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[Federal Register Volume 77, Number 50 (Wednesday, March 14, 2012)]
[Rules and Regulations]
[Pages 14989-14994]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-5913]

[[Page 14989]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 424

[CMS-6036-F2]
RIN 0938-AQ57

Medicare Program; Revisions to the Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS) Supplier Safeguards

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

ACTION: Final rule.

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SUMMARY: This final rule removes the definition of ``direct 
solicitation'' and allows DMEPOS suppliers, including DMEPOS 
competitive bidding program contract suppliers, to contract with 
licensed agents to provide DMEPOS supplies, unless prohibited by State 
law. It also removes the requirement for compliance with local zoning 
laws and modifies certain State licensure requirement exceptions.

DATES: Effective Date: These regulations are effective on April 13, 
2012.

FOR FURTHER INFORMATION CONTACT: Katie Mucklow Lehman, (410) 786-0537; 
Frank Whelan, (410) 786-1302.

SUPPLEMENTARY INFORMATION:

I. Background

A. General Overview

1. Providers and Suppliers
    Medicare services are furnished by providers and suppliers. The 
term ``provider'' is defined at 42 CFR 400.202 as a hospital, a 
critical access hospital (CAH), a skilled nursing facility (SNF), a 
comprehensive outpatient rehabilitation facility (CORF), a home health 
agency (HHA), or a hospice that has in effect an agreement to 
participate in Medicare, or a clinic, a rehabilitation agency, or a 
public health agency that has in effect a similar agreement but only to 
furnish outpatient physical therapy or speech pathology services, or a 
community mental health center that has in effect a similar agreement 
but only to furnish partial hospitalization services.
    Provider is also defined in sections 1861(u) and 1866(e) of the 
Social Security Act (the Act).
    For purposes of the DMEPOS supplier standards, the term ``DMEPOS 
supplier'' is defined in 42 CFR 424.57(a) as an entity or individual, 
including a physician or Part A provider that sells or rents Part B 
covered DMEPOS items to Medicare beneficiaries and which meets the 
DMEPOS supplier standards. A supplier that furnishes DMEPOS is one 
category of supplier. Other supplier categories include, for example, 
physicians, nurse practitioners, and physical therapists. If a 
supplier, such as a physician or physical therapist, also furnishes 
DMEPOS to a patient, the supplier is also considered to be a DMEPOS 
supplier.
2. DMEPOS
    The term ``durable medical equipment'' is defined in section 
1861(n) of the Act. It is also included in the definition of ``medical 
and other health services'' in section 1861(s)(6) of the Act. 
Furthermore, the term is defined in 42 CFR 414.202 as equipment 
furnished by a supplier or an 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.
    Examples of durable medical equipment include blood glucose 
monitors, 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 colostomy bags and supplies directly 
related to colostomy care), including replacement of such devices, and 
including one pair of conventional eyeglasses or contact lenses 
furnished subsequent to each cataract surgery with insertion of an 
intraocular lens. Other examples of prosthetic devices include cardiac 
pacemakers, cochlear implants, electrical continence aids, electrical 
nerve stimulators, and tracheostomy speaking valves.
    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, 
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 nutrients, supplies 
and equipment, and implantable items payable under section 1833(t) of 
the Act.
    Section 1861(s)(5) of the Act includes ``surgical dressings, and 
splints, casts, and other devices used for reduction of fractures and 
dislocations'' as one of the ``medical and other health services'' that 
are covered by Medicare. Other items that may be furnished by suppliers 
include, but are not limited to:
     Prescription drugs used in immunosuppressive therapy 
furnished to an individual who receives an organ transplant for which 
payment is made under this title, as noted in section 1861(s)(2)(J) of 
the Act.
     Extra-depth shoes with inserts or custom-molded shoes with 
inserts for an individual with diabetes, as described in 
section1861(s)(12) of the Act.
     Home dialysis supplies and equipment, self-care home 
dialysis support services, and institutional dialysis services and 
supplies included in section 1861(s)(2)(F) of the Act.
     Oral drugs prescribed for use as an anticancer 
chemotherapeutic agent, as specified in section 1861(s)(2)(Q) of the 
Act.
     Self-administered erythropoietin, as described in section 
1861(s)(2)(O) of the Act.

