claims in       lines in       overpaid in    Total dollars      Projected       Overpayment
                                                           sample          sample          sample      paid in sample  dollars overpaid  rate  (percent)
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All Codes With Less Than 30 Claims...................           1,769           2,742        $300,255        $531,107    $2,212,120,825             57.8
Oxygen concentrator (E1390)..........................           1,258           1,293         148,631         193,810     1,133,180,723             77.7
Blood glucose/reagent strips (A4253).................           1,457           1,466         126,344         150,622       929,031,554             84.4
Hosp bed semi-electr w/Matt (E0260)..................             227             232          19,078          21,779       135,908,667             88.5
Budesonide non-comp unit (J7626).....................              72              74          13,555          24,420       106,061,471             57.9
Tacrolimus oral per 1 MG (J7507).....................              68              72          16,147          31,803       104,040,006             52.4
Lancets per box (A4259)..............................             852             858          12,940          15,323        99,822,219             84.8
Cont airway pressure device (E0601)..................             303             318          12,665          21,987        98,014,011             60.1
Portable gaseous 02 (E0431)..........................             634             658          12,774          16,517        97,194,278             77.4
Diab shoe for density insert (A5500).................             125             136          11,949          15,420        88,965,667             78.2
Multi den insert direct form (A5512).................              78              84           9,561          11,631        71,586,004             81.8
Enteral feed supp pump per d (B4035).................              67              68           8,452          14,853        66,560,532             58.2
RAD w/o backup non-inv Intfc (E0470).................              68              75           9,264          13,079        64,412,596             69.8
CPAP full face mask (A7030)..........................              81              81           8,336          12,774        64,248,424             65.6
Nasal application device (A7034).....................             145             145           9,043          14,366        62,469,031             62.0
High strength ltwt whlchr (K0004)....................              84              88           7,870           8,315        61,980,799             94.9
Disp fee inhal drugs/30 days (Q0513).................             386             389           7,590          12,210        57,749,018             62.0
Multi den insert custom mold (A5513).................              45              52           7,333           9,366        54,355,934             80.5
Lightweight wheelchair (K0003).......................             114             115           6,995           7,503        52,201,255             92.6
Mycophenolate mofetil oral (J7517)...................              43              43           7,669          12,566        49,929,224             64.1
All Other Codes......................................           3,482           4,795         125,245         194,402       943,311,918             65.9
Combined.............................................           8,110          13,784         881,693       1,333,852     6,553,144,155             67.4
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    The 2012 CERT DME Appendix is set forth in Table 2.

                      Table 2--2012 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
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                                                          Number of       Number of        Dollars
            Service Billed to DME (HCPCS)                 claims in       lines in       overpaid in    Total dollars      Projected       Overpayment
                                                           sample          sample          sample      paid in sample  dollars overpaid  rate  (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Codes With Less Than 30 Claims...................           2,354           3,738      $1,256,083      $2,231,572    $1,536,420,429             51.9
Oxygen concentrator (E1390)..........................           1,286           1,317         156,295         194,294     1,168,366,128             80.9
Blood glucose/reagent strips (A4253).................           1,255           1,263         103,521         129,283       906,250,472             80.6
PWC gp 2 std cap chair (K0823).......................             999           1,002         513,426         553,349       201,693,896             97.3
Hosp bed semi-electr w/matt (E0260)..................             283             289          23,544          27,437       137,852,967             87.2
Lancets per box (A4259)..............................             742             748          10,761          13,088        98,992,634             83.1
Tacrolimus oral per 1 MG (J7507).....................              58              63          12,118          23,120        97,807,986             54.3
Portable gaseous 02 (E0431)..........................             590             608          12,296          15,203        96,375,515             80.9
Cont airway pressure device (E0601)..................             210             213           7,914          14,860        80,812,581             50.0
Budesonide non-comp unit (J7626).....................             100             105          13,453          24,905        78,369,581             54.1
Neg press wound therapy pump (E2402).................              39              39          17,464          47,731        72,189,807             51.0
Enteral feed supp pump per d (B4035).................              91              92          10,283          19,145        70,291,185             54.8
Nasal application device (A7034).....................             121             122           8,030          12,254        70,244,578             65.3
Diab shoe for density insert (A5500).................              97             102           8,271          11,594        68,920,996             73.2
RAD w/o backup non-inv intfc (E0470).................              68              75           9,166          13,213        63,658,439             69.6
Disp fee inhal drugs/30 days (Q0513).................             413             413           7,392          13,068        58,594,189             57.0
CPAP full face mask (A7030)..........................              75              75           7,308          11,524        57,481,278             59.3
High strength ltwt whlchr (K0004)....................              80              83           7,826           8,016        56,257,539             97.7
Lightweight wheelchair (K0003).......................              99             110           6,250           6,821        55,809,106             94.2

[[Page 30516]]

 
Multi den insert direct form (A5512).................              61              63           6,805           8,548        55,671,152             79.4
All Other Codes......................................           5,311           9,107       1,735,735       2,669,607     1,380,908,350             64.4
Combined.............................................          10,117          19,627       3,933,943       6,048,632     6,412,968,806             66.0
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    The 2013 CERT DME Appendix is set forth in Table 3.

                      Table 3--2013 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Number of       Number of        Dollars
            Service billed to DME (HCPCS)                 claims in       lines in       overpaid in    Total dollars      Projected       Overpayment
                                                           sample          sample          sample      paid in sample  dollars overpaid  rate  (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Oxygen concentrator (E1390)..........................           1,212           1,262        $136,312        $181,075      $983,768,125             75.6
All Codes With Less Than 30 Claims...................           2,147           3,235         545,968       1,053,401       867,058,104             37.4
Blood glucose/reagent strips (A4253).................           1,131           1,148          85,298         114,282       791,786,761             75.1
PWC gp 2 std cap chair (K0823).......................             734             747         181,940         212,803       201,643,982             85.4
Hosp bed semi-electr w/matt (E0260)..................             364             386          28,235          34,055       137,106,877             84.1
Tacrolimus oral per 1MG (J7507)......................              70              71          11,920          26,692        88,099,443             43.4
Cont airway pressure devce (E0601)...................             118             126           4,255           8,732        84,740,816             48.8
Lancets per box (A4259)..............................             607             615           8,409          11,030        82,958,405             76.3
Portable gaseous 02 (E0431)..........................             525             567           9,876          13,516        78,011,911             73.2
Enteral feed supp pump per d (B4035).................              90              90          11,685          18,809        69,222,164             61.7
Diab shoe for density Insert (A5500).................              82              90           7,384           9,580        65,194,062             78.3
Nasal application device (A7034).....................              78              79           4,808           8,022        59,780,922             56.8
Budesonide non-compUnit (J7626)......................             136             141          13,136          33,672        59,537,844             39.0
CPAP full face mask (A7030)..........................              62              62           5,982           9,206        53,974,803             66.0
Lightweight wheelchair (K0003).......................              67              69           4,291           4,606        53,344,568             95.5
Standard wheelchair (K0001)..........................              74              79           2,736           3,016        52,628,676             92.5
High strength ltwt whlchr (K0004)....................              80              91           7,419           9,046        51,690,372             90.9
LSO sag-coro rigid frame pre (L0631).................              62              62          28,990          48,450        51,310,493             60.4
Multi den insert direct form (A5512).................              45              48           5,649           6,623        49,722,593             86.0
Disp fee inhal drugs/30 Days (Q0513).................             424             426           7,062          13,398        47,738,353             53.1
All Other Codes......................................           7,274          13,747       3,982,290       7,804,614     1,736,897,848             55.4
Combined.............................................          11,204          23,141       5,093,646       9,624,629     5,666,217,120             58.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The proposed Master List, in Table 4, includes DMEPOS items meeting 
both the payment threshold and utilization criteria previously 
discussed, and their Healthcare Common Procedure Coding System (HCPCS) 
codes.

    Table 4--Proposed Master List of DMEPOS Items Subject to Frequent
             Unnecessary Utilization for Prior Authorization
------------------------------------------------------------------------
            HCPCS                             Description
------------------------------------------------------------------------
E0193........................  Powered air flotation bed (low air loss
                                therapy).
E0260........................  Hosp bed semi-electr w/matt.
E0277........................  Powered pres-redu air mattrs.
E0371........................  Nonpowered advanced pressure reducing
                                overlay for mattress, standard mattress
                                length and width.
E0372........................  Powered air overlay for mattress,
                                standard mattress length and width.
E0373........................  Nonpowered advanced pressure reducing
                                mattress.
E0470........................  Respiratory assist device, bi-level
                                pressure capability, without backup rate
                                feature, used with noninvasive
                                interface, e.g., nasal or facial mask
                                (intermittent assist device with
                                continuous positive airway pressure
                                device).
E0601........................  Continuous Airway Pressure (CPAP) Device.
E2402........................  Negative pressure wound therapy
                                electrical pump, stationary or portable.
K0004........................  High strength, lightweight wheelchair.
K0813........................  Power wheelchair, group 1 standard,
                                portable, sling/solid seat and back,
                                patient weight capacity up to and
                                including 300 pounds.
K0814........................  Power wheelchair, group 1 standard,
                                portable, captains chair, patient weight
                                capacity up to and including 300 pounds.
K0815........................  Power wheelchair, group 1 standard, sling/
                                solid seat and back, patient weight
                                capacity up to and including 300 pounds.
K0816........................  Power wheelchair, group 1 standard,
                                captains chair, patient weight capacity
                                up to and including 300 pounds.

