[Federal Register Volume 65, Number 82 (Thursday, April 27, 2000)]
[Proposed Rules]
[Pages 24666-24670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10482]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 414

HCFA-1084-P

RIN 0938-AJ82


Medicare Program; Payment for Upgraded Durable Medical Equipment

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend the Medicare regulations to 
permit Medicare suppliers to furnish upgraded durable medical equipment 
(DME) on an assignment basis. Medicare payment would be made to the 
supplier as if the DME were non-upgraded DME; and the beneficiary 
purchasing or renting the upgraded DME would pay the supplier an amount 
equal to the difference between the supplier's charge for the DME 
upgrade and the amount paid by Medicare for the non-upgraded DME. This 
proposed rule would also require the following consumer protection 
safeguards: determination of fair market prices, proof of full 
disclosure of the availability and cost of non-upgraded DME, and 
sanctions against suppliers who engage in coercive or abusive sales 
practices.

DATES: We will consider comments if we receive them at the appropriate 
address, as provided below, no later than 5 p.m. on June 26, 2000.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address only: Health Care Financing Administration, 
Department of Health and Human Services, Attention: HCFA-1084-P, P.O. 
Box 8013, Baltimore, MD 21244-8013.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses (If you choose to mail 
your comments to one of the following addresses, we may be delayed 
receiving them, which could result in us considering those comments 
late.):

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC, or
Room C5-16-03, 7500 Security Boulevard, Baltimore, MD

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-1084-P. Comments received timely will be available 
for public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 443-G of 
the Department's office at 200 Independence Avenue, SW., Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: William Long, (410) 786-5655.

SUPPLEMENTARY INFORMATION:

I Background

A. Durable Medical Equipment

    Durable medical equipment (DME) is medical equipment furnished by a 
supplier or a home health agency that is primarily and customarily used 
to serve a medical purpose. DME is able to withstand repeated use and 
is generally not useful to an individual in the absence of a sickness 
or an injury. To be covered by Medicare, DME must be appropriate for 
use in a beneficiary's home or in an institution that is used as a 
home. A hospital, or a critical access hospital may not be considered 
an institution that is used as a home for this purpose. Similarly, a 
Medicare-certified SNF or other institution that is primarily engaged 
in providing skilled care to its residents may not be considered an 
institution that is used as a home.
    While Medicare will pay for DME that is adequate and effective to 
meet the medical needs of the beneficiary, it will not pay extra for 
convenience or luxury features nor more than the applicable fee 
schedule amount.

B. Payment for DME

    Payment for DME furnished under Part B of the Medicare program 
(Supplementary Medical Insurance) is made through contractors known as 
Medicare carriers. Section 1834(a) of the Social Security Act (the Act) 
provides that Medicare payment for DME is equal to 80 percent of the 
lesser of the actual charge for the DME or the fee schedule amount for 
the DME. Section 1834(a) of the Act classifies DME into the following 
payment categories:

    <bullet> Inexpensive or other routinely purchased DME.
    <bullet> DME requiring frequent and substantial servicing.
    <bullet> Customized DME.
    <bullet> Supplies and accessories used with DME
    <bullet> Oxygen and oxygen equipment.
    <bullet> Other items of DME (capped rental items).

    There is a specific methodology for determining the fee schedule 
payment amount for each category of DME. In addition, for each of these 
categories there are restrictions governing

[[Page 24667]]

payment. For example, inexpensive or other routinely purchased DME may 
be rented or purchased. However, oxygen and DME requiring frequent and 
substantial servicing may only be rented and not purchased. Customized 
items and other supplies may only be purchased. Capped rental items, 
other than electric wheelchairs, may initially only be rented; however, 
the rental payments can be applied to the purchase of the item if the 
beneficiary selects the purchase option after the tenth rental month.
    The fee schedules for DME are calculated using average reasonable 
charges from 1986 and 1987 and are generally adjusted annually by the 
change in the Consumer Price Index for all Urban Consumers (CPI-U) for 
the 12-month period ending June 30, of the preceding year. In addition, 
the fee schedules for DME are limited by a ceiling (upper limit) and 
floor (lower limit). The ceiling and floor are equal to 100 percent and 
85 percent, respectively, of the median of the local (Statewide) fee 
amounts. The local fee schedule amounts for areas outside the 
continental United States are not included in the calculation of the 
ceiling and floor limits, nor are they subject to the ceiling or floor 
limits. This fee schedule payment methodology is stated in 42 CFR part 
414, subpart D.

