Federal Register / Vol. 72, No. 147 / Wednesday, August 1, 2007 / Proposed Rules 42001 

TABLE 3.—SITES WHERE ACTION OCCURRED—Continued 

CS–3 (CG)* CS–16/CS–17/DDOU* FS–20* 

CS–4* CS–22 FS–23 

CS–4 (CG)/FS–1 (CG)* FS–2 FS–25* 

CS–5* FS–4 FS–26 (CG) 

CS–6*/FS–22 FS–7 LF–4 

CS–6 (CG)* FS–9* SD–2/FS–6/FS–8 

CS–8/FS–21* FS–13 SD–3/FTA–3/CY–4 

Key: CS = Chemical Spill. 

CY = Coal Yard. 

DDOU = Drum Disposal Operable Unit. 

FS = Fuel Spill. 

FTA = Fire Training Area. 

LF = Landfill. 

SD = Storm Drain. 

USCG = U.S. Coast Guard. 

* Includes structure(s) 

[FR Doc. E7–14677 Filed 7–31–07; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 424 

[CMS–6006–P] 

RIN 0938–AO84 

Medicare Program; Surety Bond 

Requirement for Suppliers of Durable 

Medical Equipment, Prosthetics, 

Orthotics, and Supplies (DMEPOS) 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: Consistent with section 

4312(a) of the Balanced Budget Act of 

1997 (BBA), this proposed rule 

implements section 1834(a)(16)(B) of the 

Social Security Act (the Act) by 

requiring all Medicare suppliers of 

durable medical equipment, prosthetics, 

orthotics and supplies (DMEPOS) to 

furnish CMS with a surety bond. We 

believe that this requirement would 

limit the Medicare program risk to 

fraudulent DME suppliers; enhance the 

Medicare enrollment process to help 

ensure that only legitimate DME 

suppliers are enrolled or are allowed to 

remain enrolled in the Medicare 

program; ensure that the Medicare 

program recoups erroneous payments 

that result from fraudulent or abusive 

billing practices by allowing CMS or its 

designated contractor to seek payments 

from a Surety up to the penal sum; and 

help ensure that Medicare beneficiaries 

receive products and services that are 

considered reasonable and necessary 

from legitimate DME suppliers. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on October 1, 2007. 

ADDRESSES: In commenting, please refer 

to file code CMS–6006–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 

in this regulation to http:// 

www.cms.hhs.gov/eRulemaking. Click 

on the link ‘‘Submit electronic 

comments on CMS regulations with an 

open comment period.’’ (Attachments 

should be in Microsoft Word, 

WordPerfect, or Excel; however, we 

prefer Microsoft Word.) 

2. By regular mail. You may mail 

written comments (one original and two 

copies) to the following address only: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–

6006–P, P.O. Box 8017, Baltimore, 

MD 21244–8017. 

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 (one 

original and two copies) to the following 

address only: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–

6006-P, Mail Stop C4–26–05, 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

7195 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

(Because access to the interior of the 

HHH Building is not readily available to 

persons without Federal Government 

identification, commenters are 

encouraged to leave their comments in 

the CMS drop slots located in the main 

lobby of the building. A stamp-in clock 

is available for persons wishing to retain 

a proof of filing by stamping in and 

retaining an extra copy of the comments 

being filed.) 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by mailing 

your comments to the addresses 

provided at the end of the ‘‘Collection 

of Information Requirements’’ section in 

this document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Frank Whelan, (410) 786-1302. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on all issues 

set forth in this rule to assist us in fully 

considering issues and developing 

policies. You can assist us by 

referencing the file code CMS–6006–P 

and the specific ‘‘issue identifier’’ that 

precedes the section on which you 

choose to comment. 

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 


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42002 Federal Register / Vol. 72, No. 147 / Wednesday, August 1, 2007 / Proposed Rules 

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.cms.hhs.gov/ 

eRulemaking. Click on the link 

‘‘Electronic Comments on CMS 

Regulations’’ 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. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. General and Legislative History 

Medicare services are furnished by 

two types of entities—providers and 

suppliers. At § 400.202, ‘‘provider’’ is 

defined as a hospital, a critical access 

hospital (CAH), a skilled nursing 

facility, a comprehensive outpatient 

rehabilitation facility, 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. The term ‘‘provider’’ is also 

defined in sections 1861(u) and 1866(e) 

of the Social Security Act (the Act). 

A supplier that furnishes durable 

medical equipment, prosthetics, 

orthotics, and suppliers (DMEPOS) is 

one category of supplier. Other supplier 

categories may include, for example, 

physicians, nurse practitioners, and 

physical therapists. The term 

‘‘DMEPOS’’ encompasses the types of 

items included in the definition of 

medical equipment and supplies found 

at section 1834(j)(5) of the Act. 

For purposes of the DMEPOS supplier 

standards, the term ‘‘supplier’’ is 

defined in § 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 that meets the 

DMEPOS supplier standards. This 

proposed rule would apply to all 

DMEPOS suppliers. Those individuals 

or entities that do not furnish DMEPOS 

items but furnish other types of health 

care services only (for example, 

physician services or nurse practitioner 

services) would not be subject to this 

requirement. 

B. Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

(DMEPOS) 

1. Durable Medical Equipment 

The term DME is defined at section 

1861(n) of the Act. This definition, in 

part, excludes from coverage as DME 

items furnished in skilled nursing 

facilities and hospitals (equipment 

furnished in those facilities is paid for 

as part of their routine or ancillary 

costs). Also, the term DME is included 

in the definition of ‘‘medical and other 

health services’’ found at section 

1861(s)(6) of the Act. Furthermore, the 

term is defined in § 414.202 as 

equipment furnished by a supplier or a 

HHA that—

(1) Can withstand repeated use; 

(2) Is primarily and customarily used 

to serve a medical purpose; 

(3) Generally is not useful to an 

individual in the absence of an illness 

or injury; and 

(4) Is appropriate for use in the home. 

Examples of DMEPOS supplies include 

items such as blood glucose monitors, 

hospital beds, nebulizers, oxygen 

delivery systems, and wheelchairs. 

2. Prosthetic Devices 

Prosthetic devices are included in the 

definition of ‘‘medical and other health 

services’’ under section 1861(s) (8) of 

the Act. Prosthetic devices are defined 

in this section of the Act 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. Under section 

1834(h)(4)(B), prosthetic devices do not 

include parenteral and enteral nutrition 

nutrients and implantable items payable 

under section 1833(t) of the Act. 

3. Orthotics and Prosthetics 

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 of 

required because of a change in 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.’’

4. Supplies 

Section 1861(s)(5) of the Act includes 

‘‘surgical dressings, splints, casts, and 

other devices used for reduction of 

fractures and dislocation’’ as one of the 

‘‘medical and other health services’’ that 

is covered by Medicare. Other items that 

may be furnished by suppliers would 

include (among others): 

• Prescription drugs used in 

immunosuppressive therapy furnished 

to an individual who receives an organ 

transplant for which payment is made 

under this title, and that are furnished 

within a certain time period after the 

date of the transplant procedure as 

noted at 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 listed at 

section 1861(s)(12) of the Act. 

• Home dialysis supplies and 

equipment, self-care home dialysis 

support services, and institutional 

dialysis services and supplies included 

at section 1861(s)(2)(F) of the Act. 

• Oral drugs prescribed for use as an 

anticancer therapeutic 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. 

II. General Overview of the Proposed 

Rule 

In the January 20, 1998 Federal 

Register (63 FR 2926), we published a 

proposed rule to reflect the changes 

made to section 1834 of the Act by 

section 4312(a) of the Balanced Budget 

Act of 1997 (BBA) (Pub. L. 105–33). 

Section 4312(a) of the BBA amended 

section 1834(a) of the Act by adding 

paragraph (a)(16)(B) which requires a 

DMEPOS supplier to provide us, on a 

continuing basis, with a surety bond of 

at least $65,000, as a condition of the 

issuance or renewal of a provider 

number. Section 1834(a)(16), as 

amended by section 4312(c) of the BBA, 

further provides that we may also 

require a surety bond from some or all 

providers or suppliers who furnish 

items or services under Medicare Part A 

or Part B. However, since section 902 of 

the Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (Pub. L. 108–173) (MMA) prohibits 

the Secretary from finalizing a proposed 

rule related to Title 18 that was 

published more than 3 years earlier 

except under exceptional 

circumstances, this rule was never 

finalized. 