B. Statutory Authority

    Various sections of the Act and the regulations require providers 
and suppliers to furnish information concerning the amounts due and the 
identification of individuals or entities that furnish medical services 
to beneficiaries before payment can be made. The following is an 
overview of the sections that grant this authority:
     Sections 1102 and 1871 of the Act provide general 
authority for the Secretary of the Department of Health and Human 
Services (the Secretary) to prescribe regulations for the efficient 
administration of the Medicare program.
     Section 1834(j)(1)(A) of the Act states that no payment 
may be made for items furnished by a supplier of medical equipment and 
supplies unless such supplier obtains (and renews at such intervals as 
the Secretary may require) a supplier number. In order to obtain a 
supplier billing number, a supplier must comply with certain supplier 
standards as identified by the Secretary.
    We are authorized to collect information on the Medicare enrollment 
application (that is, the CMS-855 (Office of Management and Budget 
(OMB) approval number 0938-0685)) to ensure that correct payments are 
made to providers and suppliers under the Medicare program, as 
established by Title XVIII of the Act.

[[Page 14990]]

II. Provisions of the Proposed Rule and Responses to Public Comments

    In the April 4, 2011 Federal Register (76 FR 18472), we issued a 
proposed rule that removed the definition of and modified the 
requirements regarding ``direct solicitation;'' allowed DMEPOS 
suppliers, including DMEPOS competitive bidding program contract 
suppliers, to contract with licensed agents to provide DMEPOS supplies 
unless prohibited by State law; removed the requirement for compliance 
with local zoning laws; and modified certain State licensing 
requirement exceptions. We received 14 timely pieces of correspondence 
on the April 4, 2011 proposed rule. In this section of the final rule, 
we will present our proposals and summarize and respond to the public 
comments that we received.

A. Direct Solicitation

    In the August 27, 2010 Federal Register (75 FR 52629), we published 
a final rule that addressed several matters related to the DMEPOS 
supplier standards in 42 CFR 424.57(c). One involved the prohibition in 
Sec.  424.57(c)(11) against the direct solicitation of Medicare 
beneficiaries by DMEPOS suppliers. Previously, the definition of direct 
solicitation was generally limited to telephonic contact. The August 
27, 2010 final rule expanded the scope of this provision to include in-
person contacts, email, and instant messaging. Since publication of the 
August 27, 2010 final rule, we discovered that implementation of the 
expanded portions of this provision as written was unfeasible. The 
definition of ``direct solicitation'' was criticized as being overly 
broad as it covered some types of marketing activity outside the bounds 
of what we intended to prohibit under our regulations.
    Therefore, in the April 4, 2011 proposed rule, we proposed to 
remove the definition of ``direct solicitation'' from Sec.  424.57(a), 
revise Sec.  424.57(c)(11) to remove all references to ``direct 
solicitation,'' and clarify that the prohibition was limited to 
telephonic contact.
    The proposed revision to Sec.  424.57(c)(11) thus read as follows:
     Must agree not to contact a beneficiary by telephone when 
supplying a Medicare-covered item unless one of the following applies:
    ++ The individual has given written permission to the supplier to 
contact them by telephone concerning the furnishing of a Medicare-
covered item that is to be rented or purchased.
    ++ The supplier has furnished a Medicare-covered item to the 
individual and the supplier is contacting the individual to coordinate 
the delivery of the item.
    ++ If the contact concerns the furnishing of a Medicare-covered 
item other than a covered item already furnished to the individual, the 
supplier has furnished at least one covered item to the individual 
during the 15-month period preceding the date on which the supplier 
makes such contact.