C. Medicare's Assignment Rules

    An assignment is an agreement between a supplier and a Medicare 
beneficiary whereby the beneficiary transfers to the supplier his or 
her right to collect benefits for furnished covered services. The 
supplier in return agrees:
    <bullet> To accept, as full charge for the service, the amount 
approved by the Medicare carrier as the basis for determining the 
Medicare Part B payment.
    <bullet> To collect from the beneficiary only the difference 
between the Medicare-approved amount and the Medicare Part B 
payment, that is, any deductible and coinsurance amounts. A 
violation of the assignment occurs if the supplier collects from the 
beneficiary or anyone else any amount in excess of the approved 
amount.

    If the supplier does not accept assignment, payment is made by the 
carrier directly to the beneficiary less any deductible and copayment 
and the beneficiary is then responsible to the supplier for the entire 
amount. Also, without assignment the supplier is not limited in his 
charges, and the beneficiary may have to pay more than he or she would 
have paid if the claim had been assigned. The rules governing 
assignment are stated in 42 CFR part 424, subpart D.

D. Current Payment Process for Upgraded DME

    An item of DME may have certain convenience or luxury features that 
make it more expensive than non-upgraded DME however, these features 
are not necessary to adequately meet the medical needs of the 
beneficiary. Medicare does not cover medically unnecessary upgrades. If 
a supplier accepts assignment, it must accept the Medicare-approved 
amount as full payment for the upgraded DME.
    The Medicare-approved payment amount for the more expensive DME 
cannot exceed the payment amount for the non-upgraded DME. If a 
beneficiary purchases or rents DME that has more expensive features 
than his or her condition requires, the supplier accepting assignment 
for the DME may not charge or collect any amount in excess of the 
Medicare-approved amount for the non-upgraded DME.
    Currently, a supplier that wishes to charge and collect a greater 
price for upgraded DME must submit an unassigned claim. The carrier 
then pays the beneficiary an amount equal to the Medicare payment, less 
the deductible and coinsurance. The beneficiary is then responsible to 
the supplier for the full payment price of the upgraded DME. The 
current procedures for Medicare payment of assigned and unassigned DME 
claims are stated in 42 CFR part 414, subpart D.

II. Provisions of the Balanced Budget Act of 1997

    On August 5, 1997, the Congress passed the Balanced Budget Act of 
1997 (BBA). Section 4551(c) of the BBA added a second paragraph 
1834(a)(17) to the Act, authorizing the Secretary to issue regulations 
under which an individual may purchase or rent upgraded DME from a 
supplier, and Medicare payment would be made to the supplier as if the 
upgraded DME were non-upgraded DME if the supplier presented an 
assigned claim.
    Section 1834(a) second (17)(B) of the Act provides that (i) In the 
case of the purchase or rental of upgraded DME, the supplier shall 
receive payment for that upgraded DME as if the DME was non-upgraded 
DME; and (ii) the individual purchasing or renting the DME shall pay 
the supplier an amount equal to the difference between the allowed 
Medicare payment for the non-upgraded DME and the supplier's charge for 
the upgraded DME. In no event may the supplier's charge for the 
upgraded DME exceed the applicable fee schedule amount (if any). In the 
event that the upgraded DME is not on any fee schedule, the supplier's 
charge for the DME upgrade shall not exceed the fair market price to 
its other customers for the same DME. Our authority for this 
determination is section 1834(a) second (17)(B)and (C)(v) of the Act. 
Under section 1834(a) second (17)(B) of the Act, these rules only apply 
to assigned claims. Conversely, they do not apply to unassigned claims.
    Section 1834(a) second (17)(C) of the Act requires that any 
regulations under section 1834(a) second (17)(A) must provide for 
consumer protection standards with respect to the furnishing of 
upgraded DME. These regulations must provide for the following:
    (1) A determination of the fair market prices for upgraded DME.
    (2) Full disclosure by the supplier of the availability and price 
of non-upgraded DME and proof of receipt of this disclosure information 
by the beneficiary before furnishing upgraded DME to the beneficiary.
    (3) Conditions of participation for suppliers in the billing 
arrangement.
    (4) Sanctions (including exclusion) on suppliers who we determine 
have engaged in coercive or abusive practices.
    (5) Other safeguards that we determine are necessary.
    This amendment to the Act would apply to purchases and rentals made 
after the effective date of the final regulations. Under section 
1834(a) second (17)(B) of the Act, these rules only apply to assigned 
claims.