[[Page 30517]]

 
K0820........................  Power wheelchair, group 2 standard,
                                portable, sling/solid seat/back, patient
                                weight capacity up to and including 300
                                pounds.
K0821........................  Power wheelchair, group 2 standard,
                                portable, captains chair, patient weight
                                capacity up to and including 300 pounds.
K0822........................  Power wheelchair, group 2 standard, sling/
                                solid seat/back, patient weight capacity
                                up to and including 300 pounds.
K0823........................  Power wheelchair, group 2 standard,
                                captains chair, patient weight capacity
                                up to and including 300 pounds.
K0824........................  Power wheelchair, group 2 heavy duty,
                                sling/solid seat/back, patient weight
                                capacity 301 to 450 pounds.
K0825........................  Power wheelchair, group 2 heavy duty,
                                captains chair, patient weight capacity
                                301 to 450 pounds.
K0826........................  Power wheelchair, group 2 very heavy
                                duty, sling/solid seat/back, patient
                                weight capacity 451 to 600 pounds.
K0827........................  Power wheelchair, group 2 very heavy
                                duty, captains chair, patient weight
                                capacity 451 to 600 pounds.
K0828........................  Power wheelchair, group 2 extra heavy
                                duty, sling/solid seat/back, patient
                                weight capacity 601 pounds or more.
K0829........................  Power wheelchair, group 2 extra heavy
                                duty, captains chair, patient weight 601
                                pounds or more.
K0835........................  Power wheelchair, group 2 standard,
                                single power option, sling/solid seat/
                                back, patient weight capacity up to and
                                including 300 pounds.
K0836........................  Power wheelchair, group 2 standard,
                                single power option, captains chair,
                                patient weight capacity up to and
                                including 300 pounds.
K0837........................  Power wheelchair, group 2 heavy duty,
                                single power option, sling/solid seat/
                                back, patient weight capacity 301 to 450
                                pounds.
K0838........................  Power wheelchair, group 2 heavy duty,
                                single power option, captains chair,
                                patient weight capacity 301 to 450
                                pounds.
K0839........................  Power wheelchair, group 2 very heavy
                                duty, single power option sling/solid
                                seat/back, patient weight capacity 451
                                to 600 pounds.
K0840........................  Power wheelchair, group 2 extra heavy
                                duty, single power option, sling/solid
                                seat/back, patient weight capacity 601
                                pounds or more.
K0841........................  Power wheelchair, group 2 standard,
                                multiple power option, sling/solid seat/
                                back, patient weight capacity up to and
                                including 300 pounds.
K0842........................  Power wheelchair, group 2 standard,
                                multiple power option, captains chair,
                                patient weight capacity up to and
                                including 300 pounds.
K0843........................  Power wheelchair, group 2 heavy duty,
                                multiple power option, sling/solid seat/
                                back, patient weight capacity 301 to 450
                                pounds.
K0848........................  Power wheelchair, group 3 standard, sling/
                                solid seat/back, patient weight capacity
                                up to and including 300 pounds.
K0849........................  Power wheelchair, group 3 standard,
                                captains chair, patient weight capacity
                                up to and including 300 pounds.
K0850........................  Power wheelchair, group 3 heavy duty,
                                sling/solid seat/back, patient weight
                                capacity 301 to 450 pounds.
K0851........................  Power wheelchair, group 3 heavy duty,
                                captains chair, patient weight capacity
                                301 to 450 pounds.
K0852........................  Power wheelchair, group 3 very heavy
                                duty, sling/solid seat/back, patient
                                weight capacity 451 to 600 pounds.
K0853........................  Power wheelchair, group 3 very heavy
                                duty, captains chair, patient weight
                                capacity 451 to 600 pounds.
K0854........................  Power wheelchair, group 3 extra heavy
                                duty, sling/solid seat/back, patient
                                weight capacity 601 pounds or more.
K0855........................  Power wheelchair, group 3 extra heavy
                                duty, captains chair, patient weight
                                capacity 601 pounds or more.
K0856........................  Power wheelchair, group 3 standard,
                                single power option, sling/solid seat/
                                back, patient weight capacity up to and
                                including 300 pounds.
K0857........................  Power wheelchair, group 3 standard,
                                single power option, captains chair,
                                patient weight capacity up to and
                                including 300 pounds.
K0858........................  Power wheelchair, group 3 heavy duty,
                                single power option, sling/solid seat/
                                back, patient weight 301 to 450 pounds.
K0859........................  Power wheelchair, group 3 heavy duty,
                                single power option, captains chair,
                                patient weight capacity 301 to 450
                                pounds.
K0860........................  Power wheelchair, group 3 very heavy
                                duty, single power option, sling/solid
                                seat/back, patient weight capacity 451
                                to 600 pounds.
K0861........................  Power wheelchair, group 3 standard,
                                multiple power option, sling/solid seat/
                                back, patient weight capacity up to and
                                including 300 pounds.
K0862........................  Power wheelchair, group 3 heavy duty,
                                multiple power option, sling/solid seat/
                                back, patient weight capacity 301 to 450
                                pounds.
K0863........................  Power wheelchair, group 3 very heavy
                                duty, multiple power option, sling/solid
                                seat/back, patient weight capacity 451
                                to 600 pounds.
K0864........................  Power wheelchair, group 3 extra heavy
                                duty, multiple power option, sling/solid
                                seat/back, patient weight capacity 601
                                pounds or more.
L5010........................  Partial foot, molded socket, ankle
                                height, with toe filler.
L5020........................  Partial foot, molded socket, tibial
                                tubercle height, with toe filler.
L5050........................  Ankle, symes, molded socket, sach foot.
L5060........................  Ankle, symes, metal frame, molded leather
                                socket, articulated ankle/foot.
L5100........................  Below knee, molded socket, shin, sach
                                foot.
L5105........................  Below knee, plastic socket, joints and
                                thigh lacer, sach foot.
L5150........................  Knee disarticulation (or through knee),
                                molded socket, external knee joints,
                                shin, sach foot.
L5160........................  Knee disarticulation (or through knee),
                                molded socket, bent knee configuration,
                                external knee joints, shin, sach foot.
L5200........................  Above knee, molded socket, single axis
                                constant friction knee, shin, sach foot.
L5210........................  Above knee, short prosthesis, no knee
                                joint (`stubbies'), with foot blocks, no
                                ankle joints, each.
L5220........................  Above knee, short prosthesis, no knee
                                joint (`stubbies'), with articulated
                                ankle/foot, dynamically aligned, each.
L5230........................  Above knee, for proximal femoral focal
                                deficiency, constant friction knee,
                                shin, sach foot.

[[Page 30518]]

 
L5250........................  Hip disarticulation, canadian type;
                                molded socket, hip joint, single axis
                                constant friction knee, shin, sach foot.
L5270........................  Hip disarticulation, tilt table type;
                                molded socket, locking hip joint, single
                                axis constant friction knee, shin, sach
                                foot.
L5280........................  Hemipelvectomy, canadian type; molded
                                socket, hip joint, single axis constant
                                friction knee, shin, sach foot.
L5301........................  Below knee, molded socket, shin, sach
                                foot, endoskeletal system.
L5312........................  Knee disarticulation (or through knee),
                                molded socket, single axis knee, pylon,
                                sach foot, endoskeletal system.
L5321........................  Above knee, molded socket, open end, sach
                                foot, endoskeletal system, single axis
                                knee.
L5331........................  Hip disarticulation, canadian type,
                                molded socket, endoskeletal system, hip
                                joint, single axis knee, sach foot.
L5341........................  Hemipelvectomy, canadian type, molded
                                socket, endoskeletal system, hip joint,
                                single axis knee, sach foot.
L5400........................  Immediate post surgical or early fitting,
                                application of initial rigid dressing,
                                including fitting, alignment,
                                suspension, and one cast change, below
                                knee.
L5420........................  Immediate post surgical or early fitting,
                                application of initial rigid dressing,
                                including fitting, alignment and
                                suspension and one cast change `ak' or
                                knee disarticulation.
L5500........................  Initial, below knee `ptb' type socket,
                                non-alignable system, pylon, no cover,
                                sach foot, plaster socket, direct
                                formed.
L5505........................  Initial, above knee--knee
                                disarticulation, ischial level socket,
                                non-alignable system, pylon, no cover,
                                sach foot, plaster socket, direct
                                formed.
L5510........................  Preparatory, below knee `ptb' type
                                socket, non-alignable system, pylon, no
                                cover, sach foot, plaster socket, molded
                                to model.
L5520........................  Preparatory, below knee `ptb' type
                                socket, non-alignable system, pylon, no
                                cover, sach foot, thermoplastic or
                                equal, direct formed.
L5530........................  Preparatory, below knee `ptb' type
                                socket, non-alignable system, pylon, no
                                cover, sach foot, thermoplastic or
                                equal, molded to model.
L5535........................  Preparatory, below knee `ptb' type
                                socket, non-alignable system, no cover,
                                sach foot, prefabricated, adjustable
                                open end socket.
L5540........................  Preparatory, below knee `ptb' type
                                socket, non-alignable system, pylon, no
                                cover, sach foot, laminated socket,
                                molded to model.
L5560........................  Preparatory, above knee--knee
                                disarticulation, ischial level socket,
                                non-alignable system, pylon, no cover,
                                sach foot, plaster socket, molded to
                                model.
L5570........................  Preparatory, above knee--knee
                                disarticulation, ischial level socket,
                                non-alignable system, pylon, no cover,
                                sach foot, thermoplastic or equal,
                                direct formed.
L5580........................  Preparatory, above knee--knee
                                disarticulation ischial level socket,
                                non-alignable system, pylon, no cover,
                                sach foot, thermoplastic or equal,
                                molded to model.
L5585........................  Preparatory, above knee--knee
                                disarticulation, ischial level socket,
                                non-alignable system, pylon, no cover,
                                sach foot, prefabricated adjustable open
                                end socket.
L5590........................  Preparatory, above knee--knee
                                disarticulation ischial level socket,
                                non-alignable system, pylon no cover,
                                sach foot, laminated socket, molded to
                                model.
L5595........................  Preparatory, hip disarticulation-
                                hemipelvectomy, pylon, no cover, sach
                                foot, thermoplastic or equal, molded to
                                patient model.
L5600........................  Preparatory, hip disarticulation-
                                hemipelvectomy, pylon, no cover, sach
                                foot, laminated socket, molded to
                                patient model.
L5610........................  Addition to lower extremity, endoskeletal
                                system, above knee, hydracadence system.
L5611........................  Addition to lower extremity, endoskeletal
                                system, above knee--knee
                                disarticulation, 4 bar linkage, with
                                friction swing phase control.
L5613........................  Addition to lower extremity, endoskeletal
                                system, above knee--knee
                                disarticulation, 4 bar linkage, with
                                hydraulic swing phase control.
L5614........................  Addition to lower extremity, exoskeletal
                                system, above knee--knee
                                disarticulation, 4 bar linkage, with
                                pneumatic swing phase control.
L5616........................  Addition to lower extremity, endoskeletal
                                system, above knee, universal multiplex
                                system, friction swing phase control.
L5639........................  Addition to lower extremity, below knee,
                                wood socket.
L5643........................  Addition to lower extremity, hip
                                disarticulation, flexible inner socket,
                                external frame.
L5649........................  Addition to lower extremity, ischial
                                containment/narrow m-l socket.
L5651........................  Addition to lower extremity, above knee,
                                flexible inner socket, external frame.
L5681........................  Addition to lower extremity, below knee/
                                above knee, custom fabricated socket
                                insert for congenital or atypical
                                traumatic amputee, silicone gel,
                                elastomeric or equal, for use with or
                                without locking mechanism, initial only
                                (for other than initial, use code l5673
                                or l5679).
L5683........................  Addition to lower extremity, below knee/
                                above knee, custom fabricated socket
                                insert for other than congenital or
                                atypical traumatic amputee, silicone
                                gel, elastomeric or equal, for use with
                                or without locking mechanism, initial
                                only (for other than initial, use code
                                l5673 or l5679).
L5700........................  Replacement, socket, below knee, molded
                                to patient model.
L5701........................  Replacement, socket, above knee/knee
                                disarticulation, including attachment
                                plate, molded to patient model.
L5702........................  Replacement, socket, hip disarticulation,
                                including hip joint, molded to patient
                                model.
L5703........................  Ankle, symes, molded to patient model,
                                socket without solid ankle cushion heel
                                (sach) foot, replacement only.
L5705........................  Custom shaped protective cover, above
                                knee.
L5706........................  Custom shaped protective cover, knee
                                disarticulation.
L5707........................  Custom shaped protective cover, hip
                                disarticulation.
L5718........................  Addition, exoskeletal knee-shin system,
                                polycentric, friction swing and stance
                                phase control.
L5722........................  Addition, exoskeletal knee-shin system,
                                single axis, pneumatic swing, friction
                                stance phase control.
L5724........................  Addition, exoskeletal knee-shin system,
                                single axis, fluid swing phase control.
L5726........................  Addition, exoskeletal knee-shin system,
                                single axis, external joints fluid swing
                                phase control.