We received the following comments on this proposal:
    Comment: A commenter expressed support for CMS's proposal to remove 
email, instant messaging, and in-person contacts from the definition of 
``direct solicitation.'' However, the commenter requested a further 
revision to Sec.  424.57(c)(11) that would allow suppliers to contact 
Medicare beneficiaries upon receipt of a written or verbal prescription 
or prescriber order as long as the beneficiary has been made aware (for 
example, through the prescribing physician) that he or she will be 
contacted by a supplier. The commenter believed that requiring written 
consent from the beneficiary would severely limit his or her access to 
care by delaying the provision of needed services and items. It would 
also impose a large administrative burden on physicians and physician 
offices, as they would have to obtain the beneficiary's written 
permission to be contacted by the DMEPOS supplier.
    The commenter added that the policy stated in CMS's February 2010 
frequently asked question (FAQ) 3 regarding what constitutes 
``unsolicited contact'' with a beneficiary is appropriate. CMS's 
response to that question was:

    ``If a physician contacts a supplier on behalf of a beneficiary 
with the beneficiary's knowledge, and then a supplier contacts the 
beneficiary to confirm or gather information needed to provide that 
particular covered item (including delivery and billing 
information), then that contact would not be considered 
``unsolicited.'' Please note that the beneficiary need only be aware 
that a supplier will be contacting him/her regarding the prescribed 
covered item, recognizing that the appropriate supplier may not have 
been identified at the time of consultation.''

    Response: We appreciate the commenter's support. We note that we 
did not specifically solicit comments on our proposed change to Sec.  
424.57(c)(11). As such, we are not in a position to incorporate the 
commenter's requested revision of Sec.  424.57(c)(11) into this final 
rule. However, we have addressed these concerns in our Frequently Asked 
Questions (FAQ) section (available at http://www.cms.gov/MedicareProviderSupEnroll/ by clicking on ``DME Supplier Telemarketing 
Frequently Asked Questions'' under the ``Downloads'' section) and may 
update that information in the future.
    Comment: A commenter supported CMS's proposed revisions regarding 
Sec.  424.57(c)(11), believing that the current standard prohibiting 
``direct solicitation'' of beneficiaries is too broad, thus making it 
difficult for compliant suppliers to operate their businesses and 
respond to the care expectations of beneficiaries. The commenter posed 
several scenarios, asking whether any of them violated the DMEPOS 
supplier standards.
    Response: We appreciate the commenter's support. For the scenarios 
that the commenter posed, we will be conducting significant outreach to 
the DMEPOS supplier and beneficiary communities before and after the 
implementation of this final rule. This will include the issuance of 
updated frequently asked questions (FAQs). We will address the general 
tenets of the commenter's scenarios in our FAQ updates.
    Comment: One commenter stated that the proposal to remove the 
definition of ``direct solicitation'' from Sec.  424.57(c)(11) will 
continue to unnecessarily restrain DMEPOS suppliers. In order to reduce 
annoying or abusive marketing practices while also granting suppliers 
more freedom to legitimately contact beneficiaries, the commenter 
recommended that Sec.  424.57(c)(11) be revised to allow beneficiaries 
to give verbal permission for a supplier to contact them, and/or allow 
DMEPOS suppliers to contact beneficiaries when they have received a 
written order or prescription for a Medicare-covered item to be 
furnished from the patient's physician prior to contact with the 
beneficiary.
    Response: We disagree with the commenter's first recommendation as 
it pertains to Sec.  424.57(c)(11)(i) regarding verbal consent. Due to 
the potential for abuse, we believe it is important that there be a 
documented record of the beneficiary's approval of the contact. 
Concerning this recommendation and as previously explained, we are not 
in a position to adopt this suggestion for this final rule. However, we 
may consider addressing the issue through future rulemaking.
    Comment: A commenter noted that the April 4, 2011 proposed rule 
stated: ``In the interim, we intend to instruct Medicare contractors to 
continue applying the restrictions on telephone solicitation that were 
in effect before publication of the August 27, 2010 final rule, instead 
of implementing the final rule's requirements regarding direct