III. Provisions of This Proposed Regulation

    We propose to add the acronym ``DME'' for durable medical equipment 
at Sec. 414.202.
    We propose to add a new Sec. 414.231 that would permit suppliers to 
sell or rent upgraded DME on an assigned basis to a beneficiary and 
charge the beneficiary the difference between the supplier's charge for 
the upgraded DME and the allowed Medicare amount for the non-upgraded 
DME, provided that all consumer protection safeguards are met. 
Medicare's payment for the upgraded DME would be the same allowed 
amount as if the upgraded DME was non-upgraded DME.
    In Sec. 414.231(a), we propose to add the definition of upgraded 
DME.
    We propose to add in Sec. 414.231(c), the requirements that 
suppliers must meet before they are allowed to sell upgraded DME to 
Medicare beneficiaries on an assigned basis. These qualification rules 
address: (1) Disclosure of information, (2) Charge limitations, (3) 
Billing requirements, (4) Returns of upgraded

[[Page 24668]]

DME by dissatisfied beneficiaries, and (5) Conditions of participation.
    We propose to add Sec. 414.231(c)(1) to describe the disclosure 
information that the supplier must provide to the beneficiary. It is 
our intention to design a prescribed disclosure form that must be used 
by suppliers who sell upgraded DME and who accept assignment.
    This section would also identify who is responsible for obtaining 
the signed disclosure form acknowledging that the beneficiary or 
representative was given, and understood, all of the required 
information. This signed disclosure form must also be signed by the 
supplier and must attest that the supplier informed the beneficiary 
that non-upgraded DME is available and medically adequate for the 
beneficiary's needs; and informed the beneficiary of the name of the 
manufacturer that made the upgraded DME, the manufacturer's model 
number for the upgraded DME, the manufacturer's suggested retail price 
for the upgraded DME, the supplier's usual or customary charge for the 
upgraded DME, the estimated charge for the DME without the upgraded 
features, the beneficiary's out-of-pocket cost for the DME without the 
upgraded features, the supplier's charge to the beneficiary for the 
upgraded DME, and the beneficiary's out of pocket cost for the upgraded 
DME. A copy of the completed disclosure form must be sent by the DME 
supplier to the physician prescribing the DME, if the beneficiary 
elects to notify the prescribing physician. The supplier must also 
retain the signed disclosure form in its file and upon request submit 
the disclosure form to the Durable Medical Equipment, Prosthetics, 
Orthotics and Supplies (DMEPOS) carrier. We would require this signed 
statement under the authority of section 1834(a) second (17)(C)(v) of 
the Act, which provides for such other safeguards as the Secretary 
determines are necessary.
    We propose that a beneficiary who receives an upgraded DME and is 
dissatisfied with the DME upgrade may return the upgraded DME within 
thirty days and receive a full refund for the upgraded portion of the 
DME from the DME supplier. The DME supplier would be required to 
furnish a non-upgraded item of DME to the beneficiary.
    We propose, under the authority of section 1834(a) second 
(17)(C)(i) of the Act, to add Sec. 414.231(c)(2) to prohibit the 
supplier's charge for any upgraded DME from exceeding the Medicare fee 
schedule amount. If there is no applicable fee schedule amount, the 
supplier's charge may not exceed the lower of its customary charge to 
the general public, or the manufacturer's suggested retail price.
    We propose to add Sec. 414.231(c)(3) to require a supplier to 
submit claims, with code modifiers, that indicate when upgraded DME was 
furnished to a Medicare beneficiary.
    Section 1834(a) second (17)(B) requires that for upgraded DME, the 
Medicare payment amount must be based on the payment amount for non-
upgraded DME. We propose to require suppliers to submit claims for 
upgraded DME as if the DME was non-upgraded DME. The rules governing 
the payment methodology contained in part 414, subpart D for non-
upgraded DME, would apply to upgraded DME.
    We believe that section 1834(a) second (17)(B)(i) precludes us from 
paying for the upgraded DME as an upgrade but requires that we pay as 
if the DME was non-upgraded DME. Therefore, we would use the same 
payment methodology for the upgraded DME as for the non-upgraded DME. 
This would be less administratively cumbersome, and would efficiently 
utilize the safeguards built into the current payment methodology.
    For example, if a beneficiary wanted to upgrade capped rental DME 
and instead, obtain an upgraded DME that is in the routinely purchased 
payment category, the supplier would submit a claim for, and the 
payment would be based on, the non-upgraded capped rental DME. The 
supplier also would be required to use a code modifier on the claim 
form to indicate that upgraded DME had been furnished. The rules 
governing the capped rental payment category would therefore apply to 
the routinely purchased DME. Thus, the supplier would be required to 
submit rental claims, even if the upgraded DME was a routinely 
purchased DME, in accordance with the capped rental requirements. 
Likewise, the supplier would be required to offer the purchase option 
during the tenth rental month as if the upgraded DME were in the capped 
rental payment category. Finally, the supplier would also be required 
to comply with the capped rental maintenance and servicing 
requirements.
    We propose to add Sec. 414.231(c)(4) to require suppliers 
furnishing upgraded DME to comply with the supplier standards for 
Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) 
at Sec. 424.57.
    Finally, we propose to add Sec. 414.231(d) to require that the 
sanctions found in part 402 apply to any supplier that engages in 
coercive or abusive practices. These regulations also would allow us to 
sanction a supplier for failure to submit the documentation that we 
would require in Sec. 414.231(c).
    This new provision would change the nature of Medicare assignment 
in the context of DME, and the protection it has historically afforded 
beneficiaries from being charged extra for equipment or features of 
equipment that are not medically necessary. In light of this 
legislative departure from Medicare's long-established rules relating 
to assignment and in light of the statutory requirement for the 
Secretary to include such other safeguards as the Secretary determines 
are necessary, we are especially interested in receiving comments about 
the adequacy of the beneficiary protections proposed in this rule as 
well as the breadth of potential additional approaches to beneficiary 
protection. For example, it may be important to distinguish between an 
upgraded item that might be covered as medically necessary for a 
particular beneficiary from a slightly different item for which there 
was no Medicare fee schedule amount. In the former case, the 
beneficiary would have the advantage of Medicare payment for the item 
with additional features while in the latter case Medicare would pay 
only for the item without features and the beneficiary would pay, fully 
at their own expense, for the difference between the supplier's charge 
for the upgraded item and the Medicare payment for the non-upgraded 
item. Or, it might be appropriate to consider whether upgrade covers 
minor variations in an item of DME where the same code is used to bill 
for the item as the standard item. Therefore, we ask for comment about 
manageable ways to look at and quantify the extent of variation in DME 
that would constitute an upgrade and what might be the differences 
between non upgraded DME and upgraded DME. Because our experience in 
capturing these distinctions for purposes of payment is limited, we 
welcome suggestions relating to potential beneficiary protections which 
may need to be introduced in this rule. For example, we ask for comment 
about an approach that might phase-in the provision, focusing initially 
on certain kinds of DME which we believe from conversations with the 
industry to be the items for which there may be the greatest demand, 
and evaluating impacts before expanding application of the provision. 
We request comment about particular categories of DME, such as ultra 
light wheelchairs or total electric hospital beds, to which the 
provision might initially be applied if we were to pursue a targeted 
approach.