[[Page 30519]]

 
L5728........................  Addition, exoskeletal knee-shin system,
                                single axis, fluid swing and stance
                                phase control.
L5780........................  Addition, exoskeletal knee-shin system,
                                single axis, pneumatic/hydra pneumatic
                                swing phase control.
L5781........................  Addition to lower limb prosthesis, vacuum
                                pump, residual limb volume management
                                and moisture evacuation system.
L5782........................  Addition to lower limb prosthesis, vacuum
                                pump, residual limb volume management
                                and moisture evacuation system, heavy
                                duty.
L5795........................  Addition, exoskeletal system, hip
                                disarticulation, ultra-light material
                                (titanium, carbon fiber or equal).
L5814........................  Addition, endoskeletal knee-shin system,
                                polycentric, hydraulic swing phase
                                control, mechanical stance phase lock.
L5816........................  Addition, endoskeletal knee-shin system,
                                polycentric, mechanical stance phase
                                lock.
L5818........................  Addition, endoskeletal knee-shin system,
                                polycentric, friction swing, and stance
                                phase control.
L5822........................  Addition, endoskeletal knee-shin system,
                                single axis, pneumatic swing, friction
                                stance phase control.
L5824........................  Addition, endoskeletal knee-shin system,
                                single axis, fluid swing phase control.
L5826........................  Addition, endoskeletal knee-shin system,
                                single axis, hydraulic swing phase
                                control, with miniature high activity
                                frame.
L5828........................  Addition, endoskeletal knee-shin system,
                                single axis, fluid swing and stance
                                phase control.
L5830........................  Addition, endoskeletal knee-shin system,
                                single axis, pneumatic/swing phase
                                control.
L5840........................  Addition, endoskeletal knee/shin system,
                                4-bar linkage or multiaxial, pneumatic
                                swing phase control.
L5845........................  Addition, endoskeletal, knee-shin system,
                                stance flexion feature, adjustable.
L5848........................  Addition to endoskeletal knee-shin
                                system, fluid stance extension,
                                dampening feature, with or without
                                adjustability.
L5856........................  Addition to lower extremity prosthesis,
                                endoskeletal knee-shin system,
                                microprocessor control feature, swing
                                and stance phase, includes electronic
                                sensor(s), any type.
L5857........................  Addition to lower extremity prosthesis,
                                endoskeletal knee-shin system,
                                microprocessor control feature, swing
                                phase only, includes electronic
                                sensor(s), any type.
L5858........................  Addition to lower extremity prosthesis,
                                endoskeletal knee shin system,
                                microprocessor control feature, stance
                                phase only, includes electronic
                                sensor(s), any type.
L5930........................  Addition, endoskeletal system, high
                                activity knee control frame.
L5960........................  Addition, endoskeletal system, hip
                                disarticulation, ultra-light material
                                (titanium, carbon fiber or equal).
L5964........................  Addition, endoskeletal system, above
                                knee, flexible protective outer surface
                                covering system.
L5966........................  Addition, endoskeletal system, hip
                                disarticulation, flexible protective
                                outer surface covering system.
L5968........................  Addition to lower limb prosthesis,
                                multiaxial ankle with swing phase active
                                dorsiflexion feature.
L5973........................  Endoskeletal ankle foot system,
                                microprocessor controlled feature,
                                dorsiflexion and/or plantar flexion
                                control, includes power source.
L5979........................  All lower extremity prosthesis, multi-
                                axial ankle, dynamic response foot, one
                                piece system.
L5980........................  All lower extremity prostheses, flex foot
                                system.
L5981........................  All lower extremity prostheses, flex-walk
                                system or equal.
L5987........................  All lower extremity prosthesis, shank
                                foot system with vertical loading pylon.
L5988........................  Addition to lower limb prosthesis,
                                vertical shock reducing pylon feature.
L5990........................  Addition to lower extremity prosthesis,
                                user adjustable heel height.
------------------------------------------------------------------------

D. Proposed Future Process for Implementing a Prior Authorization 
Program for Items on the Master List

    Presence on the Master List would not automatically require prior 
authorization. We propose implementing the prior authorization program 
by limiting the number of items from the Master List that are subject 
to prior authorization. In order to balance minimizing provider and 
supplier burden with our need to protect the Trust Funds, we propose to 
initially implement prior authorization for a subset of items on the 
Master List (hereafter referred to as ``Required Prior Authorization 
List''). We propose that we inform the public of the Required Prior 
Authorization List in the Federal Register with 60-day notice before 
implementation.
    Additionally, we propose a prior authorization program for items on 
the Master List that may be implemented nationally or locally. While 
OIG and/or GAO and the CERT DME Appendix provide national summary data, 
the reports often include regional data as well. We may elect to limit 
the prior authorization requirement to a particular region of the 
country if claims data analysis or OIG/GAO reports show that 
unnecessary utilization of the selected item(s) is concentrated in a 
particular region. Alternately, we may elect to implement prior 
authorization nationally if claims data analysis shows that unnecessary 
utilization of the selected item(s) is widespread and occurring across 
multiple geographic areas.
    We also propose to have the authority to suspend or cease the prior 
authorization requirement program generally, or for a particular item 
or items at any time, without undertaking a separate rulemaking. For 
example, we may need to suspend or cease the prior authorization 
program due to new payment policies, which may render the prior 
authorization requirement obsolete or remove the item from Medicare 
coverage. If we suspend or cease the prior authorization requirement, 
we would post notification of the suspension on the CMS Prior 
Authorization Web site, contractor Web sites, publications, and 
bulletins and include the date of suspension.
    We note that this proposal would apply in competitive bidding areas 
because CMS conditions of payment apply under the Medicare DMEPOS 
Competitive Bidding Program.
    In summary, because the Master List would be self-updating, we 
propose that we would annually publish notification of any additions or 
deletions to the Master List in the Federal Register and on the CMS 
Prior Authorization Web site. In addition, we propose to periodically 
publish notification of additions and deletions to the Required Prior 
Authorization List (including

[[Page 30520]]