[[Page 14991]]

solicitation.'' The commenter requested that CMS explain its legal 
authority to instruct Medicare contractors not to enforce the 
regulatory modification to the ``direct solicitation'' requirement made 
in the August 27, 2010 final rule. The commenter stated that Federal 
regulations have the effect of law and that CMS instructions cannot 
trump them.
    Response: We understand the commenter's concerns. However, due to 
the concerns that we ourselves had regarding the implementation of the 
August 27, 2010 final rule, we decided not to enforce it while working 
on the April 4, 2011 proposed rule. Indeed, we believed that the direct 
solicitation restrictions in the August 27, 2010 rule created an 
exigent situation, such that enforcement of the rule as written would 
have been problematic. Nor would it have benefitted the DMEPOS supplier 
community, Medicare beneficiaries, or CMS for the August 27, 2010 rule 
to have been enforced while waiting for the restrictions in question to 
be removed via a subsequent regulation.
    Comment: A commenter recommended that CMS retain the ``direct 
solicitation'' provisions established in the August 27, 2010 final 
rule, and modify the definition of ``direct solicitation'' found in 
Sec.  424.57(a) by deleting the phrase, ``which includes, but is not 
limited to.'' The commenter believes by deleting this phrase it would 
make the ``direct solicitation'' definition less ambiguous.
    Response: For reasons previously stated, we believe that the 
definition of ``direct solicitation'' should be deleted from the 
regulations.
    Comment: A commenter requested that CMS explain, using actual 
examples: (1) Why it believed a problem existed in unwanted and 
unsolicited communications between DMEPOS suppliers and beneficiaries; 
(2) whether those problems have abated or increased; and (3) why it is 
not taking the necessary steps to reduce or eliminate unwanted and 
unsolicited communications between DMEPOS suppliers and beneficiaries.
    Response: We disagree with the commenter's assertion that we have 
not taken steps to resolve these problems. We have not conducted formal 
studies in a way that would enable us to quantify whether those issues 
have abated or increased. Although we are modifying the supplier 
standard on direct solicitation at Sec.  424.57(c)(11), we will 
continue to actively monitor the issue of unwanted and unsolicited 
communications between DMEPOS suppliers and beneficiaries. We will also 
be working with law enforcement agencies to determine if further agency 
intervention is required. In the event we believe that we need to take 
action to limit these types of communications, we will engage in 
further rulemaking to address this concern.
    Comment: A commenter recommended that CMS add a subparagraph (iv) 
to Sec.  424.57(c)(11) that will allow suppliers, after receipt of a 
prescription or prescriber order, to contact individuals to coordinate 
the delivery of a covered item. The commenter stated that it can be 
extremely difficult, and sometimes impossible, for suppliers to 
coordinate timely delivery of an item without first contacting the 
beneficiary. The commenter also noted that the proposed language in 
Sec.  424.57(c)(11)(ii) is ambiguous because it states that the 
supplier may contact the beneficiary to arrange delivery only after the 
item has already been furnished. In short, the commenter contends that 
the supplier must contact the beneficiary in order to furnish the item; 
waiting for written permission from the beneficiary before contacting 
him or her is neither practical nor efficient. Another commenter agreed 
that contact with the beneficiary is necessary so that the item can be 
furnished. Another commenter contended that contacting beneficiaries 
about the delivery of a prescribed item is, in actuality, ``care 
coordination,'' not telemarketing, and is not an ``unsolicited 
communication.''
    Response: As previously explained, we are not able to adopt the 
commenter's recommendation. However, we may consider addressing the 
issue through future rulemaking.
    Comment: A commenter stated that the August 27, 2010 final rule 
contained a CMS response to a public comment in that rule that stated:

    However, if a physician contacts the supplier on behalf of the 
beneficiary's [sic] with the beneficiary's knowledge, and then a 
supplier contacts the beneficiary to confirm or gather information 
needed to provide that particular covered item (including the 
delivery and billing information), then that contact would not be 
considered a direct solicitation for the purpose of this standard. 
This is the case even if the physician has not specified the precise 
DMEPOS supplier that will be contacting the beneficiary regarding 
the item referred by that physician.