[[Page 24669]]

IV. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the ``DATES'' 
section of this preamble, and, if we proceed with a subsequent 
document, we will respond to the major comments in the preamble to that 
document.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, (PRA) 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:

    <bullet> The need for the information collection and its 
usefulness in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information 
collection burden.
    <bullet> The quality, utility, and clarity of the information to 
be collected.
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.

    Therefore, we are soliciting public comment on the information 
collection requirement discussed below.
    Section 414.231 Upgraded durable medical equipment.
    Section 414.231 (c) requires that the supplier of DME give to the 
beneficiary (or the beneficiary's representative renting or purchasing 
the DME on the beneficiary's behalf) a disclosure form, indicating (1) 
the supplier informed the beneficiary (or beneficiary's representative) 
that a non-upgraded DME was available and explained that the non-
upgraded DME met the beneficiary's medical needs, (2) the supplier 
provided the beneficiary or beneficiary's representative with the 
estimated cost for both the non-upgraded DME and the additional out-of-
pocket cost for the upgraded DME.
    This information would be provided by the DME supplier on a one-
time basis for each sale of upgraded DME. We would require the DME 
supplier to retain the disclosure form and submit it to the DMEPOS 
carrier upon request. The DME supplier would also be required to 
furnish a copy of the disclosure form to the prescribing physician, if 
the beneficiary elects to notify the prescribing physician. Our best 
estimate is that it would take 15 minutes or less for each sale of 
upgraded DME.
    Section 414.231(c)(3)(ii) requires that the supplier use a code 
modifier, when submitting a claim, that indicates that the upgraded DME 
was furnished to a Medicare beneficiary.
    The burden that would be added as a result of this reporting 
requirement is minimal over that already approved, through July 31, 
2000, under OMB approval number 0938-0008, which is the approval number 
for the Medicare common claim form (HCFA 1500). That form currently has 
a field for a code modifier, further diminishing the burden of entering 
the modifier.
    We have submitted a copy of this proposed rule to OMB for its 
review of the information collection requirement described above. This 
requirement is not effective until it has been approved by OMB.
    If you comment on this information collection, please mail copies 
directly to the following:
    Health Care Financing Adminis-tration, Office of Information 
Services, Security and Standards Group, Division of HCFA Enterprise 
Standards Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-
1850. ATTN: Julie Brown, HCFA-1084-P, and Office of Information and 
Regulatory Affairs,
Office of Management and Budget, Room 10235, New Executive Office 
building, Washington, DC 20503 Attn: Allison Eydt, HCFA Desk Officer