changes to the geographic regions in which prior authorization occurs) 
in the Federal Register and on the CMS Prior Authorization Web site. 
The announcement would appear in the Federal Register and there would 
be at least 60 days notice before prior authorization is required. This 
proposed rule does not announce the first items on the Required Prior 
Authorization List. We seek public comment on the: (1) Number of items 
selected for initial implementation; (2) number of future items 
selected for implementation; and (3) frequency in which we would select 
the items.
    Since the proposed Master List contains DMEPOS items currently 
included in the CMS Prior Authorization of Power Mobility Device (PMD) 
Demonstration, we would not require prior authorization for PMDs under 
this proposed rule, at least until the demonstration was complete. This 
proposed rule would not affect the current Prior Authorization of PMD 
Demonstration.
    The proposed prior authorization process would not create new 
clinical documentation requirements. Instead, it would require the same 
information necessary to support Medicare payment, just earlier in the 
process. This would ensure that all relevant coverage, coding, and 
clinical documentation requirements are met before the item is 
furnished to the beneficiary and before the claim is submitted for 
payment.
    Prior to furnishing the item and prior to submitting the claim for 
processing, a prior authorization requester would submit evidence that 
the item complies with all coverage, coding, and payment rules. 
Information regarding Medicare coverage, coding, and payment rules for 
DMEPOS items is found in the Act, our regulations, National Coverage 
Determinations (NCDs), Local Coverage Determinations (LCD), CMS manuals 
and transmittals, as well as Durable Medical Equipment Medicare 
Administrative Contractors' (DME MAC') Web sites. All coverage, coding, 
and payment rules would apply. Medicare coverage, coding, and payment 
rules applicable to items on the Required Prior Authorization List 
would also be posted on the CMS Prior Authorization Web site. Further, 
this proposed rule would not change who creates the required clinical 
documentation. For example, clinical documentation that is required to 
be created by a practitioner would still be required to be created by 
the practitioner. Similarly, documentation requiring supplier 
origination, (for example, product description), would still be 
generated by the supplier.
    CMS or its contractors would review the prior authorization request 
to determine whether the item ordered for the beneficiary complies with 
applicable coverage, coding, and payment rules. After receipt of all 
applicable required Medicare documentation, CMS or its contractors 
would conduct a medical review and communicate a decision that 
provisionally affirms or non-affirms the request. A provisional 
affirmation is a preliminary finding that a future claim meets 
Medicare's coverage, coding, and payment rules. Claims receiving a 
provisional affirmation may still be denied based on technical 
requirements that can only be evaluated after the claim has been 
submitted for formal processing. For example, a finding that a claim is 
a duplicate claim can only be made after the claim has been submitted 
for formal processing. Claims receiving a provisional affirmation may 
also be denied based on information not available at the time of a 
prior authorization request (that is, proof of delivery). A prior 
authorization request that is non-affirmed under section 1834(a)(15) of 
the Act is not an initial determination on a claim for payment for 
items furnished, and therefore would not be appealable. We propose to 
make this distinction clear by adding a new paragraph (t) to Sec.  
405.926 stating that a contractor's prior determination of coverage is 
not an initial determination.
    Claims receiving a non-affirmative decision, as well as claims for 
items subject to prior authorization but for which no prior 
authorization was requested would be denied if submitted for 
processing. A requester who submits a claim for which there was a non-
affirmative decision or for which no prior authorization request was 
obtained is afforded appeal rights.
    CMS or its contractors would make reasonable efforts to communicate 
the decision within 10 days of receipt of all applicable information. 
However, final timelines for communicating an affirmed or non-affirmed 
decision to the requester would be described in CMS manual and on the 
CMS Prior Authorization Web site. We propose to allow unlimited 
resubmissions.
    To address circumstances where applying the standard timeframe for 
making a prior authorization decision could seriously jeopardize the 
life or health of the beneficiary, we propose an exception to the 
initial review timeline. We are proposing that if CMS or its contractor 
agrees that using the standard timeframes for review places the 
beneficiary at risk as previously described, then we would allow an 
expedited review of the prior authorization request and communicate an 
expedited decision. In these situations, CMS or its contractors would 
make reasonable efforts to communicate the decision within 2 business 
days of receipt of all applicable Medicare required documentation. This 
process would be further defined in CMS guidance and posted on the CMS 
Prior Authorization Web site. A prior authorization request for an 
expedited review would include documentation that shows that applying 
the standard timeframe for making a decision could seriously jeopardize 
the life or health of the beneficiary. We are soliciting public comment 
on whether the proposed process would meet our objective of ensuring 
beneficiary access to care and protecting the Medicare Trust Funds 
without placing undue burden on practitioners and suppliers.
    We propose to automatically deny payment for a claim for an item on 
the Required Prior Authorization List that is submitted without an 
affirmative prior authorization decision. We believe section 
1834(a)(15) of the Act authorizes the Secretary to make an affirmative 
prior authorization decision a condition of payment for items on the 
Required Prior Authorization List. As discussed earlier, section 1834 
(a)(15)(A) of the Act authorizes the Secretary to develop and update a 
list of DMEPOS items frequently subject to unnecessary utilization. 
Section 1834(a)(15)(C) of the Act, titled ``Determinations Of Coverage 
In Advance,'' allows the Secretary to determine in advance of delivery 
whether payment should be made for an item on the list developed by the 
Secretary. We believe that Congress intended section 1834(a)(15) of the 
Act to establish an advanced determination process (that is, a prior 
authorization process) as a condition of payment for items on the list 
developed by the Secretary. Absent this potential penalty for 
noncompliance with the prior authorization process, section 1834(a)(15) 
of the Act would be rendered moot, as suppliers would not be required 
to seek an advance decision of coverage for these items. A mandatory 
prior authorization process for these items best ensures that CMS 
effectuates Congress' intent of reducing unnecessary utilization for 
the items identified by the Secretary pursuant to section 
1834(a)(15)(A) of the Act. Thus, if this proposed rule is finalized, 
prior authorization would become a condition of payment for the items 
on the Required Prior Authorization List.
    We propose to permit a requester to resubmit a prior authorization 
request if the initial request was non-affirmed. Prior authorization 
requests would be

[[Page 30521]]

reviewed, and a decision of a provisional affirmative or non-
affirmative would be communicated to the affected parties in the same 
manner as an initial request. We would consider a request for the same 
beneficiary for the same HCPCS code in a 6-month period of time to be a 
resubmission. A request outside of those parameters would be treated as 
a new initial request. We seek public comment on the number of 
resubmitted prior authorization requests allowed. This supports CMS's 
objective to satisfy our overall goal of enabling beneficiary access to 
care while protecting the Medicare Trust Fund. For the purpose of this 
proposed rule, we suggest that Medicare or its contractor make a 
reasonable effort to render an affirmative or non-affirmative decision 
within 10 days of receiving the initial request, 2 days for an 
expedited request or 20 days for a resubmission. We also seek public 
comment on suggested timeframes for provisionally affirmative or non-
affirmative decisions on resubmitted prior authorization requests. 
Additional information about timeframes for all decisions would be 
described in CMS guidance to its contractors. The following illustrates 
possible prior authorization scenarios:
    Scenario 1: A requester submits to CMS (or its contractor) a prior 
authorization request along with all required documentation. CMS (or 
its contractor) finds that the request meets all applicable Medicare 
requirements. CMS (or its contractor) would communicate a provisional 
affirmative decision to the affected parties. The supplier would submit 
the claim following receipt of a provisional affirmative decision, and 
the claim would be paid, as long as all other requirements were met.
    In the preceding example, the granted affirmative decision is 
provisional because payment decisions can only be made after all 
requirements are evaluated. For example, a claim could have received a 
provisional affirmative prior authorization decision. However, after 
submission, the claim could be denied due to technical payment reasons, 
such as the claim was a duplicate claim or the claim was for a deceased 
beneficiary. In addition, certain documentation needed in support of 
the claim, such as proof of delivery, cannot be reviewed on a prior 
authorization request.
    Scenario 2: A requester submits to CMS (or its contractor) a prior 
authorization request. CMS (or its contractor) conducts a medical 
review of submitted documentation and determines that the request and 
submitted documentation does not comply with one or more applicable 
coverage, coding, and payment rules. CMS (or its contractor) 
communicates a decision that provisionally non-affirms the request. A 
provisional non-affirmation is a preliminary finding that a future 
claim associated with the submitted documentation and prior 
authorization request would be denied if submitted because the 
associated request and submitted documentation did not meet one or more 
of Medicare's coverage, coding, and payment rules. CMS (or its 
contractor) would communicate a non-affirmative decision to the 
affected parties. The communication to the affected parties would 
identify which Medicare coverage, coding or payment rule(s) was not 
supported in the request and submitted documentation and thus served as 
the basis for the non-affirmative decision. The requester could 
resubmit the prior authorization request. If the claim is submitted for 
payment without a provisional affirmative decision, it would be 
automatically denied. The supplier would assume liability if the item 
was furnished after receiving a non-affirmative decision, unless 
conditions for assigning liability to the beneficiary or Medicare, (as 
described in section 1879(h)(2) of the Act for assigned claims and 
section 1834(j)(4) of the Act for non-assigned claims and as discussed 
in section II.E. of this proposed rule) are met. A prior authorization 
request that is non-affirmed under section 1834(a)(15) of the Act is 
not an initial decision on a claim for payment for items furnished, and 
therefore would not be appealable. However, a claim for which a non-
affirmative prior authorization decision was received, submitted and 
subsequently denied could be appealed.
    Scenario 3: A claim is submitted without a prior authorization 
decision. The claim would be denied because there was no prior 
authorization request, which is a condition of payment. The supplier is 
liable unless the conditions described at section 1879(h)(2) of the Act 
for assigned claims and section 1834(j)(4) of the Act for non-assigned 
claims (and discussed in section II.E. of this proposed rule) are met.

E. Liability

    A request for prior authorization must be submitted prior to 
furnishing the item to the beneficiary and prior to submitting the 
claim for processing. When a claim for an item on the Required Prior 
Authorization List is submitted and denied, the contractor determines 
liability for the denied item based on sections 1834(j)(4) of the Act 
for non-assigned claims and 1879(h)(2) of the Act for assigned claims. 
Under these sections, any expenses incurred for the denied item or 
service are the responsibility of the supplier unless liability is 
transferred to the beneficiary in instances where beneficiaries are 
given an Advanced Beneficiary Notice of Noncoverage (ABN), Form CMS-R-
131, because the beneficiary knows or could be expected to know that 
payment would not be made. Sections 1834(j)(4) and 1879(h)(2) of the 
Act, both of which reference the refund procedures in section 
1834(a)(18)(A) of the Act, address liability decisions made after 
assessing actual or expected knowledge, based on all the relevant facts 
pertaining to each particular denial.
    The limitation on liability provision in section 1879 of the Act 
establishes a process for determining financial liability for certain 
denials of items or services. In the case of assigned DME that is 
subject to the prior authorization requirement established in this 
rule, under section 1879(h) of the Act, a supplier is presumed to be 
financially liable for a claim denied if there is no affirmative prior 
authorization. The same holds true for non-assigned DME under section 
1834(j)(4) of the Act. If the supplier collected any monies from the 
beneficiary for such denied items, the supplier is required to refund 
such monies. Under section 1879(a) of the Act, the determination of 
financial liability for certain categories of denied claims is based on 
actual or constructive knowledge that Medicare is not expected to cover 
or make payment for such denied items or services. In general, the 
supplier is held financially liable under section 1879 of the Act 
because it is expected to be familiar with Medicare coverage and 
payment requirements. However, as explained later in this section, 
under sections 1879(h) and 1834(a)(18) of the Act, liability may be 
shifted from the supplier to the beneficiary if the supplier delivers a 
valid Advanced Beneficiary Notice of Noncoverage (ABN), Form CMS-R-131, 
to the beneficiary. Similarly, under section 1879(a) of the Act, if the 
supplier believes, for example, that an item may not be considered 
medically reasonable and necessary under section 1862(a)(1)(A) of the 
Act, the supplier may shift financial liability to the beneficiary by 
delivering a valid ABN to the beneficiary.
    After promulgation of the prior authorization requirement through a 
possible final rule, CMS or its contractor would presume that the 
supplier knew that Medicare would automatically deny