The commenter stated that the April 4, 2011 proposed rule removing the 
prohibition against ``direct solicitation'' did not address this 
specific issue. The commenter sought confirmation that the quoted 
verbiage remains CMS policy notwithstanding the removal of the ``direct 
solicitation'' reference.
    Response: For reasons previously stated, we are finalizing the 
version of Sec.  424.57(c)(11) that was in the April 4, 2011 proposed 
rule by removing the definition of ``direct solicitation.'' The 
language in this final rule reflects our policy on this particular 
issue. The quoted verbiage still reflects our policy with regard to 
this provision.
    Comment: One commenter stated that direct solicitation creates an 
opportunity for businesses to solicit the purchase of products that 
recipients may not need, and that this opens the door for fraud and 
waste.
    Response: We appreciate the commenter's concern. As previously 
stated, we will continue to actively monitor the issue of unwanted and 
unsolicited communications between DMEPOS suppliers and beneficiaries. 
We will also be working with law enforcement agencies to determine if 
further agency intervention is required. In the event we believe that 
we need to take action to limit these types of communications, we will 
engage in further rulemaking to address this concern.
    After review of the public comments received, we are finalizing our 
proposals to remove the definition of ``direct solicitation'' from 
Sec.  424.57(a), to revise Sec.  424.57(c)(11) to remove all references 
to ``direct solicitation,'' and to clarify that the prohibition is 
limited to telephonic contact.

B. Contractual Arrangement Issues

    In the August 27, 2010 final rule, we finalized an additional layer 
of oversight of DMEPOS suppliers via State law. Specifically, we added 
a new paragraph (c)(1)(ii) to Sec.  424.57. It read--
     State licensure and regulatory requirements. If a State 
requires licensure to furnish certain items or services, a DMEPOS 
supplier--
    ++ Must be licensed to provide the item or service;
    ++ Must employ the licensed professional on a full-time or part-
time basis, except for DMEPOS suppliers who are--
--Awarded competitive bid contracts using subcontractors to meet this 
standard; or
--Allowed by the State to contract licensed services as described in 
paragraph (c)(1)(ii)(C) of this section;
--Must not contract with an individual or other entity to provide the 
licensed services, unless allowed by the State where the licensed 
services are being performed.
    After the implementation of Sec.  424.57(c)(1)(ii), the absence of 
specific State laws regarding certain areas of DMEPOS supplier 
oversight caused

[[Page 14992]]

confusion among suppliers regarding who they could contract with. This 
was especially true regarding paragraphs (ii)(B)(2) and (ii)(C), which 
use the term ``allowed by the State.'' Therefore in the April 4, 2011 
proposed rule, we stated that we would revise Sec.  424.57(c)(1)(ii) to 
read--
     State licensure and regulatory requirements. If a State 
requires licensure to furnish certain items or services, a DMEPOS 
supplier--
    ++ Must be licensed to provide the item or service; and
    ++ May contract with a licensed individual or other entity to 
provide the licensed services unless expressly prohibited by State law.
    We believed that this change would clarify our expectations with 
regard to State licensure and contracts. We received the following 
comment on this proposal:
    Comment: A commenter expressed support for our proposed revision to 
Sec.  424.57(c)(1)(ii), stating that it is straightforward compared to 
the current standard. The commenter also posed several factual 
scenarios and asked whether said situations would constitute violations 
of the DMEPOS supplier standards.
    Response: We appreciate the commenter's support concerning this 
provision. As previously mentioned, we will be conducting outreach to 
the DMEPOS supplier community before and after the implementation of 
this final rule. This will include the issuance of updated FAQs. We 
will address the general tenets of the commenter's scenarios during 
this process. We also remind suppliers that they must always comply 
with any applicable Federal and State laws, including, without 
limitation, those related to fraud and abuse.
    After review of the public comments received, we are finalizing our 
proposed revision to Sec.  424.57(c)(1)(ii) without modification.