As a result, we are proposing this rule 

at this time to implement the statutory 


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surety bond requirement set forth in 

section 1834(a)(16)(B) of the Act. 

However, given the lapse in time 

between the statutory effective date and 

date of this proposed rule, we believe 

that it appropriate to adjust the amount 

of the surety bond from $50,000 in 1997 

by the Consumer Price Index (CPI) and 

calculate a higher surety bond amount. 

In doing so, we have adjusted the initial 

surety bond amount of $50,000 by the 

CPI and have calculated that a $50,000 

surety bond in 1997 would equate to a 

surety bond value of $64,907.17 in 2007. 

Further, we have rounded the calculated 

value of $64,907.17 to the nearest 

thousand to derive a surety bond 

amount of $65,000. We believe that 

establishing a $65,000 surety bond for 

DMEPOS suppliers would: (1) Limit the 

Medicare program risk to fraudulent 

DME suppliers; (2) enhance the 

Medicare enrollment process to help 

ensure that only legitimate DME 

suppliers are enrolled or are allowed to 

remain enrolled in the Medicare 

program; (3) ensure that the Medicare 

program recoups erroneous payments 

that result from fraudulent or abusive 

billing practices by allowing CMS or its 

designated contractor to seek payments 

from a Surety up to the penal sum; and 

(4) help ensure that Medicare 

beneficiaries receive products and 

services that are considered reasonable 

and necessary from legitimate DME 

suppliers. 

III. Provisions of the Proposed Rule 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘PROVISIONS’’ at the 

beginning of your comments.] 

A. Special Payment Rules for Items 

Furnished by DMEPOS Suppliers and 

Issuance of DMEPOS Supplier Billing 

Numbers (§ 424.57) 

In § 424.57, we are proposing to 

define the following terms as they are 

used throughout this regulation in the 

context of the surety bond requirements: 

• Assessment. 

• Authorized Surety. 

• Civil money penalty. 

• Government-Operated Suppliers. 

• National Supplier Clearinghouse 

(NSC). 

• Penal Sum. 

• Rider. 

• Sufficient evidence. 

• Surety bond. 

• Unauthorized Surety. 

• Unpaid claim. 

Although we are proposing to define 

‘‘unauthorized surety’’, we clarify that 

we do not envision that we would need 

to declare a surety to be unauthorized 

except on rare occasions. We anticipate 

that virtually every surety would 

provide us, upon written request, 

information needed to verify the 

identity of a bondholder, the effective 

date of the bond, and proof that the 

surety issued the bond as represented by 

the supplier. However, if a surety fails 

to comply with our request for this 

information, we would consider that 

surety as unauthorized to provide bonds 

to DMEPOS suppliers seeking 

enrollment in the Medicare program. 

We believe that without this provision, 

some sureties may not be inclined to 

provide information we need on a 

timely basis. 

Furthermore, a surety is unauthorized 

if it had previously failed to comply 

with a reasonable request from us for 

payment against a bond. An example of 

a reasonable request would be a request 

in writing, signed by an official of CMS 

or its representatives, or documentation 

about the amount payable by the 

supplier. This provision would allow us 

to take action to prevent a surety from 

issuing a bond to a Medicare DMEPOS 

supplier in cases where we have 

determined that the surety failed to 

meet its obligations to the Medicare 

program. 

In § 424.57, we propose to add new 

(c)(26). Specifically, we propose that—

• § 424.57(c)(26) would specify the 

requirements for a DMEPOS supplier 

seeking to become a Medicare-enrolled 

DMEPOS supplier. 

• § 424.57(c)(26)(i) would clarify the 

minimum requirements for a DMEPOS 

supplier. We specify that each 

Medicare-enrolled DMEPOS supplier 

must obtain a surety bond for each 

National Provider Identifier (NPI) from 

an authorized surety. The surety bond 

or government security must be in the 

amount of $65,000 and in the form 

specified by the Secretary. While we are 

proposing to adjust the amount of the 

surety bond from $50,000 in 1997 by the 

CPI and calculate a higher surety bond 

amount of $65,000 in 2007, we are not 

proposing to adjust the base surety bond 

amount by the CPI annually thereafter. 

However, we will consider whether any 

additional adjustments (increase or 

decrease) in the base surety amount are 

necessary in through a future 

rulemaking effort. 

• § 424.57(c)(26)(i)(A) would specify 

that a DMEPOS supplier must submit a 

surety bond with its initial paper or 

electronic Medicare enrollment 

application (CMS–855S, OMB Number 

0938–0685) or with its paper or 

electronic revalidation or reenrollment 

application. 

• § 424.57(c)(26)(i)(B) specifies how a 

change of ownership interest affects the 

DMEPOS supplier. 

• § 424.57(c)(26)(i)(C) specifies that a 

DMEPOS supplier seeking to enroll a 

new location must obtain a new surety 

bond for this new location since this 

new location is also required to be 

enumerated with a unique NPI. 

• § 457.57(c)(26)(ii) would establish 

an exception to the bond requirement 

for a DMEPOS supplier operated by a 

Federal, State, local, or tribal 

government agency if the DME supplier 

has provided CMS with a comparable 

surety bond required under State law 

and if the supplier does not have any 

unpaid claims, Civil Money Penalties 

(CMPs), or assessments. However, a 

government-operated supplier that does 

not qualify for an exception must 

submit a surety bond. We have 

determined that an exception of the 

surety bond requirement for 

government-operated suppliers extends 

only to those suppliers that have a good 

history of paying their Medicare debts. 

The basis for this exception is 

principally that government-operated 

suppliers have the power to tax; 

therefore, it is unlikely the DMEPOS 

suppliers will be unable to pay their 

Medicare debts. Thus, governmentoperated DMEPOS suppliers, by their 

public nature, furnish a comparable or 

greater guarantee of payment than 

would be afforded us by a surety bond 

issued by a private surety. 

Nevertheless, government-operated 

DMEPOS suppliers with a poor history 

of paying their Medicare debts are 

subject to the surety bond requirement. 

While the Medicare contractors collect 

overpayments in full or as part of a 

predetermined payment schedule, such 

as an extended repayment schedule, 

some DMEPOS suppliers default on 

their scheduled repayment plan. When 

this occurs and the repayment schedule 

cannot be extended, we will place the 

DMEPOS supplier on 100 percent 

payment withholding. In the event that 

a government-operated DMEPOS 

supplier is placed on 100 percent 

payment withholding due to nonpayment of an overpayment, the 

DMEPOS supplier will also be required 

to obtain a surety bond. A supplier 

operating under a contract with a 

government agency but not owned and 

staffed by the government would not 

qualify for this exception. Our anecdotal 

experience with previously published 

rules suggests that a governmentoperated entity would timely pay their 

Medicare debts (see the HHA surety 

bond final rule published in the Federal 

Register on January 5, 1998 (63 FR 315); 

amended by a final rule published in 

the Federal Register on March 4, 1998 

(63 FR 10731); a final rule published in 

the Federal Register on June 1, 1998 (63 


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42004 Federal Register / Vol. 72, No. 147 / Wednesday, August 1, 2007 / Proposed Rules 

FR 29656); and a final rule published in 

the Federal Register on July 21, 1998 

(63 FR 41171)). 

• We are soliciting comments on 

whether we should consider 

establishing an exception to the surety 

bond requirement for certain physicians 

and non-physician practitioners, such as 

those that occasionally furnish DMEPOS 

items for the convenience of their 

patients. While we are seeking 

comments about establishing an 

exception for physicians and nonphysician practitioners, we are not 

certain about the scope of the exception 

that should be established for 

physicians and non-physician 

practitioners. As such, we are soliciting 

comments on how to identify whether a 

physician or non-physician practitioner 

should be given an exception to the 

surety bond requirement. We also are 

soliciting comments on any other 

appropriate criteria that we should use 

when considering the establishment of 

an exception to this requirement for 

certain physicians and non-physician 

practitioners. 