[[Page 30522]]

the claim for which the supplier failed to request a prior 
authorization, per section 1834(a)(15) of the Act. However, CMS or its 
contractor would generally presume that the Medicare beneficiary does 
not know, and cannot reasonably be expected to know, that Medicare will 
deny, or has denied, payment in advance under section 1834(a)(15) of 
the Act.
    Under sections 1834(j)(4) and 1879(h)(2) of the Act, when a 
beneficiary receives an item or service and does not know that CMS or 
its contractor may deny the claim based on an unmet prior authorization 
requirement, the supplier is financially liable for the denied claim 
and is obligated to refund any payments received from the beneficiary. 
In cases where the beneficiary insists on getting the item without the 
prior authorization decision or while the decision is pending, or in 
cases where the prior authorization decision is non-affirmed, the 
supplier must issue an Advanced Beneficiary Notice of Noncoverage (ABN) 
to the beneficiary, in order to shift liability to the beneficiary. If 
the beneficiary agrees to pay for the item when signing the ABN, 
liability rests with the beneficiary if Medicare does, in fact, deny 
the claim. The ABN notifies the beneficiary that an item usually 
covered by Medicare may not be paid for in this instance. When 
completing the ABN, the supplier must provide a valid and 
understandable reason why Medicare may deny payment so that the 
beneficiary realizes that Medicare coverage of the item could be 
supported if a prior authorization affirmation is obtained by the 
supplier. The ABN must not be used to bypass the prior authorization 
process, and our policy prohibits routine ABN issuance. In order for 
the ABN to be considered valid, the ABN must be issued to the 
beneficiary before the beneficiary receives the item or services.
    Detailed requirements for valid ABN issuance can be found in the 
Medicare Claims Processing Manual (Internet Only Manual (IOM) 100-04): 
http://www.cms.gov/Regulations and Guidance/Guidance/Manuals/Downloads/
clm104c30.pdf. This section will be updated to provide standard 
language that suppliers must include on ABNs issued for items requiring 
prior authorization. If an ABN is not given to the beneficiary in the 
manner described in CMS' claims processing manual, financial liability 
for the denied claim will not be shifted to the beneficiary.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs).
    In Sec.  414.234(c), we would require, as a condition of payment 
for certain DMEPOS items frequently subject to unnecessary utilization, 
that a prior authorization request be submitted prior to the submission 
of a claim.
    For purposes of this proposed rule, we are defining unnecessary 
utilization as the furnishing of items or services that do not comply 
with one or more of Medicare's clinical documentation, coverage, 
payment and coding rules, as applicable. Items frequently subject to 
unnecessary utilization are those identified by evaluation of past 
payment experience. Specifically, and for the purpose of this proposed 
rule, an item frequently subject to unnecessary utilization is 
identified as having a high incidence of fraud, improper payments or 
unnecessary utilization in GAO or OIG reports or the CERT DME Appendix, 
has an average purchase fee of $1,000 or greater or an average rental 
fee schedule of $100 or greater, and is listed on the DMEPOS fee 
schedule. Payment made when the item does not meet Medicare policy is 
an improper payment. It is important to keep in mind that all fraud is 
considered to be improper payment, but not all improper payments are 
fraud.
    Prior authorization would require information to support a Medicare 
provisional payment decision earlier in the process, before the item is 
delivered. This would ensure that all relevant clinical and/or medical 
documentation requirements are met before the item is delivered to the 
beneficiary and before the claim is submitted for payment. A prior 
authorization request would include evidence that the request for 
payment complies with Medicare clinical documentation, coverage, 
payment, and coding rules. All documentation requirements specified in 
policy would still apply. This proposed rule would not change who 
originates the documentation.
    This proposed rule would implement prior authorization, a tool 
utilized by private sector health care payers to prevent unnecessary 
utilization of certain DMEPOS items. In 2012, the total utilization for 
all items listed in the Master List was nearly $1.3 billion. The Master 
List includes DMEPOS items frequently subject to unnecessary 
utilization meeting criteria described earlier in this proposed rule. 
Presence of an item(s) on the Master List would not automatically 
result in that item being subject to prior authorization. In order to 
balance minimizing provider and supplier burden with our need to 
protect the Trust Funds, we propose to initially implement prior 
authorization for a subset of items on the Master List. This subset of 
items would be called the Required Prior Authorization List. We seek 
public comment on the number of items selected for initial 
implementation of the prior authorization requirement.
    In 2012, there were over 1.7 million beneficiaries receiving an 
item from the Master List. Cost, utilization and improper payment rates 
of items on the Master List vary greatly. It is important to note that 
not all items on the Master List have a known improper payment rate 
since their Master List inclusion may have been based on a 2007 or 
later OIG/GAO report and not the CERT Report DME appendix. As discussed 
earlier, the CERT program develops improper payment rates for those 
items for which at least 30 claims are included in their sample. 
Consequently, DMEPOS items have an associated improper payment rate if 
at least 30 claims for that code were included in the CERT sample.
    To estimate the impact of this proposed rule within a range of 
programmatic activity, we isolated those items on the Master List that 
had an associated improper payment rate. We then excluded power 
mobility devices from the list since they are currently subject to 
prior authorization under a CMS demonstration and thus not eligible to 
be selected from the Master List until the demonstration is completed. 
We ranked the remaining 25

[[Page 30523]]

items by average improper payment dollars per line. Using 2013 CERT 
data, we developed low, primary, and high estimates of potentially 
affected claims for each year for the first 10 years of the program, if 
implemented as proposed.
    We base our low estimate of affected claims on the possible number 
of claims we can subject to the prior authorization requirements based 
on selecting Master List items with the highest average improper 
payment dollars per line. For example, during the 2013 CERT reporting 
period Medicare paid for the top two DMEPOS items on the Master List 
associated with the highest improper payment dollars per line nearly 
7,500 times. We believe limiting prior authorization to the top two 
items results in a low programmatic activity compared to implementing 
prior authorization for all items in the Master List. Consequently we 
use 7,500 as our low estimate of potentially affected claims for our 
10-year projection (see Table 5). We did not account for Medicare 
growth or ramp up activities for our low estimate since we selected 
7,500 to represent the minimum level of program activity regardless of 
other factors. Based on the 2013 CERT data, if we avoided 100 percent 
of payment errors for the top 2 items, we would realize the largest 
gain on investment. Again, it is important to note that the average 
error ranking could change every year since it is based on the acquired 
CERT sample. Thus the top two items with the highest average improper 
payments could change every year.
    Based on the 2013 CERT data, CMS paid for the top 22 DMEPOS items 
on the Master List with the highest average improper payments nearly 
400,000 times. If we avoid 100 percent of improper payments for the top 
22 Master List DMEPOS items with the highest average improper payments, 
we realize a significantly lower gain on investment. Subjecting 22 
items to prior authorization results in high programmatic activity, 
thus we used 500,000 as our highest estimate of affected claims for 
years 8 through 10 in our projections (CYs 2022 through 2024 Table 5). 
We believe 500,000 accounts for Medicare growth as well as the 
potential variability in ranking the highest average improper payments 
of Master List DMEPOS items which may result in higher than 400,000 
claim counts.
    Based on the 2013 CERT data, there were over 200,000 Medicare 
payments made for the top 16 Master List DMEPOS items with the highest 
average improper payments. If we avoid 100 percent of improper payments 
for the top 16 Master List DMEPOS items with the highest improper 
payments, we realize a moderate gain on investment. We derive at our 
primary estimate (see Table 5) by averaging the low and high estimate 
of potential claims affected. Subjecting 16 items to prior 
authorization results in moderate programmatic activity, thus we used 
253,750 as our primary estimate of affected claims for years 8 through 
10 in our projections (CYs 2022 through 2024 (see Table 5)). We believe 
the primary estimates accounts for Medicare growth as well as the 
potential variability in ranking the highest improper payment rates of 
Master List DMEPOS items which may result in higher than 200,000 claim 
counts.
    We provide the preceding discussion to explain how we arrived at 
the estimated number potential claims affected. However, we note that 
other factors may contribute to the number of claims ultimately 
affected. For example, future policies, regulations or response to 
stakeholder needs may be factored into the Master List item 
selection(s) and consequently impact the number of claims ultimately 
affected.
    As noted earlier, Table 5 lists our estimated range of potentially 
affected claims.

                                               Table 5--Range of Estimates of Potentially Affected Claims
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Number of potentially affected claims
                 Estimate                  -------------------------------------------------------------------------------------------------------------
                                             CY 2015    CY 2016    CY 2017    CY 2018    CY 2019    CY 2020    CY 2021    CY 2022    CY 2023    CY 2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low.......................................      7,500      7,500      7,500      7,500      7,500      7,500      7,500      7,500      7,500      7,500
Primary...................................      8,750     53,750     53,750    128,750    128,750    128,750    128,750    253,750    253,750    253,750
High......................................     10,000    100,000    100,000    250,000    250,000    250,000    250,000    500,000    500,000    500,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    If implemented, this proposed rule would allow unlimited 
resubmissions of prior authorization requests. To account for unlimited 
resubmissions, we multiplied the low, primary, and high estimates of 
potentially affected claims in Table 5 by 2.25. We selected 2.25 as the 
multiplier based on preliminary analysis of resubmitted prior 
authorization requests in the CMS Prior Authorization of Power Mobility 
Device (PMD) Demonstration. Once multiplied by 2.25, the value no 
longer reflects estimated individual affected claims. Rather, the value 
represents the estimated number of potential cases (potential claims 
plus resubmission(s) of associated prior authorization requests).
    Table 6 provides low, primary and high estimates of potentially 
affected cases (claims and resubmissions of associated prior 
authorization requests). The average of the high estimate of 
potentially affected cases in years 1 through 3 is 157,500 ((22,500 + 
225,000 + 225,000)/3) cases per year for the first 3 years.