C. Local Zoning Requirements

    In the August 27, 2010 final rule, we stated in the new Sec.  
424.57(c)(1)(iii) that the DMEPOS supplier must operate its business 
and furnish Medicare covered supplies in compliance with local zoning 
requirements. We believe that this would help ensure that DMEPOS 
suppliers were providing goods and services to Medicare beneficiaries 
in a physical location, rather than out of a residence; indeed, the 
latter practice is often prohibited by municipal code zoning 
requirements. However, the wide variances in State and municipal laws 
and the potential difficulty our contractors could have in verifying 
compliance with municipal codes, led us to propose the elimination of 
Sec.  424.57(c)(1)(iii) in the April 4, 2011 proposed rule. In 
hindsight, we believe that the task of ensuring that DMEPOS suppliers 
comply with local zoning requirements is best left to the States. The 
State's verification of the supplier's compliance will generally be 
reflected in the supplier's business license status, which the National 
Supplier Clearinghouse (NSC) validates. Thus, ensuring the supplier's 
adherence to all State and local laws is, in part, accomplished through 
the verification of the supplier's licensure status. We received the 
following comments on this proposal:
    Comment: A commenter requested that CMS explain the following:
     Whether the NSC verified that suppliers met local zoning 
requirements before the publication of the January 25, 2008 proposed 
rule entitled ``Medicare Program; Establishing Additional Medicare 
Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) 
Supplier Enrollment Standards.''
     Whether the NSC verified that DMEPOS suppliers met local 
zoning requirements between January 2008 and the publication of the 
August 27, 2010 final rule.
     How this proposed change (that is, no longer verifying 
local zoning requirements) will impact CMS's efforts to reduce fraud, 
waste and abuse in the Medicare program.
     Whether it believes that more unscrupulous DMEPOS 
suppliers will try and obtain Medicare billing privileges in 
residential neighborhoods as a result of limiting the NSC from denying 
or revoking Medicare billing privileges based on local zoning 
requirements.
    Response: The NSC did not routinely verify, either before or after 
the publication of the January 25, 2008 proposed rule, whether DMEPOS 
suppliers met local zoning requirements. Therefore, we believe that our 
proposed change will not impact our ability to combat fraud, waste, and 
abuse, as it simply codifies existing practices. As explained 
previously, the State's verification of the supplier's compliance with 
local laws will often be reflected in the supplier's State business 
license status, which the NSC verifies. We note that DMEPOS suppliers 
would still be required to comply with all applicable Federal and State 
laws to comply with the supplier standards. Furthermore, suppliers are 
still required to comply with all applicable local zoning requirements. 
However, we believe that allowing local municipalities to enforce their 
zoning requirements is most appropriate, as they are most familiar with 
their respective requirements and have jurisdiction over these matters.
    Comment: One commenter stated that in the April 4, 2011 proposed 
rule, CMS stated: ``In the August 27, 2010 final rule, we finalized 
regulations at Sec.  424.57(c)(1)(iii) that required DMEPOS suppliers 
to comply with all local zoning requirements.'' This statement, the 
commenter contended, made it appear that CMS established the 
requirement that DMEPOS suppliers adhere to local zoning requirements 
in August 2010. The commenter disagreed with this statement, noting 
that the March 2009 version of the CMS-855S showed that CMS required 
DMEPOS suppliers to submit ``local (city/county) business licenses'' in 
March 2009, if not before. The commenter recommended that CMS withdraw 
its proposal to remove the provision found at Sec.  424.57(c)(1)(iii) 
until it provides more facts and data to the public about why this 
change should be made. Another commenter opposed the proposal to remove 
Sec.  424.57(c)(1)(iii), believing that it would increase Medicare's 
exposure to fraud, waste, and abuse.
    Response: The previously quoted statement in the August 27, 2010 
final rule was not meant to imply that Sec.  424.57(c)(1)(iii) was a 
new requirement. It was merely a restatement of the fact that we had 
finalized Sec.  424.57(c)(1)(iii) in the August 27, 2010 rule. However, 
we decline to accept the suggestion to withdraw our proposal to remove 
Sec.  424.57(c)(1)(iii) for the reasons outlined in the April 4, 2011 
proposed rule and in the summary of this provision outlined earlier in 
this final rule.
    After review of the public comments received, we are finalizing the 
proposed changes to Sec.  424.57(c)(1) without modification.

D. State Licensure Requirement Exception

    Per Sec.  424.57(c)(7), a DMEPOS supplier must maintain a physical 
facility on an appropriate site. The August 27, 2010 final rule added 
several paragraphs to Sec.  424.57(c)(7), of which paragraph 
(c)(7)(i)(A) stated that an appropriate site must, among other things, 
meet the following size requirement:

    Except for State-licensed orthotic and prosthetic personnel 
providing custom fabricated orthotics or prosthetics in private 
practice, (the DMEPOS supplier) maintains a practice location that 
is at least 200 square feet. (Parentheses added.)