• We are soliciting comments on 

whether we should establish an 

exception to the surety bond 

requirement for licensed pharmacists 

who furnish DMEPOS items for the 

convenience of their patients. We also 

are soliciting comments on any other 

appropriate criteria that we should 

consider in establishing an exception to 

this requirement for licensed 

pharmacists. 

• We are also soliciting comments on 

any other appropriate criteria that we 

should consider in establishing an 

exception to this requirement as to these 

types of suppliers. 

• We are also soliciting comment on 

whether we should establish an 

exception to the surety bond 

requirement for large, publicly traded 

chain suppliers of DMEPOS. We are 

soliciting comments on any appropriate 

criteria that we should consider in 

waiving this requirement as to these 

types of suppliers. 

• We are also soliciting comments on 

the appropriate criteria that we may use 

for establishing exceptions for other 

types of DMEPOS suppliers from the 

requirement to purchase a surety bond. 

• § 424.57(c)(26)(iii) would specify 

the terms of a bond submitted by a 

DMEPOS supplier. 

• § 424.57(c)(26)(iv) would specify 

additional DMEPOS supplier bond 

requirements and would specify the 

surety’s liability under the bond for 

unpaid claims, CMPs, or assessments 

that the surety is liable to us, up to a 

total of the full penal amount of the 

bond. Thus, since we are proposing that 

surety bonds be issued in an amount 

equal to $65,000, the surety is liable to 

us for up to $65,000. 

• § 424.57(c)(26)(v) would specify the 

requirements to cancel a surety bond. 

Specifically, this section would allow a 

DMEPOS supplier to terminate or cancel 

a bond upon proper notice to the NSC. 

If another bond is submitted and there 

is a lapse in bond coverage, Medicare 

would not pay for items or services 

furnished during the gap in coverage, 

and the DMEPOS supplier would be 

held liable for the items or services (that 

is, the DMEPOS supplier would not be 

permitted to charge the beneficiary for 

the items or services). Failure by the 

DMEPOS supplier to submit another 

bond would result in revocation of the 

DMEPOS supplier’s Medicare billing 

privileges. The supplier would be 

required to refund the beneficiary any 

amounts collected for services or 

supplies furnished during the gap in the 

surety bond coverage. 

Also, a supplier or surety may not 

place any limitations on the surety bond 

except as specifically provided for in 

this section. Any attempt to do so may 

result in revocation of the DMEPOS 

supplier’s billing privileges and a 

determination that the surety is an 

unauthorized surety. 

• § 424.57(c)(26)(vi) would specify 

that the bond must provide that actions 

under the surety bond may be brought 

by our contractors or us. 

• § 424.57(c)(26)(vii) would specify 

that the surety must provide 

information regarding their physical 

location including their name, street 

address, city, state, and zip code and, if 

different, their mailing address, 

including name, post office box, city, 

state, and zip code. 

• § 424.57(c)(26)(viii) would specify 

the submission date and the term of the 

DMEPOS supplier bond. 

• § 424.57(c)(26)(viii)(A) would 

specify that each enrolled DMEPOS 

supplier that does not meet the criteria 

for exception must submit to the NSC an 

initial surety bond before (60 days 

following the publication date of the 

final rule). 

• § 424.57(c)(26)(viii)(B) would 

specify the type of bond required to be 

submitted by a DMEPOS supplier under 

this subpart must be either a continuous 

bond or an annual bond, with the 

exception of the initial bond which may 

differ as specified in this section. 

• § 424.57(c)(26)(ix) would specify 

the loss of a DMEPOS supplier 

exception. A DMEPOS supplier that no 

longer qualifies for a exception as a 

government-operated DMEPOS supplier 

must submit a surety bond to the NSC 

within 60 days after it receives notice 

that it no longer meets the criteria for 

and exception. 

• § 424.57(c)(26)(x) would specify the 

conditions under which a DMEPOS 

supplier changes a surety. 

• § 424.57(c)(26)(xi) would specify 

who the parties are to the bond. 

• § 424.57(c)(26)(xii) would specify 

the effect of a DMEPOS supplier’s 

failure to obtain, maintain, and timely 

file a surety bond. 

• § 424.57(c)(26)(xii)(A) would 

specify that we may revoke the 

DMEPOS supplier’s billing privileges if 

an enrolled supplier fails to obtain, file 

timely, and maintain a surety bond as 

specified in this subpart and as 

instructed by us. The revocation is 

effective with the date the bond lapsed 

and any payments for items or services 

furnished on or after that date must be 

repaid to us by the DMEPOS supplier. 

• § 424.57(c)(26)(xii)(B) would 

specify that we refuse to issue billing 

privileges to the DMEPOS supplier if a 

DMEPOS supplier seeking to become an 

enrolled DMEPOS supplier fails to 

obtain and file timely a surety bond as 

specified in this subpart and our 

instructions. 

• § 424.57(c)(26)(xiii) would specify 

the documentation that a DMEPOS 

supplier must have to be in compliance 

with these requirements and that we 

may require a supplier to produce 

documentation that it has a bond and 

that it meets the requirements of this 

section. 

• § 424.57(c)(26)(xiv) would specify 

the effect of subsequent DMEPOS 

supplier payments paid to us. If a surety 

has paid an amount to us on the basis 

of liability incurred under a bond and 

we subsequently collect from the 

DMEPOS supplier, in whole or in part, 

on the unpaid claims, CMPs, or 

assessments that were the basis for the 

surety’s liability, we would reimburse 

the surety the amount that it collected 

from the DMEPOS supplier, up to the 

amount paid by the Surety to us, 

provided the surety has no other 

liability to us under the bond. 

• § 424.57(c)(26)(xv) would specify 

the effect of a review reversing an 

appealed determination. We would 

refund to the DMEPOS supplier the 

amount that the DMEPOS supplier paid 

us, to the extent that the amount relates 

to the matter that was successfully 

appealed, provided all review, 

including judicial review, has been 

completed on the matter. 

In addition, DMEPOS suppliers have 

the right to appeal any adverse 

decisions with respect to unpaid claims, 

CMPs or assessments. DMEPOS 

suppliers must use the following 

applicable appeals provisions specified 


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in 42 CFR associated with each adverse 

determination: Part 405, subpart I 

(claims appeals); Part 1003 (civil money 

penalties); and Part 498 (Medicare 

participation and enrollment). 

We believe that the appeals processes 

as they apply to DMEPOS suppliers and 

sureties should be addressed through a 

private contract between the parties. 

Specifically, we believe that sureties 

should consider requiring DMEPOS 

suppliers to agree to repay the surety 

any payments made by a Medicare 

contractor resulting from a DMEPOS 

supplier’s appeal of any adverse 

decisions with respect to unpaid claims, 

CMPs or assessments. Any such contract 

must be consistent with the applicable 

appeals processes referenced above. In 

determining whether a private contract 

is necessary, we suggest that the sureties 

and DMEPOS suppliers consider the 

following types provisions: appointment 

of representative, repayment of any 

bonding amounts paid to the DMEPOS 

supplier that were already paid by the 

surety and the potential cost of pursuing 

administrative appeals. 

Furthermore, we are soliciting 

comments on requiring DMEPOS 

suppliers to obtain a surety bond of 

more than $65,000 if the DMEPOS 

supplier poses a significantly higher 

than average risk to the Medicare Trust 

Funds. Specifically, we are soliciting 

comments on how to establish elevated 

amounts of surety bonds for higher risk 

DMEPOS suppliers. We are considering 

the option of establishing elevated 

amounts of the surety bond at a rate of 

$65,000 per high risk factor. Also, we 

are soliciting comments on determining 

the high risk factors that should be used. 

We suggest several potential high risk 

factors below, but would consider any 

comments on these factors, as well as 

suggestions for additional factors. 

We are considering a $65,000 increase 

in the surety amount for each 

occurrence when a DMEPOS supplier 

has a final adverse action as specified in 

section 221(g)(1)(A) of the Health 

Insurance Portability and 

Accountability Act of 1996 (Pub. L. 