V. Regulatory Impact Analysis

    We have examined the impacts of this proposed rule as required by 
Executive Order (EO) 12866, the Unfunded Mandates Act of 1995, and the 
Regulatory Flexibility Act (RFA) (Public Law 96-354). Executive Order 
12866 directs agencies to assess all costs and benefits of available 
regulatory alternatives and, when 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 of $100 
million or more annually. Since we believe that this proposed rule 
would have no significant effect on program expenditures, we do not 
consider this to be a major rule. We have not prepared an RIA.
    Section 1102(b) of the Act requires us to prepare a RIA 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 604 of the RFA. For purposes of section 1102(b) of the Act, 
we define a small rural hospital as a hospital that is located outside 
of a Metropolitan Statistical Area and has fewer than 50 beds. We are 
not preparing a rural impact analysis since we have determined that 
this proposed rule would not have a significant economic impact on 
operations of a substantial number of small rural hospitals.
    The Unfunded Mandates Reform Act of 1995 also requires (in section 
202) that agencies perform an assessment of anticipated costs and 
benefits before proposing any rule that may result in expenditures, in 
any given year by State, local, or tribal governments, in the 
aggregate, or by the private sector, of $100 million. This rule would 
not have any effect on the Medicare expenditures or the solvency of the 
Medicare Trust Fund. The RFA requires agencies to analyze options for 
regulatory relief of small businesses. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and 
governmental agencies. Most hospitals and most other providers and 
suppliers are small entities, either by virtue of their nonprofit 
status or by having revenues of $5 million or less annually. 
Intermediaries and carriers are not considered to be small entities.
    While we have estimated the time required to complete the required 
form as 15 minutes, we are unable to quantify the ``burden'' this 
imposes because we cannot predict the number of forms individual 
suppliers will be completing. A DME supplier has two options when a 
beneficiary seeks to purchase upgraded DME. One option is simply to 
sell the beneficiary the item and allow the beneficiary to submit an 
unassigned claim. This option imposes no burden on the supplier and the 
beneficiary is not required to complete the form. The second option is 
to accept assignment and to complete and submit the form. Given the 
resources at our disposal, we cannot determine the number of DME 
suppliers that would accept either option.
    We believe that beneficiaries may use the upgrade provision to 
obtain only a relatively few categories of equipment. We also believe 
that this provision might be used mostly by more active beneficiaries 
who desire wheelchairs that contain features suited to their active 
lifestyles, such as upgrading from standard wheelchairs to ultra light

[[Page 24670]]

weight wheelchairs. Although there are perhaps 100 large DME suppliers, 
there is a total of more than 100,000 dealers. It is impossible to 
estimate the distribution of assigned claims that involve upgraded DME 
across either the smaller or the larger group. Based on the industry's 
own assertions, however, we do not believe that any one supplier will 
incur a significant burden. If we receive additional information as a 
result of this proposed rule, we would revisit the idea of calculating 
the burden arising from this provision.
    We are not preparing an analysis for section 1102(b) of the Act 
because this rule is not a major rule as defined at 5 U.S.C. 804(2), 
nor will it have a significant economic impact on the operations of a 
substantial number of small rural hospitals.
    We have reviewed this proposed rule under the threshold criteria of 
Executive Order 13132, Federalism. We have determined that it does not 
significantly affect the rights, roles and responsibility of States. In 
accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.
    For the reasons stated in the preamble, the Health Care Financing 
Administration proposes to amend 42 CFR part 414 as follows:

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

    1. The authority citation for part 414 continues to read as 
follows:

    Authority: 42 U.S.C. 1302, and 1395hh.