    In the April 4, 2011 rule, we proposed to modify Sec.  
424.57(c)(7)(i)(A) to allow

[[Page 14993]]

orthotic and prosthetic professionals to qualify for the minimum square 
footage exception if the State does not offer licensure. We believed 
that due to variations in State licensing procedures, comparable 
practitioners should not be excluded from this exception. Of course, if 
a State does offer licensure for orthotic and prosthetic professionals, 
the supplier must obtain licensure in order to qualify for the minimum 
square footage exception. We received the following comments on this 
proposal:
    Comment: For the square footage requirements, a commenter stated 
that DMEPOS suppliers furnishing orthotic and prosthetic items and 
services should have a facility large enough to perform all activities 
associated with orthotic and prosthetic activities, including a 
laboratory. The commenter expressed concern about orthotic and 
prosthetic offices that are very small, have little overhead, and spend 
time serving patients at nursing homes and other provider facilities. 
The commenter stated that this makes it difficult for larger facilities 
to compete.
    Response: As we stated in the August 27, 2010 final rule (75 FR 
52636), we received the following comment to the January 25, 2008 
proposed rule, which proposed a minimum square footage requirement in 
Sec.  424.57(c)(7):

    One commenter believes the minimum square footage requirement 
causes potential issues for orthotic and prosthetic suppliers, since 
the lab area is separate from the patient area and is often located 
off-site. The patient interaction area is most important, but since 
this area can be as small as 80 square feet, the size requirement 
should not be imposed as to orthotic and prosthetic suppliers.

    We agreed with this comment and, as a result, established an 
exception to the proposed requirement for certain orthotic and 
prosthetic suppliers. While we understand the April 4, 2011, proposed 
rule commenter's concerns, we continue to believe that this exception 
is necessary.
    After review of the public comments received, we are finalizing the 
proposed changes to Sec.  424.57(c)(7)(i)(A) without modification.

E. Open Hours Exception

    Section 424.57(c)(30)(i), in the August 27, 2010 final rule, states 
that suppliers must be open to the public a minimum of 30 hours per 
week. Section (c)(30)(ii)(B) of this section prescribes an exception to 
this requirement for ``licensed non-physician practitioners whose 
services are defined in sections 1861(p) and 1861(g) of the Act (and) 
furnishes items to his or her own patients as part of his or her 
professional service.'' (Parentheses added.) Sections 1861(p) and (g) 
of the Act define certain outpatient physical therapy services and 
certain outpatient occupational therapy services, respectively. In the 
April 4, 2011 proposed rule to clarify which non-physician 
practitioners fall under Sec.  424.57(c)(30)(ii)(B), we proposed to 
remove the phrase ``licensed non-physician practitioners'' from Sec.  
424.57(c)(30)(ii)(B) and simply refer to physical and occupational 
therapists.
    We did not receive any comments on this provision. Therefore, we 
are finalizing proposed changes to Sec.  424.57(c)(30)(ii)(B) without 
modification.

F. Out of Scope Comments

    We received several other comments that were outside of the scope 
of the proposed rule. Therefore, we are not addressing these comments 
in this final rule.

III. Provisions of Final Rule

    This final rule finalizes the provisions of the proposed rule 
without modification.

IV. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35).

V. Regulatory Impact Statement

    We have examined the impacts 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, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security 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 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). 
This final rule does not reach the economic threshold and thus is not 
considered a major rule.
    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 small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$7.0 million to $34.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity. We are not preparing 
an analysis for the RFA because the Secretary has determined that this 
rule will not have a significant economic impact on a substantial 
number of small entities. The provisions contained in this final rule 
are primarily procedural and do not require DMEPOS suppliers to incur 
additional operating costs. They merely clarify several provisions in 
the DMEPOS supplier standards covered in Sec.  424.57. We anticipate a 
minimal economic impact, if any, on small entities.
    As of March 2008, there were 113,154 individual DMEPOS suppliers. 
However, due to the affiliation of some DMEPOS suppliers with chains, 
there were only approximately 65,984 unique billing numbers. We believe 
that approximately 20 percent of the DMEPOS suppliers are located in 
rural areas.
    Comment: A commenter suggested that we use current data (for 
example, June 2011) rather than data from 2008 to update the number of 
DMEPOS suppliers found in the Regulatory Impact Analysis (RIA) and the 
percentage of DMEPOS suppliers that are located in rural areas.
    Response: The percentage of DMEPOS suppliers located in rural areas 
remains largely unchanged from 2008. As of June 2011, there were 
approximately 102,000 individual DMEPOS suppliers enrolled in Medicare. 
We believe that approximately 20 percent of Medicare-enrolled DMEPOS 
suppliers are located in rural areas.
    Comment: A commenter recommended that CMS more fully explain how 
this proposed change will impact Medicare beneficiaries.
    Response: We believe that Medicare beneficiaries will be well-
served by the provisions of this final rule, as the protections 
afforded by Sec.  424.57(c)(11) will remain largely intact.
    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