104–191) (HIPAA). Examples of final 

adverse actions include, but are not 

limited to, Federal and State criminal 

convictions related to the delivery of 

health care item or service, formal or 

official actions, such as revocation or 

suspension of a license, and exclusion 

from participation in Federal or State 

health care programs. The following is 

an example of how high-risk criteria 

would be used to increase the bond 

amount by $65,000 per occurrence. 

• For example, a DMEPOS supplier 

would be required to obtain a surety 

bond in the amount of $130,000, an 

increase of $65,000 from the base surety 

bond amount of $65,000, if the DMEPOS 

supplier or any of its owners, authorized 

officials, or delegated officials had their 

billing privileges revoked within the last 

10 years. If the DMEPOS supplier or any 

of its owners, authorized officials, or 

delegated officials had more than one 

revocation in the last 10 years, then the 

amount of the surety bond the DMEPOS 

supplier would be required to obtain 

would increase $65,000 per occurrence. 

For example, a DMEPOS supplier with 

three different revocations during the 

proceeding 10 years would be required 

to obtain a surety bond in the amount 

of $260,000; $65,000 for the base surety 

amount and $195,000 (3 x $65,000) for 

the multiple revocations. 

In addition to the elevated risk-based 

model described above, we are soliciting 

comments regarding the establishment 

of elevated bond amounts by classifying 

DMEPOS suppliers into two or three 

general categories such as—

• New DMEPOS supplier applicants 

that have no prior billing history with 

the Medicare program that also would 

be required to secure a surety bond; 

• Current Medicare enrolled 

DMEPOS suppliers that do not have any 

prior history of criminal, civil or 

administrative sanctions for billingrelated problems; and, 

• Current Medicare enrolled 

DMEPOS supplier with a prior ‘‘adverse 

history’’ of criminal, civil or 

administrative sanctions for billingrelated problems for which the 

regulation would elevate the amount of 

the required surety by an appropriate 

amount per prior sanction. 

We are soliciting comments regarding 

the appropriate elevated amounts of the 

surety bond using this categorical 

approach. 

We are also soliciting comments on 

whether we should establish an 

exception for rural DMEPOS suppliers 

and the appropriate criteria that we 

should consider in establishing an 

exception for rural DMEPOS suppliers. 

Finally, we are soliciting comments 

on the appropriate period of time that a 

DMEPOS supplier should be required to 

maintain a higher surety bond amount. 

Given the higher level of risk associated 

with DMEPOS suppliers that have one 

or more risk factors, we are proposing to 

establish a timeframe of 5 years. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), we are required to 

provide a 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 the following issues pertaining 

to the information collection 

requirements discussed in this proposed 

rule. 

Special Payment Rules for Items 

Furnished by DMEPOS Suppliers and 

Issuance of DMEPOS Supplier Billing 

Numbers (§ 424.57) 

Section 424.57(c)(26) outlines the 

surety bond requirements for DMEPOS 

suppliers. Specifically, § 424.57(c)(26) 

states that each Medicare-enrolled 

DMEPOS supplier must obtain and 

furnish to the National Supplier 

Clearinghouse (NSC) a surety bond in 

the amount of $65,000. The bond must 

be obtained from an authorized surety, 

and must be submitted for each NPI 

obtained by a Medicare enrolled 

DMEPOS supplier. 

Section 424.57(c)(26)(i) outlines the 

minimum requirements for a DMEPOS 

supplier seeking to become a Medicareenrolled DMEPOS supplier. Section 

424.57(c)(26)(i)(A) requires a DMEPOS 

supplier seeking to become a Medicareenrolled supplier to submit 

documentation verifying possession of a 

surety bond with its Medicare 

enrollment application. Section 

424.57(c)(26)(i)(B) states that a DMEPOS 

supplier seeking to become an enrolled 

supplier through the purchase or 

transfer of assets or ownership interest 

of an enrolled or formerly enrolled 

DMEPOS supplier must provide a surety 

bond that is effective from the date of 

the purchase or transfer in order to 

exercise billing privileges as of that 

date. If the bond is effective at a later 

date, the effective date of the new 

DMEPOS supplier number will be the 

effective date of the surety bond as 

validated by the NSC rather than the 

date of the change of ownership. 

Section 424.57(c)(26)(i)(C) requires a 

DMEPOS supplier that is seeking to 

enroll a new location to obtain a new 

surety bond for that new location since 


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that new location will also require a 

unique NPI. 

Section 424.57(c)(26)(v) discusses the 

change of ownership process. DMEPOS 

suppliers are required to submit an 

updated enrollment application if they 

have undergone a change in ownership. 

As part of the updated application, the 

new owners are required to obtain and 

submit a surety bond to the NSC that is 

effective with the date of the change of 

ownership in order to obtain or retain 

billing privileges. If the bond is effective 

at a later date, the effective date of the 

change of ownership by the new 

DMEPOS supplier number is the date of 

the surety bond as validated by the NSC 

rather than the date of the transfer of 

ownership. 

The burden associated with all of the 

requirements in § 424.57(c)(26)(i) 

through (iv) is the time and effort 

required for a DMEPOS supplier to 

obtain a surety bond and to submit the 

bond as part of its Medicare Enrollment 

Application. 

A DMEPOS supplier is required to 

submit a Medicare enrollment 

application if it is: 

• Enrolling in Medicare for the first 

time as a DMEPOS supplier. 

• Currently enrolled in Medicare as a 

DMEPOS supplier and needs to report 

changes to its business, other than 

enrolling a new business location. 

Changes must be reported within 30 

days of the effective date of the change. 

• Currently enrolled in Medicare as a 

DMEPOS supplier but need to enroll a 

new business location. This is to add a 

new location to an organization with a 

TIN already listed with the NSC. (This 

differs from changing information on an 

already existing location.) 

• Currently enrolled in Medicare as a 

DMEPOS supplier and has been asked 

to verify or update its information. This 

includes situations where it has been 

asked to attest that its organization is 

still eligible to receive Medicare 

payments. 

• Reactivating its Medicare DMEPOS 

supplier billing number (for example, its 

Medicare supplier billing number was 

deactivated because of non-billing, and 

they wish to receive payment from 

Medicare for future claims). 

• Voluntarily terminating its 

Medicare DMEPOS supplier billing 

number. 

The burden associated with 

submitting an updated enrollment 

application is approved under OMB 

control number 0938–0685 with an 

expiration date of April 30, 2009. We 

believe the requirements in 

§ 424.57(c)(26) impose a marginal 

increase in burden as DMEPOS 

suppliers are already required to submit 

the Medicare Enrollment Application. 

We estimate the burden associated 

with the requirements in 

§ 424.57(c)(26)(i) through (v) to be 60 

minutes per DMEPOS supplier. In 

addition, we estimate that 

approximately 116,500 DMEPOS 

suppliers will comply with these 

requirements. Therefore, the estimated 

total annual burden is 116,500 hours. 

Section 424.57(c)(26)(v) states that a 

surety bond may be cancelled with 

written notice from the DMEPOS 

supplier to the NSC. The burden 

associated with this requirement is the 

time and effort necessary for either 

DMEPOS supplier to draft and submit 

the notice of cancellation to the NSC. 

We estimate the burden associated with 

this requirement to be 30 minutes. In 

addition, we anticipate that 1,000 

suppliers will draft and submit the 

necessary documentation. We estimate 

the total annual burden to be 500 hours. 

Section 424.57(c)(26)(ix) requires a 

DMEPOS supplier that no longer 

qualifies as a government-operated 

DMEPOS supplier to submit a surety 

bond to the NSC within 60 days of 

receiving notice that it no longer 

qualifies for a exception. The burden 

associated with this requirement is the 

time and effort necessary for the 

DMEPOS supplier to obtain and submit 

a surety bond to the NSC within 60 days 

of receiving notice that it no longer 

qualifies for a exception. We estimate 

the burden associated with this 

requirement to be 30 minutes. In 

addition, we anticipate that 10 suppliers 

will draft and submit the necessary 

documentation. We estimate the total 

annual burden to be 5 hours. 