    2. Add the acronym ``DME'' to the definition of durable medical 
equipment in Sec. 414.202 to read as follows:

Sec. 414.202  Definitions.

* * * * *
    Durable medical equipment (DME) means equipment, furnished by a 
supplier or a home health agency that--
* * * * *
    3. Add Sec. 414.231 to subpart D to read as follows:


Sec. 414.231  Upgraded durable medical equipment.

    (a) Definition. Upgraded durable medical equipment means DME that 
contains features that are not reasonable and necessary for the 
treatment of an illness or an injury, or to improve the functioning of 
a malformed body member.
    (b) General rules. (1) HCFA pays for DME that meets the coverage 
requirements in Sec. 410.38.
    (2) For upgraded DME, HCFA pays a supplier an amount equal to the 
Medicare-approved amount that it pays for DME that does not contain 
upgraded features under Sec. 414.210, less any applicable beneficiary 
deductible and coinsurance.
    (3) If a beneficiary purchases or rents upgraded DME, the 
beneficiary is responsible for the difference in the payment between 
the supplier's charge for the upgraded DME and the Medicare-approved 
amount for the DME without the upgraded features, in addition to any 
applicable beneficiary deductible and coinsurance.
    (c) Rules for suppliers--(1) Disclosure of information. Before 
furnishing upgraded DME to a beneficiary, a supplier must meet the 
following requirements:
    (i) Give to the beneficiary (or the representative renting or 
purchasing the DME on the beneficiary's behalf) a disclosure form 
prescribed by HCFA containing the following information:
    (A) The DME without the upgraded features effectively meets the 
beneficiaries medical needs and is as available as the upgraded DME.
    (B) The name of the manufacturer that made the upgraded DME.
    (C) The manufacturer's model number for the upgraded DME.
    (D) The manufacturer's suggested retail price for the upgraded DME.
    (E) The supplier's usual or customary charge for the upgraded DME.
    (F) The estimated charge, and the beneficiary's out-of-pocket costs 
for the DME without the upgraded features.
    (G) The supplier's charge to the beneficiary for the upgraded DME 
and the beneficiary's out-of pocket cost for the upgraded DME.
    (ii) The supplier must obtain the beneficiary's or representative's 
signature on the disclosure form, attesting that the beneficiary or 
representative has read and understands the information provided on the 
form.
    (iii) The supplier must furnish a copy of the signed disclosure 
form to the prescribing physician, provided the beneficiary elects to 
notify the prescribing physician, retain the signed disclosure form in 
its file and, upon request, submit the signed disclosure form to the 
DMEPOS carrier.
    (2) Charge limitations. The suppliers charge for upgraded DME must 
not exceed the applicable Medicare fee schedule amount (if any) for the 
upgraded DME. If there is no fee schedule amount for the upgraded DME, 
the supplier's charge for the upgraded DME must not exceed the lower of 
its customary charge to the general public, or the manufacturer's 
suggested retail price.
    (3) Billing requirements. A supplier must meet the following 
billing requirements:
    (i) Follow the payment and billing requirements for the DME without 
the upgraded features.
    (ii) Submit a claim, with a code modifier indicating that upgraded 
DME was furnished to a Medicare beneficiary.
    (4) Returns of upgraded DME. (i) A supplier must refund any 
payments made by a beneficiary, for the upgraded portion of an item of 
upgraded DME if the beneficiary, or representative, returns the 
upgraded DME to the supplier within 30 days of receiving the upgraded 
DME.
    (ii) The supplier must furnish the DME without the upgrade to the 
beneficiary at no additional cost.
    (5) Conditions of participation. Suppliers submitting claims for 
upgraded DME must comply with the special payment rules for DMEPOS 
suppliers at Sec. 424.57 of this chapter.
    (d) Supplier sanctions. If a supplier engages in coercive or 
abusive practices regarding the sale or rental of upgraded DME, HCFA 
may apply to the supplier the same sanctions found in part 402 of this 
subchapter that it may apply to a physician.

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

    Dated: January 24, 2000.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
    Approved: March 17, 2000.
Donna E. Shalala,
Secretary.
[FR Doc. 00-10482 Filed 4-26-00; 8:45 am]
BILLING CODE 4120-01-P