                                                      Table 6--Range of Potentially Affected Cases
                                     [Potential claims and resubmissions of associated prior authorization requests]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Number of potentially affected claims
                 Estimate                  -------------------------------------------------------------------------------------------------------------
                                             CY 2015    CY 2016    CY 2017    CY 2018    CY 2019    CY 2020    CY 2021    CY 2022    CY 2023    CY 2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low.......................................     16,875     16,875     16,875     16,875     16,875     16,875     16,875     16,875     16,875     16,875
Primary...................................     19,688    120,938    120,938    289,688    289,688    289,688    289,688    570,938    570,938    570,938
High......................................     22,500    225,000    225,000    562,500    562,500    562,500    562,500  1,125,000  1,125,000  1,125,000
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 30524]]

    We estimate that the private sector's per-case time burden 
attributed to submitting documentation and associated clerical 
activities in support of a prior authorization request is equivalent to 
that of submitting documentation and clerical activities associated for 
prepayment review, which is 0.5 hours. We apply this time-burden 
estimate to initial submissions, resubmissions, and expedited requests 
(that is, affected cases). The total high estimated burden for the 
first year is 11,250 hours (22,500 x 0.5 hours) and the total high 
estimated burden per year for years 2 and 3 is 112,500 hours (225,000 x 
0.5 hours). Table 7 lists the low, primary, and high estimated time 
burden associated with potentially affected cases.

                                             Table 7--Time Burden Associated With Potentially Affected Cases
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Number of hours
             Estimate             ----------------------------------------------------------------------------------------------------------------------
                                    CY 2015     CY 2016     CY 2017     CY 2018     CY 2019     CY 2020     CY 2021     CY 2022     CY 2023     CY 2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low..............................   8,437.50    8,437.50    8,437.50    8,437.50    8,437.50    8,437.50    8,437.50    8,437.50    8,437.50    8,437.50
Primary..........................   9,843.75   60,468.75   60,468.75  144,843.75  144,843.75  144,843.75  144,843.75  285,468.75  285,468.75  285,468.75
High.............................  11,250.00  112,500.00  112,500.00  281,250.00  281,250.00  281,250.00  281,250.00  562,500.00  562,500.00  562,500.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We then multiply the time burden estimate to an average loaded 
hourly rate of $35.36 (actual hourly rate of $17.86 + fringe benefits) 
\2\ to equate the burden in dollars. The high time-burden for the first 
year is 11,250 hours and multiplied by the hourly rate of $35.36, we 
arrive at a high cost estimate of $397,800. Using the same approach, 
the total estimated high cost per year for years 2 and 3 is $3,978,000. 
The average of the high estimate annual cost for years 1 through 3 is 
$2.8 million Table 8 lists the range estimate of PRA burden in dollars. 
This impact is allocated across providers and suppliers nationwide.
---------------------------------------------------------------------------

    \2\ Based on Bureau of Labor Statistics information (29-2070 
Medical Record and Health Information Technician 2012).

                                                    Table 8--Range Estimate of PRA Burden in Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      PRA burden (in dollars)
                Estimate                 ---------------------------------------------------------------------------------------------------------------
                                           CY 2015   CY 2016    CY 2017    CY 2018    CY 2019    CY 2020    CY 2021     CY 2022     CY 2023     CY 2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low.....................................   298,350    298,350    298,350    298,350    298,350    298,350    298,350     298,350     298,350     298,350
Primary.................................   348,075  2,138,175  2,138,175  5,121,675  5,121,675  5,121,675  5,121,675  10,094,175  10,094,175  10,094,175
High....................................   397,800  3,978,000  3,978,000  3,978,000  9,945,000  9,945,000  9,945,000  19,890,000  19,890,000  19,890,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We also estimate the cost of mailing medical records to be $5 per 
request for prior authorization. However, many of the records are 
received via fax machines which have lower associated costs than 
traditional mail. Additionally, we offer electronic submission of 
medical documentation (esMD) to providers and suppliers who wish to use 
a less expensive alternative for sending in medical documents. 
Additional information on esMD can be found at www.cms.gov/esMD.
    In instances when the supplier must first obtain the medical 
records from a health care provider, we estimate that the mailing costs 
are doubled ($10), as records are transferred from provider to 
supplier, and then to CMS or its contractors. We estimate that there 
are 22,500 cases (high estimate cases, see Table 6) for which the 
mailing costs could be doubled in the first year. However, it is 
reasonable to believe that less than half (11,250) of the medical 
records are mailed in. Therefore, we estimate the costs are $112,500 
(11,250 x $10) for the first year. The total high estimated mailing 
cost for years 2 and 3 is $4,500,000, or $2,250,000 per year.
    We believe that the requirements expressed in this proposed rule 
meet the utility and clarity standards. We welcome comment on this 
assumption and on ways to minimize the burden on affected parties.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
CMS-6050-P, Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, 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, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule codifies section 1834(a)(15)(A) and (C) of the 
Act to monitor payments for certain DMEPOS items by creating a 
requirement for advance decision as a condition of payment. This new 
requirement aims to reduce the unnecessary utilization and the 
resulting overpayment for certain DMEPOS items.

B. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(February 2, 2012), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96 354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999) and the

[[Page 30525]]

Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct 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). 
Since the effect of this rule may possibly redistribute more than $100 
million in years 8 through 10, it may have an economically significant 
impact if the high estimates are realized. Per Executive Order 12866, 
we have prepared a regulatory impact analysis that, to the best of our 
ability, presents the costs and benefits of this proposed rule. The RFA 
requires agencies to analyze options for regulatory relief of small 
entities. For purposes of the RFA, small entities include small 
businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $7.0 million to $35.5 million in any 1 year. For details see 
the Small Business Administration's (SBA) Web site at: www.sba.gov/content/table-small-business-size-standards (refer to the 62 sector). 
Individuals and states are not included in the definition of a small 
entity.
    The RFA requires that we analyze regulatory options for small 
businesses and other entities. We prepare a regulatory flexibility 
analysis unless we certify that a rule would not have a significant 
economic impact on a substantial number of small entities. The analysis 
must include a justification concerning the reason action is being 
taken, the kinds and number of small entities that the rule affects, 
and an explanation of any meaningful options that achieve the 
objectives with less significant adverse economic impact on the small 
entities.
    For purposes of the RFA, physicians, non-physician practitioners 
(NPPs), and suppliers including independent diagnostic treatment 
facilities (IDTFs) are considered small businesses if they generate 
revenues of $10 million or less based on SBA size standards. 
Approximately 95 percent of physicians are considered to be small 
entities. There are over 1 million physicians, other practitioners, and 
medical suppliers that receive Medicare payment under the physician fee 
schedule (PFS).
    Because we acknowledge that many of the affected entities are small 
entities, the analysis discussed throughout the preamble of this 
proposed rule constitutes our regulatory flexibility analysis for the 
remaining provisions and addresses comments received on these issues.
    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 for Medicare payment regulations and has fewer than 
100 beds. We are not preparing an analysis for section 1102(b) of the 
Act because we have determined, and the Secretary certifies, that this 
proposed rule would not have a significant impact on the operations 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 on state, 
local, or tribal governments or on the private sector before issuing 
any rule whose mandates require spending in any 1 year of $100 million 
in 1995 dollars, updated annually for inflation. In 2014, that 
threshold is approximately $141 million. This proposed rule would not 
impose a mandate that will result in the expenditure by State, local, 
and Tribal Governments, in the aggregate, or by the private sector, of 
more than $141 million in any one year.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates 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. Since this proposed rule does not impose any costs on 
state or local governments, the requirements of Executive Order 13132 
are not applicable.
    We have prepared the following analysis, which together with the 
information provided in the rest of this preamble, meets all assessment 
requirements. The analysis explains the rationale for and purposes of 
this proposed rule, details the costs and benefits of the rule, and 
presents the measures we would use to minimize the burden on small 
entities. We are unaware of any relevant federal rules that duplicate, 
overlap, or conflict with this proposed rule. The relevant sections of 
this proposed rule contain a description of significant alternatives if 
applicable.
    As discussed under the section III. of this proposed rule 
(Collection of Information Requirements section), the number of Master 
List items selected to be subject to the prior authorization 
requirement created if this proposed rule is finalized is dependent on 
multiple factors. Consequently, we are proposing a range of estimates 
to illustrate various implementation scenarios, as described in section 
III. of this proposed rule.
    We believe there are a number of factors that may contribute to the 
potential growth assumed in the scenarios presented. For example, as 
the DMEPOS community acclimates to using prior authorization as part of 
their billing practice, there may be greater systemic or other 
processing efficiencies to allow more extensive implementation.
    The overall economic impact of this provision on the health care 
sector is dependent on the number of claims affected. For the purpose 
of this narrative analysis, we use the ``primary'' estimate to project 
costs. However, Table 9 lists both the low and high estimated cost 
projections, as well as the primary cost estimate.
    The values populating Table 9 were obtained from Table 10, Private 
Sector Cost and Table 11, Medicare Cost, which can be found in 
following pages. Together, Tables 10 and 11 combine to convey the 
overall economic impact to the health sector, which is illustrated in 
Table 9 appropriately titled, Overall Economic Impact to the Health 
Sector.
    Based on the estimate, the overall economic impact of this proposed 
rule is approximately $1.3 million in the first year. The 5-year impact 
is approximately $57 million and the 10-year impact is approximately 
$212 million, mostly driven by the increased number of items subjected 
to prior authorization after the first year. Additional administrative 
paperwork costs to private sector providers and an increase in Medicare 
spending to conduct reviews combine to create the financial impact. 
However, this impact is offset by some savings. We believe there are 
likely to be other benefits and cost savings that result from the 
DMEPOS prior authorization requirement. However, many of those benefits 
are difficult to quantify. For instance, we expect to see savings in 
the form of reduced unnecessary utilization, fraud, waste, and abuse, 
including a

[[Page 30526]]

reduction in improper Medicare fee-for-service payments (note that not 
all improper payments are fraudulent). We are soliciting comment on the 
potential increased costs and benefits associated with this provision.