Section 424.57(c)(26)(x) requires a 

DMEPOS supplier that obtains a 

replacement surety bond from a 

different surety to cover the remaining 

term of a previously obtained bond to 

submit the new surety bond to the NSC 

within 30 days of expiration of the 

previous bond. The burden associated 

with this requirement is the time and 

effort necessary to obtain and submit the 

new surety bond to the NSC. We 

estimate the burden associated with this 

requirement to be 30 minutes. In 

addition, we anticipate that 1,000 

suppliers will comply with this 

requirement. We estimate the total 

annual burden to be 500 hours. 

Section 424.57(c)(26)(xiii) imposes 

recordkeeping and reporting 

requirements. Section 

424.57(c)(26)(xvi)(A) states that CMS 

may at any time require a DMEPOS 

supplier to show compliance with the 

requirements associated with 42 CFR 

part 424. The burden for this 

requirement is the time and effort 

associated with maintaining the 

necessary documentation on file. While 

this requirement is subject to the PRA, 

we believe the burden is exempt as 

stated in 5 CFR 1320.3(b)(2) because the 

time, effort, and financial resources 

necessary to comply with the 

requirement would be incurred by 

persons in the normal course of their 

activities. 

The burden associated with 

producing the documents upon request 

from CMS is estimated to be 30 minutes 

per DMEPOS supplier. We estimate that 

1,000 DMEPOS suppliers will be asked 

to submit the requested documentation. 

The total annual burden associated with 

this requirement is estimated to be 500 

hours. 

TABLE 1.—ESTIMATED ANNUAL REPORTING AND RECORDKEEPING BURDEN

Regulation section OMB control 

number 

Number of respondents Number of responses Total annual 

burden hours 

424.57(c)(26)(i through iv) ............................................................................ 0938–New ........ 116,500 116,500 116,500 

0938–0685 ....... 400,000 400,000 1,000,000 

§ 424.57(c)(26)(v) .......................................................................................... 0938–New ........ 1,000 1,000 500 

§ 424.57(c)(26)(ix) ......................................................................................... 0938–New ........ 10 10 5 

§ 424.57(c)(26)(xi) ......................................................................................... 0938–New ........ 1,000 1,000 500 

§ 424.57(c)(26)(xii) ........................................................................................ 0938–New ........ 1,000 1,000 500 

Total ....................................................................................................... ........................... ........................ ........................ 1,118,005 


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We submitted a copy of this proposed 

rule with comment to the OMB for its 

review of the information collection 

requirements. These requirements are 

not effective until approved by OMB. 

If you comment on any of these 

information collection and 

recordkeeping requirements, please mail 

copies directly to the following: 

Centers for Medicare and Medicaid 

Services, Office of Strategic 

Operations and Regulatory Affairs, 

Regulations Development Group 

Attn.: William N. Parham, III, CMS–

6006–P Room C4–26–05, 7500 

Security Boulevard, Baltimore, MD 

21244–1850; and 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 

20503. 

Attn.: Carolyn Lovett, CMS Desk 

Officer, CMS–6006–P, 

carolyn_lovett@omb.eop.gov. Fax (202) 

395–6974. 

V. 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. 

VI. Regulatory Impact Analysis 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘IMPACT’’ at the beginning of 

your comments.] 

A. Introduction 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), and Executive Order 13132. 

Executive Order 12866 (as amended 

by Executive Order 13258, which 

merely reassigns responsibility of 

duties) directs agencies to assess all 

costs and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any 1 year). 

We estimate that the surety bond 

requirement as specified in 

§ 424.57(c)(26)(i) would cost 

approximately $198 million annually. 

This cost is based on the number of 

suppliers furnishing DMEPOS 

(approximately 99,000) multiplied by 

the average annual cost of a bond 

($2,000). Based on information received 

from the industry, we estimated that the 

average bond cost is approximately 

$2,000 or 3 percent of the bond’s value. 

We are seeking comments on the 

accuracy of this estimate. 

A surety charges its underwriting fee 

based on the penal sum of the bond. We 

have determined that for this type of 

surety bond the industry usually has an 

underwriting charge of 2 to 3 percent. 

We believe that there is little variation 

of the charge based on geographical 

location or type of DMEPOS supplier 

although the DMEPOS supplier’s 

financial soundness probably would be 

a factor in the rate charged by the surety 

for the bond. We are unable to make an 

estimate of the range of financial 

soundness of DMEPOS suppliers, or its 

impact on the cost of surety bonds for 

Medicare. 

While it is not possible to estimate 

with accuracy the savings that would 

result from the implementation of this 

proposed rule, we believe that surety 

bonds combined with other program 

integrity efforts should reduce the 

number of DMEPOS suppliers that 

currently bill Medicare fraudulently 

because DMEPOS suppliers would be 

subject to the scrutiny of surety 

companies. In addition, surety bonds 

would serve as a deterrent to others 

tempted to engage in fraudulent 

behavior because of the cost of the bond 

and the possibility of the need to post 

collateral. 

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 $6.5 million to $31.5 million in any 

1 year. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area and has 

fewer than 100 beds. We are not 

preparing a rural impact statement since 

we have determined, and certify, that 

this proposed rule would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

Table 2 examines the allowed charges 

to the unique billing numbers (a 

DMEPOS supplier may have multiple 

locations, for example, a chain 

organization, but use only one unique 

billing number), the vast majority of 

DMEPOS suppliers are small entities 

(based on Medicare reimbursement 

alone). 

TABLE 2.—TOTAL NUMBER OF SUPPLIERS ARRANGED BY ALLOWED CHARGES FOR DATES OF SERVICE (JANUARY

THROUGH DECEMBER 2005 BASED ON UNIQUE BILLING NUMBERS) 

Allowed charge 

Number of 

suppliers reimbursed for 

DME 

Number of 

DMEPOS suppliers reimbursed for 

non-DME only 

$0 ............................................................................................................................................................................. 2,016 4,655 

$0.01–$999 .............................................................................................................................................................. 2,544 6,624 

$1,000–$2,499 ......................................................................................................................................................... 2,099 4,993 

$2,500–$4,999 ......................................................................................................................................................... 2,285 4,459 

$5,000–$9,999 ......................................................................................................................................................... 2,964 4,153 

$10,000–$24,999 ..................................................................................................................................................... 4,568 4,328 

$25,000–$49,999 ..................................................................................................................................................... 3,378 2,100 

$50,000–$99,999 ..................................................................................................................................................... 2,780 1,245 


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TABLE 2.—TOTAL NUMBER OF SUPPLIERS ARRANGED BY ALLOWED CHARGES FOR DATES OF SERVICE (JANUARY

THROUGH DECEMBER 2005 BASED ON UNIQUE BILLING NUMBERS)—Continued 

Allowed charge 

Number of 

suppliers reimbursed for 

DME 

Number of 

DMEPOS suppliers reimbursed for 

non-DME only 

$100,000–$499,999 ................................................................................................................................................. 5,955 1,191 

$500,000–$999,999 ................................................................................................................................................. 1,762 220 

$1,000,000–4,999,999 ............................................................................................................................................. 1,345 105 

$5,000,000 or more ................................................................................................................................................. 208 7 

Total .................................................................................................................................................................. 31,904 34,080 

In reviewing Table 2, the term, 

durable medical equipment (DME) is 

defined at section 1861(n) of the Act. 

This definition, in part, excludes from 

coverage as DME, items furnished in 

skilled nursing facilities and hospitals 

(equipment furnished in those facilities 

is paid for as part of their routine or 

ancillary costs). Also, the term DME is 

included in the definition of ‘‘medical 

and other health services’’ found at 

section 1861(s)(6) of the Act. 

Furthermore, the term is defined in 

§ 414.202 as equipment furnished by a 

supplier or a HHA that—

• Can withstand repeated use; 

• 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 DMEPOS supplies include 

items such as blood glucose monitors, 

hospital beds, nebulizers, oxygen 

delivery systems, and wheelchairs. 

Conversely, suppliers of non-DME 

only refers to items or services 

furnished by prosthetics, orthotist, and 

supplies found in section 1861(s)(5) of 

the Act. 

As of April 2007, there were 116,471 

individual DMEPOS suppliers. 