[[Page 14994]]

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 100 beds. We are not preparing an analysis for section 
1102(b) of the Act because the Secretary has determined that this final 
rule will 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 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million, updated annually for inflation. In 2011, that threshold is 
approximately $136 million. This rule does not mandate expenditures by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $136 million; therefore, no analysis is required.
    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 regulation does not impose any costs on State 
or local governments, the requirements of E.O. 13132 are not 
applicable.
    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 424

    Emergency medical services, Health facilities, Health 
professionals, Medicare, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
1. The authority citation for part 424 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart D--To Whom Payment Is Ordinarily Made

Sec.  424.57  [Amended]

0
2. Section 424.57 is amended by--
0
A. Removing the definition of ``Direct solicitation'' in paragraph (a).
0
B. Revising paragraph (c)(1)(ii).
0
C. Removing paragraph (c)(1)(iii).
0
D. Revising paragraphs (c)(7)(i)(A) and (c)(11).
0
E. In paragraph (c)(30)(ii)(B), removing the phrase ``Licensed non-
physician practitioners'' and adding the phrase ``A physical or 
occupational therapist'' in its place.
    The additions and revisions read as follows:

Sec.  424.57  Special payment rules for items furnished by DMEPOS 
suppliers and issuance of DMEPOS supplier billing privileges.

    (c) * * *
    (1) * * *
    (ii) State licensure and regulatory requirements. If a State 
requires licensure to furnish certain items or services, a DMEPOS 
supplier--
    (A) Must be licensed to provide the item or service; and
    (B) May contract with a licensed individual or other entity to 
provide the licensed services unless expressly prohibited by State law.
* * * * *
    (7) * * *
    (i) * * *
    (A)(1) Except for orthotic and prosthetic personnel described in 
paragraph (c)(7)(i)(A)(2) of this section, maintains a practice 
location that is at least 200 square feet beginning--
    (i) September 27, 2010 for a prospective DMEPOS supplier;
    (ii) The first day after termination of an expiring lease for an 
existing DMEPOS supplier with a lease that expires on or after 
September 27, 2010 and before September 27, 2013; or
    (iii) September 27, 2013, for an existing DMEPOS supplier with a 
lease that expires on or after September 27, 2013.
    (2) Orthotic and prosthetic personnel providing custom fabricated 
orthotics or prosthetics in private practice do not have to meet the 
practice location requirements in paragraph (c)(7)(i)(A)(1) of this 
section if the orthotic and prosthetic personnel are--
    (i) State-licensed; or
    (ii) Practicing in a State that does not offer State licensure for 
orthotic and prosthetic personnel.
* * * * *
    (11) Must agree not to contact a beneficiary by telephone when 
supplying a Medicare-covered item unless one of the following applies:
    (i) The individual has given written permission to the supplier to 
contact them by telephone concerning the furnishing of a Medicare-
covered item that is to be rented or purchased.
    (ii) The supplier has furnished a Medicare-covered item to the 
individual and the supplier is contacting the individual to coordinate 
the delivery of the item.
    (iii) If the contact concerns the furnishing of a Medicare-covered 
item other than a covered item already furnished to the individual, the 
supplier has furnished at least one covered item to the individual 
during the 15-month period preceding the date on which the supplier 
makes such contact.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: January 11, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Approved: February 21, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-5913 Filed 3-9-12; 4:15 pm]
BILLING CODE 4120-01-P
```