                                Table 9--Overall Economic Impact to Health Sector
                                                  [In dollars]
----------------------------------------------------------------------------------------------------------------
                                                                      Year 1          5 years        10 years
----------------------------------------------------------------------------------------------------------------
Private Sector Cost...................  Low Claim Estimation....         298,350       1,491,750       2,938,500
                                        Primary Claim Estimation         348,075      14,867,775      55,393,650
                                        High Estimation.........         397,800      28,243,800     107,803,800
Medicare Cost.........................  Low Claim Estimation....         843,750       4,218,750       8,437,500
                                        Primary Claim Estimation         984,375      42,046,875     156,656,250
                                        High Claim Estimation...       1,125,000      79,875,000     304,875,000
Total Economic Impact to Health Sector  Low Claim Estimation....       1,142,100       5,710,500      11,376,000
                                        Primary Claim Estimation       1,332,450      56,914,650     212,049,900
                                        High Claim Estimation...       1,522,800     108,118,800     412,678,800
----------------------------------------------------------------------------------------------------------------

    The definition of small entity in the RFA includes non-profit 
organizations. Per the RFA's use of the term, most suppliers and 
providers are small entities. Likewise, the vast majority of physician 
and nurse practitioner (NP) practices are considered small businesses 
according to the SBA's size standards total revenues of $10 million or 
less in any 1 year. While the economic costs and benefits of this rule 
are substantial in the aggregate, the economic impact on individual 
entities would be relatively small. We estimate that 90 to 95 percent 
of DMEPOS suppliers and practitioners who order DMEPOS are small 
entities under the RFA definition. The rationale behind requiring prior 
authorization of covered DMEPOS items is to ensure the beneficiary's 
medical condition warrants the item of DMEPOS before the item is 
delivered. The impact on these suppliers could be significant; if 
finalized, the proposed rule would change the billing practices of 
DMEPOS suppliers. We believe that the purpose of the statute and this 
proposed rule is to avoid unnecessary utilization of DMEPOS items, thus 
we do not view decreased revenues from items subject to unnecessary 
utilization by DMEPOS providers and suppliers to be a condition that we 
must mitigate. We believe that the effect on legitimate suppliers and 
practitioners would be minimal. This proposed rule would offer an 
additional protection to a supplier's cash flow as the supplier would 
know in advance if the Medicare requirements are met.

C. Anticipated Effects

1. Costs
a. Private Sector Costs
    We do not believe that this proposed rule would significantly 
affect the number of legitimate claims submitted for these items. 
However, we do expect a decrease in the overall amount paid for DMEPOS 
items resulting from a reduction in unnecessary utilization of DMEPOS 
items requiring prior authorization.
    As described in section III. of this proposed rule, we propose to 
rely on a criterion-driven approach to select items that would require 
prior authorization.
    In accordance with our proposals, we would select certain items 
from the Master List to require prior authorization by placing them on 
the Required List. As discussed previously, it is impossible to specify 
the number of items on the Required List in advance. Similarly, it is 
not possible to specify the resulting numbers of affected claims and 
medical reviews in advance. Consequently, we are proposing a range of 
estimates to capture various possible scenarios.
    If funded for the high estimation of potentially affected claims, 
we could grow the program and affect as many as 500,000 claims by years 
8 through 10. This estimate accounts for initial prior authorization 
requests only. Resubmissions after a non-affirmative decision is 
rendered on an initial request are not included in the high estimation 
of potential claims affected. If the program grew to impact as many as 
500,000 claims, the potentially impacted cases (claims and 
resubmissions) total would be 1,125,000. This potential growth accounts 
for the large fiscal increase shown in the program impact analysis.
    We estimate that the private sector's per-case time burden 
attributed to submitting documentation and associated clerical 
activities in support of a prior authorization request is equivalent to 
that of submitting documentation and clerical activities associated for 
prepayment review, which is 0.5 hours. We apply this time-burden 
estimate to initial submissions, resubmissions, and expedited requests 
(cases). (See Tables 7 and 8 of this proposed rule.)

                                                              Table 10--Private Sector Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Cost (in dollars)
           Estimate           --------------------------------------------------------------------------------------------------------------------------
                                CY 2015     CY 2016      CY 2017     CY 2018     CY 2019     CY 2020     CY 2021     CY 2022      CY 2023      CY 2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low..........................    298,350      298,350     298,350     298,350     298,350     298,350     298,350      298,350      298,350      298,350
Primary......................    348,075    2,138,175   2,138,175   5,121,675   5,121,675   5,121,675   5,121,675   10,094,175   10,094,175   10,094,175
High.........................    397,800    3,978,000   3,978,000   3,978,000   9,945,000   9,945,000   9,945,000   19,890,000   19,890,000   19,890,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Medicare Costs
    Medicare would incur additional costs associated with processing 
the prior authorization requests. Applying the same logic previously 
described, we develop a range of potential costs that are dependent on 
the extent of implementation. We use the range of potentially affected 
cases (claims and resubmissions) in Table 6 and multiply it by $50, the 
estimated cost to review each request. Table 11 lists the cost range 
estimates.

[[Page 30527]]



                                                                                     Table 11--Medicare Cost
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Cost (in dollars)
                            Estimate                            --------------------------------------------------------------------------------------------------------------------------------
                                                                   CY 2015     CY 2016      CY 2017      CY 2018      CY 2019      CY 2020      CY 2021      CY 2022      CY 2023      CY 2024
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Low............................................................     843,750      843,750      843,750      843,750      843,750      843,750      843,750      843,750      843,750      843,750
Primary........................................................     984,375    6,046,875    6,046,875   14,484,375   14,484,375   14,484,375   14,484,375   28,546,875   28,546,875   28,546,875
High...........................................................   1,125,000   11,250,000   11,250,000   28,125,000   28,125,000   28,125,000   28,125,000   56,250,000   56,250,000   56,250,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

c. Beneficiary Costs
    As will be discussed in the next section, we expect a reduction in 
the utilization of Medicare DMEPOS items when such utilization does not 
comply with one or more of Medicare's coverage, coding and payment 
rules. Although these rules are designed to permit utilization that is 
medically necessary, DMEPOS items that are not medically necessary may 
still provide convenience or usefulness for beneficiaries; any rule-
induced loss of such convenience or usefulness constitutes a cost of 
the rule that we lack data to quantify.
2. Benefits
    There would be quantifiable benefits because we expect a reduction 
in the unnecessary utilization of those Medicare DMEPOS items subject 
to prior authorization. It is difficult to project the decrease in 
unnecessary utilization. However, we will be closely monitoring 
utilization and billing practices. The benefits include a changed 
billing practice that also enhances the coordination of care for the 
beneficiary. For example, requiring prior authorization for certain 
items ensures that the primary care provider and the supplier 
collaborate more frequently to order and deliver the most appropriate 
DMEPOS item meeting the needs of the beneficiary. Improper payments 
made because the practitioner did not order the DMEPOS, or because the 
practitioner did not evaluate the patient, would likely be reduced by 
the requirement that a supplier submit clinical documentation created 
by the practitioner as part of its prior authorization request.
    We believe it is more reasonable to require practitioners and 
suppliers to adopt new practices for fewer items at a time, rather than 
institute large scale change all at once. In addition, during the ramp 
up of the program in year 1, we will be doing education and out-reach. 
Consequently, we estimate a smaller volume of items in year 1.
    Our Office of the Actuary has provided the following budgetary cash 
impact possibilities based on the President's 2015 Budget baseline with 
an assumed October 1, 2014 effective date. The impacts are specific to 
the three scenarios in our potentially affected claim range: The low, 
primary, and high estimation of potentially affected claims (see Table 
5).

[[Page 30528]]



                                                             Table 12--CY Budgetary Impact (With Managed Care) Estimate in Millions
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Calendar year
                                                      ------------------------------------------------------------------------------------------------------------------------------------------
        Type of scenario                                                                                                                                               2015-2019     2015-2024
                                                          2015       2016       2017       2018       2019       2020       2021       2022       2023       2024    (5[dash]year  (10[dash]year
                                                                                                                                                                        impact)       impact)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Scenario 1: Assume Low Number of  Number of Part B         7,500      7,500      7,500      7,500      7,500      7,500      7,500      7,500      7,500      7,500  ............  .............
 Claims.                           Claims.
                                     Part B Costs &
                                        Benefits:
                                  Benefits (in               -10        -10        -10        -10        -10        -10        -10        -10        -10        -10          -50          -100
                                   millions).
                                  Premium Offset *             0          0          0          0          0          0          0          0          0          0            0             0
                                   (in millions).
                                  Total Part B (in           -10        -10        -10        -10        -10        -10        -10        -10        -10        -10          -50          -100
                                   millions).
Scenario 2: Assume Primary        Number of Part B         8,750     53,750     53,750    128,750    128,750    128,750    128,750    253,750    253,750    253,750  ............  .............
 Number of Claims.                 Claims.
                                     Part B Costs &
                                        Benefits:
                                  Benefits ($ in             -10        -40        -60        -70        -80        -80        -80       -100       -120       -120         -260          -760
                                   millions).
                                  Premium Offset ($            0         10         10         20         20         20         20         20         30         30           60           180
                                   in millions).
                                  Total Part B ($ in         -10        -30        -50        -50        -60        -60        -60        -80        -90        -90         -200          -580
                                   millions).
Scenario 3: Assume High Number    Number of Part B        10,000    100,000    100,000    250,000    250,000    250,000    250,000    500,000    500,000    500,000  ............  .............
 of Claims.                        Claims.
                                     Part B Costs &
                                        Benefits:
                                  Benefits ($ in             -10        -50        -70        -90       -110       -110       -110       -140       -150       -150         -330          -990
                                   millions).
                                  Premium Offset ($            0         10         20         20         30         30         30         30         40         40           80           250
                                   in millions).
                                  Total Part B ($ in         -10        -40        -50        -70        -80        -80        -80       -110       -110       -110         -250          -740
                                   millions).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Premium offset is an expected change in premium resulting from the proposed rule.