However, due to the affiliation of some 

DMEPOS suppliers with chains, there 

were only approximately 65,984 unique 

billing numbers (31,904 + 34,080). 

According to Table 2, for fiscal year 

2005, approximately 15,800 billing 

suppliers with allowed charges of less 

than $1,000 (2,016 + 4,655 + 2,544 + 

6,624) would have been required to 

submit a surety bond if this proposed 

rule is implemented. Based on our 

analysis, we anticipate that almost all of 

these DMEPOS suppliers, excluding 

physician and other practitioners as 

defined in section 1842(b)(18)(C) of the 

Act, would elect to cease their 

enrollment in Medicare because their 

bond cost would exceed their profit 

from dealing in Medicare-covered items. 

Furthermore, the majority of the 13,836 

DMEPOS suppliers with allowed 

charges $1,000 to $4,999 (2,099 + 4,993 

+ 2,285 + 4,459) would not recoup their 

bond costs from Medicare business. 

Also, a portion of DMEPOS suppliers in 

higher charge categories may decide to 

forego their Medicare enrollment as a 

DMEPOS supplier because of the added 

cost of the bond. We estimate that as 

many as 15,000 DMEPOS suppliers, or 

23 percent of the 65,984 entities, and 15 

percent (or 17,471) of the 116,471 

individual suppliers currently enrolled 

in Medicare could decide to cease 

providing items to Medicare 

beneficiaries if this proposed rule is 

implemented. We believe that 

approximately 22 percent of the 15,000 

DMEPOS suppliers are located in rural 

areas. We further believe that most, if 

not all, of the Medicare business 

conducted by these DMEPOS suppliers 

would be assumed by other DMEPOS 

suppliers remaining in the program (for 

example, by mail order or via the World 

Wide Web). To assist Medicare 

beneficiaries locate a replacement 

DMEPOS supplier who qualifies to 

continue to participate in the Medicare 

program, we would conduct education 

and outreach efforts to ease the 

transition from a departing DMEPOS 

supplier to a DMEPOS supplier that will 

remain in the program. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

That threshold is currently 

approximately $120 million. This 

proposed rule would have no 

consequential effect on State, local, or 

tribal governments. We believe that the 

private sector costs of this rule are 

greater than these thresholds. 

Executive Order 13132 established 

certain requirements that an agency 

must meet when it issues a proposed 

rule (and subsequent final rule) that 

imposes substantial direct requirement 

costs on State and local governments, 

preempts State law, or otherwise has 

Federalism implications. We have 

reviewed this rule under the threshold 

criteria of Executive Order 13132 and 

have determined that it does not 

significantly affect the rights, roles, and 

responsibilities of States. 

B. Alternatives Considered 

As specified in section 4312(a) of the 

BBA, a surety bond is required as long 

as an entity remains a DMEPOS 

supplier. In the proposed rule published 

in the January 20, 1998 Federal Register 

(63 FR 2926), we proposed that a 

DMEPOS supplier would be required to 

obtain a surety bond equal to $65,000 

per TIN, the basic identification element 

for a DMEPOS supplier. However, with 

the more recent assignment of the 

National Provider Identifier (NPI), the 

TIN is no longer the basic identification 

element for a DMEPOS supplier. 

Accordingly, requiring a surety bond for 

each TIN is not consistent with the 

Agency’s NPI implementation or with 

current Medicare regulations. In the 

Agency’s Medicare Subpart Expectation 

Paper, the Agency states that each 

enrolled supplier of DMEPOS that is a 

covered entity under HIPAA must 

designate each practice location (if it 

has more than one) as a subpart and 

ensure that each subpart obtains its own 

unique NPI. Further, § 424.57(b)(1) 

requires that each practice location of a 

supplier of DMEPOS (if it has more than 

one) must, by law, be separately 

enrolled in Medicare and have its own 

unique Medicare billing number or NPI. 

Accordingly, we are proposing a 

$65,000 bond per DMEPOS supplier 

NPI; the basic identification element for 

a DMEPOS supplier. 

C. Conclusion 

Any burden imposed by this proposed 

rule is legislatively mandated, and we 

have taken steps to ensure that the 

burden on DMEPOS suppliers is 

minimal. Surety bonds use a private 

sector mechanism to screen DMEPOS 


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suppliers that provide items and 

services to Medicare’s beneficiaries and 

help ensure that they are financially 

responsible. Also, surety bonds help to 

ensure that the government can recoup 

taxpayer money from DME suppliers 

who default on their obligations to the 

Medicare program. 

We use a financial guarantee bond for 

the return of overpayments regardless of 

their source. A guarantee bond would 

ensure more scrutiny and benefits to 

Medicare. In underwriting this type of 

bond, a surety would pay particular 

attention to financial statements, 

business practices, and overpayment 

history. This scrutiny would provide the 

Medicare program with some of the 

following benefits: (1) Proprietors who 

do not have relevant program 

experience would be deterred from 

entering the program; (2) existing 

Medicare DMEPOS suppliers would be 

examined as to their business 

soundness; and (3) DMEPOS suppliers 

with overpayments that do not repay 

their overpayments would be unlikely 

to obtain a subsequent surety bond and 

would be removed from the Medicare 

business. Generally, all DMEPOS 

suppliers would be deterred from 

incurring overpayments and would have 

an incentive to repay any overpayments 

that are discovered. 

Screening by a surety appears to be 

most useful for new DMEPOS suppliers. 

The large number of DMEPOS suppliers 

entering the Medicare program with 

little scrutiny makes requiring surety 

bonds a useful mechanism for screening 

DMEPOS suppliers already in the 

program. However, the value of this 

scrutiny would probably diminish with 

a DMEPOS supplier’s continued 

participation in Medicare. 

We believe that the impact on benefit 

payments is indeterminable. In 

accordance with the provisions of 

Executive Order 12866, this rule was 

reviewed by the Office of Management 

and Budget. 

List of Subjects in 42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professions, Medicare. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV, as set forth below: 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

1. The authority citation for part 424 

is revised 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 

2. Section 424.57 is amended by—

A. Amending paragraph (a) to add the 

following definitions in alphabetical 

order: ‘‘Assessment’’, ‘‘Authorized 

surety’’, ‘‘Civil money penalty’’, 

‘‘Government-operated supplier’’, 

‘‘National Supplier Clearinghouse 

(NSC)’’, ‘‘Penal sum’’, ‘‘Rider’’, 

‘‘Sufficient evidence’’, ‘‘Surety bond’’, 

‘‘Unauthorized surety’’, and ‘‘Unpaid 

claim’’. 

B. Adding paragraph (c)(26). 

The additions read as follows: 

§ 424.57 Special payment rules for items 

furnished by DMEPOS suppliers and 

issuance of DMEPOS supplier billing 

privileges. 

(a) * * * 

Assessment means a sum certain that 

CMS or the Office of Inspector General 

(OIG) may assess against a DMEPOS 

supplier under Titles XI, XVIII, or XXI 

of the Social Security Act or as specified 

in this chapter. 

Authorized surety means a surety 

that—

(1) Has been issued a Certificate of 

Authority by the U.S. Department of the 

Treasury as an acceptable surety on 

Federal bonds and the certificate has 

neither expired nor been revoked; and 

(2) Has not been determined by CMS 

to be an unauthorized surety under this 

section. 

Civil money penalty (CMP) means a 

sum that CMS has the authority, as 

implemented by 42 CFR 402.1(c); or OIG 

has the authority under section 1128A 

of the Act or 42 CFR part 1003, to 

impose on a supplier as a penalty. 

* * * * * 

Government-operated supplier is a 

DMEPOS supplier owned or operated by 

a Federal, State, or Tribal entity. 

* * * * * 

National Supplier Clearinghouse 

(NSC) is the contractor that is 

responsible for the enrollment and reenrollment process for DMEPOS 

suppliers. 

Penal sum is a sum to be paid (up to 

the value of the bond) by the surety as 

a penalty under the terms of the surety 

bond when a loss has occurred. 

Rider means a notice issued by a 

surety that a change in the bond has 

occurred or would occur. 

Sufficient evidence means the 

documentation that CMS may supply to 

the surety in order to establish that a 

DMEPOS supplier had received 

Medicare funds in excess of amounts 

due and payable under the statute and 

regulations. 

Surety bond means a bond issued by 

one or more sureties under 31 U.S.C. 

9304 through 9308 and 31 CFR parts 

223, 224, and 225. 

Unauthorized surety mean a surety 

that—

(1) Fails, upon written request by the 

National Supplier Clearinghouse or 

CMS, to furnish confirmation of the 

issuance of a surety bond within 30 

days. 

(2) Fails to furnish evidence of the 

validity and accuracy of information 

appearing on a surety bond that a 

supplier has presented to the NSC or 

CMS showing the company as surety on 

the bond. 

(3) Fails to pay CMS in full the 

amount requested, up to the penal sum 

of the bond when presented with a 

request for payment within 30 days of 

written notification. 

Unpaid claim means an overpayment 

made by the Medicare program to the 

DMEPOS supplier for which the 

DMEPOS supplier is responsible, plus 

accrued interest that is effective 90 days 

after the date of the notice sent to the 

DMEPOS supplier of the overpayment. 

If a written agreement for payment, 

acceptable to CMS, is made, an unpaid 

claim also means a Medicare 

overpayment for which the DMEPOS 

supplier is responsible, plus accrued 

interest after the DME supplier’s default 

on the arrangement. 

* * * * * 

(c) * * * 

(26) Surety bond requirements for 

DMEPOS suppliers. Except as provided 

in paragraph (c)(26)(ii) of this section, 

each DMEPOS supplier that is a 

Medicare-enrolled DMEPOS supplier 

must obtain and furnish to the NSC, a 

surety bond of at least $65,000, from an 

authorized surety, as defined in 

paragraph (a) of this section of this 

section, for each NPI issued by 

Medicare. 

(i) Minimum requirements for a 

DMEPOS supplier. 

(A) A supplier enrolling in the 

Medicare program, making a change in 

their existing enrollment information, or 

responding to a revalidation or 

reenrollment request must submit a 

surety bond of $65,000 with its paper or 

electronic Medicare enrollment 

application (CMS–855S, OMB number 

0938–0685). The term of the initial 

surety bond must be effective on the 

date that the application is submitted to 

the NSC. 

(B) A supplier that seeks to become an 

enrolled DMEPOS supplier through 

purchase or transfer of assets or 

ownership interest must provide a 

surety bond that is effective from the 

date of the purchase or transfer in order 

to exercise billing privileges as of that 


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42010 Federal Register / Vol. 72, No. 147 / Wednesday, August 1, 2007 / Proposed Rules 

date. If the bond is effective at a later 

date, the effective date of the new 

DMEPOS supplier number will be no 

sooner than the effective date of the 

surety bond as validated by the NSC. 

(C) A DMEPOS supplier seeking to 

enroll a new location under a tax 

identification number for which it 

already has a DMEPOS surety bond in 

place may obtain a new surety bond or 

can submit an amendment or rider to 

the existing bond, showing that the new 

location is covered by an additional 

$65,000 surety bond. 

(ii) Exception for Governmentoperated suppliers. Governmentoperated DMEPOS suppliers are 

provided an exception of the surety 

bond requirement if the DME supplier 

has provided CMS with a comparable 

surety bond under State law, and if it 

does not have any unpaid claims, CMPs 

or assessments. 

(iii) Terms of the surety bond. The 

terms of the bond submitted by a 

DMEPOS supplier for the purpose of 

complying with this section must meet 

the minimum requirements of liability 

coverage ($65,000) and surety and 

DMEPOS supplier responsibility as set 

forth in this section. CMS requires a 

supplier to submit a bond that on its 

face reflects the requirements of this 

section. CMS will revoke or deny a 

DMEPOS supplier’s billing privileges 

based upon the submission of a bond 

that does not reflect the requirements of 

this section. 

(iv) Specific surety bond 

requirements. 

(A) The bond must guarantee that the 

surety must, within 30 days of receiving 

written notice from CMS containing 

sufficient evidence to establish the 

surety’s liability under the bond of 

unpaid claims, CMPs, or assessments, 

pay CMS a total of up to the full penal 

amount of the bond in the following 

amounts: 

(1) The amount of any unpaid claim, 

plus accrued interest, for which the 

DMEPOS supplier is responsible. 

(2) The amount of any unpaid claims, 

CMPs, or assessments imposed by CMS 

or OIG on the DMEPOS supplier, plus 

accrued interest. 

(B) The bond must provide the 

following: The surety is liable for 

unpaid claims, CMPs, or assessments 

that are presented to the surety for 

payment when the surety bond is in 

effect, regardless of when the payment, 

overpayment, or other event giving rise 

to the claim, CMPs, or assessment 

occurred, provided CMS or OIG make a 

written demand for payment from the 

surety during the term of the bond 

except or after such term in accordance 

with paragraph (c)(26)(iv)(C) of this 

section. 

(C) If the DMEPOS supplier fails to 

furnish a bond meeting the 

requirements of this subpart, fails to 

submit a rider when required, or if the 

DMEPOS supplier’s billing privileges 

are revoked, the last bond or rider 

submitted by the DMEPOS supplier 

remains in effect until the last day of the 

surety bond coverage period and the 

surety remains liable for unpaid claims, 

CMPs, or assessments that—

(1) CMS or the OIG imposes or asserts 

against the DMEPOS supplier based on 

overpayments or other events that took 

place during the term of the bond or 

rider; and 

(2) Were imposed or assessed by CMS 

or the OIG during the 2 years following 

the date that the DMEPOS supplier 

failed to submit a bond or required 

rider, or the date the DMEPOS 

supplier’s billing privileges were 

terminated, whichever is later. 

(v) Cancellation of a bond. The bond 

may be canceled by written notice from 

the DMEPOS supplier to the NSC and 

the surety. The DMEPOS supplier must 

provide written notice at least 30 days 

before the effective date of the action to 

the NSC and the surety. Cancellation of 

a surety bond is grounds for revocation 

of the DMEPOS supplier’s Medicare 

billing privileges unless the DMEPOS 

supplier provides a new bond before the 

effective date of the cancellation. The 

liability of the surety continues through 

the termination effective date. The bond 

is automatically canceled and the surety 

is excused from any liability for future 

claims after the termination effective 

date. If CMS receives notification of a 

lapse in bond coverage from the surety, 

the DMEPOS supplier’s billing 

privileges will be revoked. The surety 

must immediately notify the NSC if 

there is a lapse in bond coverage. The 

liability of the DMEPOS supplier and 

the surety to CMS is not extinguished by 

any of the following: 

(A) Any action by the DMEPOS 

supplier or the surety to make 

amendment to a conforming bond that 

will terminate or limit the scope or term 

of the bond in a manner resulting in the 

bond no longer conforming to this 

regulation. 

(B) The DMEPOS supplier’s failure to 

continue to meet the requirements of 

paragraph (c)(26)(i) of this section or 

CMS determination that the surety is an 

unauthorized surety as defined in 

paragraph (a) of this section. 

(C) Revocation of the DMEPOS 

supplier’s billing privileges. 

(D) Any action by CMS to suspend, 

offset, or otherwise recover payments to 

the DMEPOS supplier unless the action 

results in complete and final recovery of 

the debt. 

(E) Any action by the DMEPOS 

supplier to—

(1) Cease operation. 

(2) Sell or transfer any asset or 

ownership interest. 

(3) File for bankruptcy. 

(4) Fail to pay the surety. 

(F) Any fraud, misrepresentation, or 

negligence by the DMEPOS supplier in 

obtaining the surety bond or by the 

surety (or the surety’s agent) in issuing 

the surety bond. 

(G) The DMEPOS supplier’s failure to 

exercise available appeal rights under 

Medicare or to assign the rights to the 

surety. 

(vi) Actions under the bond. The bond 

must provide that actions under the 

bond may be brought by CMS or by 

CMS contractors. 

(vii) Required surety information. The 

bond must provide the surety’s name, 

street address or post office box number, 

city, state, and zip code. 

(viii) Submission date and term of the 

DMEPOS supplier bond. 