[[Page 30529]]

D. Alternatives Considered

1. No Regulatory Action
    As previously discussed, each item on the Master List is high cost 
and frequently subject to unnecessary utilization. In addition, each 
item has been either the subject of a previous OIG or GAO report or has 
appeared on a CERT DME Appendix (2011 or later) of DMEPOS items with 
high improper payment rates. Together, utilization of items on the 
Master List accounted for $1.3 billion. The status quo is not a 
desirable alternative to this proposed rule because current payment 
practices have not affected unnecessary utilization appreciably. 
Evidence of this is found in the CERT improper payment rates for all 
DMEPOS, which have remained high for the last several years (67 percent 
in 2011, 66 percent in 2012). By creating a Master List of DMEPOS high 
cost items known to be the subject of GAO/OIG reports and/or high 
improper payment rates, we hope to positively affect unnecessary 
utilization and improper payments for DMEPOS in general.
2. Defer to Medicare Administrative Contractors (MACs)
    Another alternative we considered was to allow MACs processing 
Medicare claims to design safeguards that positively affect improper 
payment rates and unnecessary utilization. However, in recent years we 
have required MACs to create strategies aimed at reducing improper 
payment and over utilization. While MACs have complied with this 
requirement, we have not seen sufficient effect on the improper payment 
rate and over utilization. The reason is that MACs are limited in their 
resources and authority. Often unforeseen issues or statutory 
requirements cause the MACs to reprioritize their work and respond to 
CMS direction to focus on an issue not previously on their strategy. In 
addition, their current practice of pre-payment or post-payment manual 
medical reviews are costly, and thus are used on a very small 
percentage of claims. Both create burdens for the claim submitter. For 
example, in a pre-payment medical review, the claim submitter has 
already furnished the item or service. Payment is held until the claim 
submitter supplies the MAC with requested documentation supporting 
their request for payment. Submitters may be confused about the type of 
documents being requested and submit incomplete documentation. The 
submitter has only one opportunity to submit the appropriate 
documentation and if insufficient will not receive their payment. In 
post-payment reviews, the submitter has furnished the item or service 
and has received payment. Similar to pre-payment reviews, the submitter 
may be confused about the documents needed to support the payment. If 
the payment is denied, the MAC is obligated to recover the payment. 
Claim submitters have told us that returning payment, or requesting an 
appeal to defend the payment is burdensome and costly.
    By requiring documentation before the claim is submitted and before 
the item or service is furnished, the submitter and contractor are 
afforded unlimited opportunities to clarify requirements to receive a 
provisionally affirmative decision. By addressing this process in 
advance of furnishing the item or service or submitting the claim, we 
believe there will be less items and/or services paid improperly and 
unnecessarily utilized, as well as less burden on providers.

E. Accounting Statement and Table

    As required by OMB Circular A4 (available at http://www.whitehouse.gov/omb/circulars_default/), in Table 13 (Accounting 
Statement), we have prepared an accounting statement showing the 
estimated expenditures associated with this proposed rule. This 
estimate includes the estimated FY 2013 expenditures.

                               Table 13--Accounting Statement: Classification of Estimated Transfers, Benefits, and Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Units
                 Category                       Primary      Low estimate    High estimate -------------------------------------------------------------
                                               estimate                                      Year dollars    Discount rate         Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized *....................             4.9             0.3             8.9            2014              7%  2015-2024
 ($million/year)                                       5.3             0.3             9.6            2014              3%  2015-2024
Annualized Monetized **...................            13.9             0.8            27.0            2014              7%  2015-2024
 ($million/year)                                      14.9             0.8            29.0            2014              3%  2015-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Transfers ***
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized......................           -53.5           -10.0           -68.1            2014              7%  2015-2024
 ($million/year)                                     -56.0           -10.0           -71.4            2014              3%  2015-2024
�������������������������������������������
From Whom to Whom.........................                                    Federal government to Medicare providers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* These costs are associated with the private sector paperwork.
** These costs are associated with the processing the prior authorization requests for Medicare.
*** Savings to the Medicare program due to the reduced unnecessary utilization, fraud, waste, and abuse.

F. Conclusion

    The analysis in the previous sections, together with the remainder 
of this preamble, provides an initial Regulatory Flexibility Analysis. 
In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
&

[[Page 30530]]

Medicaid Services proposes to amend 42 CFR Chapter IV as set forth 
below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority: Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 
1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).

0
2. Section 405.926 is amended as follows:
0
a. In the introductory text, removing the phrase ``but are not limited 
to--'' and adding in its place the phrase ``but are not limited to the 
following:''
0
b. In paragraphs (a)(2) and (b) through (q), removing ``;'' and adding 
in its place ``.''.
0
c. In paragraph (r), removing ``; and'' adding in its place ``.''.
0
d. Adding a new paragraph (t).
    The addition reads as follows:


Sec.  405.926  Actions that are not initial determinations.

* * * * *
    (t) A contractor's prior authorization determination related to 
coverage of durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS).

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

0
3. 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)).

0
4. Subpart D is amended by adding a new Sec.  414.234 to read as 
follows:


Sec.  414.234  Prior authorization for items frequently subject to 
unnecessary utilization.

    (a) Definitions. For the purpose of this section, the following 
definitions apply:
    Prior authorization is a process through which a request for 
provisional affirmation of coverage is submitted to CMS or its 
contractors for review before the item is furnished to the beneficiary 
and before the claim is submitted for processing.
    Provisional affirmation is a preliminary finding that a future 
claim meets Medicare's coverage, coding, and payment rules.
    Unnecessary utilization means the furnishing of items that do not 
comply with one or more of Medicare's coverage, coding, and payment 
rules.
    (b) Master list of items frequently subject to unnecessary 
utilization. (1) The Master List of Items Frequently Subject to 
Unnecessary Utilization includes items listed on the Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies fee schedule with an 
average purchase fee of $1,000 or greater or an average rental fee 
schedule of $100 or greater that also meet one of the following two 
criteria:
    (i) The item has been identified as having a high rate of fraud or 
unnecessary utilization in a report that is national in scope from 2007 
or later published by any of the following:
    (A) The Office of Inspector General (OIG).
    (B) The General Accountability Office (GAO).
    (ii) The item is listed in the 2011 or later Comprehensive Error 
Rate Testing (CERT) program's Annual Medicare Fee-For-Service (FFS) 
Improper Payment Rate Report DME Service Specific Overpayment Rate 
Appendix.
    (2) The Master List of DMEPOS Items Frequently Subject to 
Unnecessary Utilization is self-updating annually and is published in 
the Federal Register.
    (3) DMEPOS items identified in any of the following reports and 
meeting the payment threshold criteria set forth in paragraph (b)(1) of 
this section are added to the Master List:
    (i) Future published OIG reports that are national in scope.
    (ii) Future published GAO reports.
    (iii) Future Comprehensive Error Rate Testing (CERT) program's 
Annual Medicare FFS Improper Payment Rate Report DME Service Specific 
Overpayment Rate Appendix.
    (4) Items remain on the Master List for 10 years from the date the 
item was added to the Master List.
    (5) Items that are discontinued or are no longer covered by 
Medicare are removed from the Master List.
    (6) Items for which the average purchase fee and average rental fee 
is reduced to below the inclusion threshold of average purchase fee of 
$1,000 or greater or an average rental fee schedule of $100 or greater, 
are removed from the list.
    (7) An item is removed from the Master List and replaced by its 
equivalent when the Healthcare Common Procedure Coding System (HCPCS) 
code representing the item has been discontinued and cross-walked to an 
equivalent item.
    (c) Condition of payment--(1) Items requiring prior authorization. 
CMS publishes in the Federal Register and posts on the CMS Prior 
Authorization Web site a list of items, the Required Prior 
Authorization List, that require prior authorization as a condition of 
payment.
    (i) The Required Prior Authorization List specified in paragraph 
(c)(1) of this section is selected from the Master List of Items 
Frequently Subject to Unnecessary Utilization (as described in 
paragraph (b) of this section). CMS may elect to limit the prior 
authorization requirement to a particular region of the country if 
claims data analysis shows that unnecessary utilization of the selected 
item(s) is concentrated in a particular region.
    (ii) The Required Prior Authorization List is effective no less 
than 60 days after publication and posting.
    (2) Denial of claims. (i) CMS or its contractors denies a claim for 
an item that requires prior authorization if the claim has not received 
a provisional affirmation.
    (ii) Claims receiving a provisional affirmation may be denied based 
on either of the following:
    (A) Technical requirements that can only be evaluated after the 
claim has been submitted for formal processing.
    (B) Information not available at the time of a prior authorization 
request.
    (d) Submission of prior authorization requests. A prior 
authorization request must do the following:
    (1) Include all relevant documentation necessary to show that the 
item meets Medicare coverage, coding, and payment rules, including all 
of the following:
    (i) Order.
    (ii) Relevant information from the beneficiary's medical record.
    (iii) Relevant supplier produced documentation.
    (2) Be submitted before the item is furnished to the beneficiary 
and before the claim is submitted for processing.
    (e) Review of prior authorization requests. (1) After receipt of a 
prior authorization request, CMS or its contractor reviews the prior 
authorization request for compliance with Medicare coverage, coding, 
and payment rules.
    (2) If coverage, coding, and payment rules are met, CMS or its 
contractor issues a provisional affirmation to the requester.
    (3)(i) If coverage, coding, and payment rules are not met, CMS or 
its contractor issues a non-affirmative decision to the requester.
    (ii) If the requester receives a non-affirmative decision, the 
requester may resubmit a prior authorization request before the item is 
furnished to the beneficiary and before the claim is submitted for 
processing.
    (4) Expedited reviews. (i) A prior authorization request for an 
expedited

[[Page 30531]]

review must include documentation that shows that processing a prior 
authorization request using a standard timeline for review could 
seriously jeopardize the life or health of the beneficiary or the 
beneficiary's ability to regain maximum function.
    (ii) If CMS or its contractor agrees that processing a prior 
authorization request using a standard timeline for review could 
seriously jeopardize the life or health of the beneficiary or the 
beneficiary's ability to regain maximum function, then CMS or its 
contractor expedites the review of the prior authorization request and 
makes reasonable efforts to communicate the decision within 2 business 
days of receipt of all applicable Medicare required documentation.
    (f) Suspension of prior authorization requests. (1) CMS may suspend 
prior authorization requirements generally or for a particular item or 
items at any time and without undertaking rulemaking.
    (2) CMS provides notification of the suspension of the prior 
authorization requirements via--
    (i) Federal Register notice; and
    (ii) Posting on the CMS prior authorization Web site.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: June 12, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: November 20, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

    Editorial note: This document was received by the Office of the 
Federal Register on May 22, 2014.

[FR Doc. 2014-12245 Filed 5-22-14; 4:15 pm]
BILLING CODE 4120-01-P