(A) Each enrolled DMEPOS supplier 

that does not meet the criteria for an 

exception under paragraph (c)(26)(i)(D) 

of this section must submit to the NSC 

an initial surety bond before (60 days 

following the publication date of the 

final rule). 

(B) The type of bond required to be 

submitted by a DMEPOS supplier under 

this subpart must be either a continuous 

bond or an annual bond. 

(ix) Loss of a DMEPOS supplier 

exception. A DMEPOS supplier that no 

longer qualifies for an exception as a 

government-operated DMEPOS supplier 

described in paragraph (c)(26)(ii) of this 

section must submit a surety bond to the 

NSC within 60 days after it knows or 

has reason to know that it no longer 

meets the criteria for an exception. 

(x) Change of surety. A DMEPOS 

supplier that obtains a replacement 

surety bond from a different surety to 

cover the remaining term of a previously 

obtained bond must submit the new 

surety bond to the NSC at least 30 days 

prior to the expiration of the previous 

bond. There must be no gap in the 

coverage of the bond periods. If a gap in 

coverage exists, the NSC will revoke the 

supplier’s billing privileges and not pay 

for any items or services furnished by 

the DMEPOS supplier during the period 

for which no bond coverage was 

available. If a DMEPOS supplier 

changes its surety during the term of the 

bond, the new surety will be responsible 

for any overpayments, CMPs, or 

assessments incurred by the DMEPOS 

supplier beginning with the effective 

date of the new surety bond. The 


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Federal Register / Vol. 72, No. 147 / Wednesday, August 1, 2007 / Proposed Rules 42011 

previous surety is responsible for any 

overpayments, CMPs, or assessments 

that occurred up to the date of the 

change of surety. 

(xi) Parties to the bond. The surety 

bond must name the DMEPOS supplier 

as Principal, CMS as Obligee, and the 

surety (and its heirs, executors, 

administrators, successors and 

assignees, jointly and severally) as 

surety. 

(xii) Effect of DMEPOS supplier’s 

failure to obtain, maintain, and timely 

file a surety bond. 

(A) CMS will revoke the DMEPOS 

supplier’s billing privileges if an 

enrolled supplier fails to obtain, file 

timely, or maintain a surety bond as 

specified in this subpart and CMS 

instructions. Notwithstanding paragraph 

(d) of this section, the revocation will be 

effective with the date the bond lapsed 

and any payments for items furnished 

on or after that date must be repaid to 

CMS by the DMEPOS supplier. 

(B) CMS will deny billing privileges 

to a supplier if the supplier seeking to 

become an enrolled DMEPOS supplier 

fails to obtain and file timely a surety 

bond as specified with this subpart and 

CMS instructions. 

(xiii) Evidence of DMEPOS supplier’s 

compliance. CMS may at any time 

require a DMEPOS supplier to show 

compliance with the requirements of 

this subpart. 

(xiv) Effect of subsequent DMEPOS 

supplier payment. If a surety has paid 

an amount to CMS on the basis of 

liability incurred under a bond and 

CMS subsequently collects from the 

DMEPOS supplier, in whole or in part, 

on the unpaid claim, CMPs, or 

assessment that was the basis for the 

surety’s liability, CMS will reimburse 

the surety the amount that it collected 

from the DMEPOS supplier, up to the 

amount paid by the surety to CMS, 

provided the surety has no other 

liability to CMS under the bond. 

(xv) Effect of review reversing 

determination. If a DMEPOS supplier 

has paid CMS on the basis of liability 

incurred under a bond and to the extent 

the DMEPOS supplier that obtained the 

bond (or the surety under paragraph (m) 

of this section) is subsequently 

successful in appealing the 

determination that was the basis of the 

unpaid claim or CMPs, or assessment 

that caused the DMEPOS supplier to 

pay CMS under the bond, CMS would 

refund the DMEPOS supplier the 

amount the DMEPOS supplier paid to 

CMS to the extent that the amount 

relates to the matter that was 

successfully appealed, provided all 

review, including judicial review, has 

been completed on the matter. 

(Catalog of Federal Domestic Program No. 

93.774, Medicare—Supplementary Medical 

Insurance Program) 

Dated: April 10, 2007. 

Leslie V. Norwalk, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: June 22, 2007. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 07–3746 Filed 7–27–07; 4:00 pm] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Parts 2 and 15 

[ET Docket No. 03–201; FCC 07–117] 

Unlicensed Devices and Equipment 

Approval 

AGENCY: Federal Communications 

Commission. 

ACTION: Proposed rule. 

SUMMARY: This document seeks 

comment on recommendations for a 

spectrum etiquette in a Further Notice 

of Proposed Rule Making (Further 

NPRM) in this proceeding. Specifically, 

the Further NPRM seeks comment on a 

specific spectrum etiquette for 

unlicensed transmitters that operate in 

the 915 MHz band. The goal is to ensure 

that the different types of unlicensed 

devices that operate in a band have an 

opportunity for spectrum access. 

DATES: Comments must be filed on or 

before October 15, 2007, and reply 

comments must be filed on or before 

November 14, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Hugh Van Tuyl, Office of Engineering 

and Technology, (202) 418–7506, email: Hugh.VanTuyl@fcc.gov, TTY (202) 

418–2989. 

ADDRESSES: You may submit comments, 

identified by ET Docket No. 03–201, by 

any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Federal Communications 

Commission’s Web Site: http:// 

www.fcc.gov/cgb/ecfs/. Follow the 

instructions for submitting comments. 

• E-mail: [Optional: Include the Email address only if you plan to accept 

comments from the general public]. 

Include the docket number(s) in the 

subject line of the message. 

• Mail: [Optional: Include the mailing 

address for paper, disk or CD–ROM 

submissions needed/requested by your 

Bureau or Office. Do not include the 

Office of the Secretary’s mailing address 

here.] 

• People with Disabilities: Contact the 

FCC to request reasonable 

accommodations (accessible format 

documents, sign language interpreters, 

CART, etc.) by e-mail: FCC504@fcc.gov 

or phone: 202–418–0530 or TTY: 202–

418–0432. 

For detailed instructions for 

submitting comments and additional 

information on the rulemaking process, 

see the SUPPLEMENTARY INFORMATION

section of this document. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Further 

Notice of Proposed Rule Making, ET 

Docket No. 03–201, FCC 07–117, 

adopted June 19, 2007, and released 

June 22, 2007. The full text of this 

document is available for inspection 

and copying during normal business 

hours in the FCC Reference Center 

(Room CY–A257), 445 12th Street, SW., 

Washington, DC 20554. The complete 

text of this document also may be 

purchased from the Commission’s copy 

contractor, Best Copy and Printing, Inc., 

445 12th Street, SW., Room, CY–B402, 

Washington, DC 20554. The full text 

may also be downloaded at: http:// 

www.fcc.gov. 

Pursuant to §§ 1.415 and 1.419 of the 

Commission’s rules, 47 CFR 1.415, 

1.419, interested parties may file 

comments and reply comments on or 

before the dates indicated on the first 

page of this document. Comments may 

be filed using: (1) The Commission’s 

Electronic Comment Filing System 

(ECFS), (2) the Federal Government’s 

eRulemaking Portal, or (3) by filing 

paper copies. See Electronic Filing of 

Documents in Rulemaking Proceedings, 

63 FR 24121 (1998). 

• Electronic Filers: Comments may be 

filed electronically using the Internet by 

accessing the ECFS: http://www.fcc.gov/ 

cgb/ecfs/ or the Federal eRulemaking 

Portal: http://www.regulations.gov. 

Filers should follow the instructions 

provided on the Web site for submitting 

comments. 

• For ECFS filers, if multiple docket 

or rulemaking numbers appear in the 

caption of this proceeding, filers must 

transmit one electronic copy of the 

comments for each docket or 

rulemaking number referenced in the 

caption. In completing the transmittal 

screen, filers should include their full 

name, U.S. Postal Service mailing 

address, and the applicable docket or 

rulemaking number. Parties may also 

submit an electronic comment by 

Internet e-mail. To get filing 

instructions, filers should send an email to ecfs@fcc.gov, and include the 


pwalker on PROD1PC71 with PROPOSALS