Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 30511 

concerning its provisions or options for 

compliance, please contact the person 

listed in the FOR FURTHER INFORMATION

CONTACT, above. The Coast Guard will 

not retaliate against small entities that 

question or complain about this 

proposed rule or any policy or action of 

the Coast Guard. 

4. Collection of Information 

This proposed rule will not call for a 

new collection of information under the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501–3520). 

5. Federalism 

A rule has implications for federalism 

under Executive Order 13132, 

Federalism, if it has a substantial direct 

effect on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. We have 

analyzed this proposed rule under that 

Order and determined that this rule 

does not have implications for 

federalism. 

6. Protest Activities 

The Coast Guard respects the First 

Amendment rights of protesters. 

Protesters are asked to contact the 

person listed in the FOR FURTHER

INFORMATION CONTACT section to 

coordinate protest activities so that your 

message can be received without 

jeopardizing the safety or security of 

people, places or vessels. 

7. Unfunded Mandates Reform Act 

The Unfunded Mandates Reform Act 

of 1995 (2 U.S.C. 1531–1538) requires 

Federal agencies to assess the effects of 

their discretionary regulatory actions. In 

particular, the Act addresses actions 

that may result in the expenditure by a 

State, local, or tribal government, in the 

aggregate, or by the private sector of 

$100,000,000 (adjusted for inflation) or 

more in any one year. Though this 

proposed rule would not result in such 

an expenditure, we do discuss the 

effects of this rule elsewhere in this 

preamble. 

8. Taking of Private Property 

This proposed rule would not cause a 

taking of private property or otherwise 

have taking implications under 

Executive Order 12630, Governmental 

Actions and Interference with 

Constitutionally Protected Property 

Rights. 

9. Civil Justice Reform 

This proposed rule meets applicable 

standards in sections 3(a) and 3(b)(2) of 

Executive Order 12988, Civil Justice 

Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. 

10. Protection of Children From 

Environmental Health Risks 

We have analyzed this proposed rule 

under Executive Order 13045, 

Protection of Children from 

Environmental Health Risks and Safety 

Risks. This rule is not an economically 

significant rule and would not create an 

environmental risk to health or risk to 

safety that might disproportionately 

affect children. 

11. Indian Tribal Governments 

This proposed rule does not have 

tribal implications under Executive 

Order 13175, Consultation and 

Coordination with Indian Tribal 

Governments, because it would not have 

a substantial direct effect on one or 

more Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

12. Energy Effects 

This proposed rule is not a 

‘‘significant energy action’’ under 

Executive Order 13211, Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use. 

13. Technical Standards 

This proposed rule does not use 

technical standards. Therefore, we did 

not consider the use of voluntary 

consensus standards. 

14. Environment 

We have analyzed this proposed rule 

under Department of Homeland 

Security Management Directive 023–01 

and Commandant Instruction 

M16475.lD, which guide the Coast 

Guard in complying with the National 

Environmental Policy Act of 1969 

(NEPA) (42 U.S.C. 4321–4370f), and 

have made a preliminary determination 

that this action is one of a category of 

actions that do not individually or 

cumulatively have a significant effect on 

the human environment. This proposed 

rule involves disestablishing the special 

anchorage area at the north end of the 

main channel in Marina del Rey Harbor, 

California. The anchorage is rarely used 

and has been encroached upon by 

several docking facilities. This rule is 

categorically excluded from further 

review under paragraph 34(f) of Figure 

2–1 of the Commandant Instruction. A 

preliminary environmental analysis 

checklist supporting this determination 

and a Categorical Exclusion 

Determination are available in the 

docket where indicated under 

ADDRESSES. We seek any comments or 

information that may lead to the 

discovery of a significant environmental 

impact from this proposed rule. 

List of Subjects in 33 CFR Part 110 

Anchorage grounds. 

For the reasons discussed in the 

preamble, the Coast Guard proposes to 

amend 33 CFR part 110.111 as follows: 

PART 110—ANCHORAGE 

REGULATIONS 

■ 1. The authority citation for part 110 

continues to read as follows: 

Authority: 33 U.S.C. 471, 1221 through 

1236, 2030, 2035, 2071; 33 CFR 1.05–1; 

Department of Homeland Security Delegation 

No. 0170.1. 

§ 110.111 [Removed and Reserved] 

■ 2. Remove and reserve § 110.111. 

Dated: April 30, 2014. 

K.L. Schultz, 

Rear Admiral, U.S. Coast Guard, Commander, 

Eleventh Coast Guard District. 

[FR Doc. 2014–12178 Filed 5–27–14; 8:45 am] 

BILLING CODE 9110–04–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 405 and 414 

[CMS–6050–P] 

RIN 0938–AR85 

Medicare Program; Prior Authorization 

Process for Certain Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Items 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

establish a prior authorization process 

for certain durable medical equipment, 

prosthetics, orthotics, and supplies 

(DMEPOS) items that are frequently 

subject to unnecessary utilization and 

would add a contractor’s decision 

regarding prior authorization of 

coverage of DMEPOS items to the list of 

actions that are not initial 

determinations and therefore not 

appealable. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. Eastern Standard Time on 

July 28, 2014. 

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30512 Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 

ADDRESSES: In commenting, please refer 

to file code CMS–6050–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. You may submit 

comments in one of four ways (please 

choose only one of the ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–6050–P, P.O. Box 8013, Baltimore, 

MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–6050–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–9994 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Maria Ciccanti, (410) 786–3107. 

Kristen Zycherman, (410) 786–6974. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

A. General Overview 

1. Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

(DMEPOS) 

The term ‘‘durable medical equipment 

(DME)’’ is defined in section 1861(n) of 

the Social Security Act (the Act). It is 

also referenced in the definition of 

‘‘medical and other health services’’ in 

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

Furthermore, the term is defined in title 

42 of the Code of Federal Regulations 

(42 CFR 414.202) as equipment 

furnished by a supplier or a home 

health agency (HHA) that— 

• Can withstand repeated use; 

• Effective with respect to items 

classified as DME after January 1, 2012, 

has an expected life of at least 3 years; 

• Is primarily and customarily used 

to serve a medical purpose; 

• Generally is not useful to an 

individual in the absence of an illness 

or injury; and 

• Is appropriate for use in the home. 

Section 1861(s)(9) of the Act provides 

for the coverage of leg, arm, back, and 

neck braces, and artificial legs, arms, 

and eyes, including replacement if 

required because of a change in the 

patient’s physical condition. As 

indicated by section 1834(h)(4)(C) of the 

Act, together with certain shoes 

described in section 1861(s)(12) of the 

Act, these items are often referred to as 

‘‘orthotics and prosthetics.’’ Under 

section 1834(h)(4)(B) of the Act, the 

term ‘‘prosthetic devices’’ does not 

include parenteral and enteral nutrition, 

supplies and equipment, and 

implantable items payable under section 

1833(t) of the Act. 

Examples of durable medical 

equipment include hospital beds, 

oxygen tents, and wheelchairs. 

Prosthetic devices are included in the 

definition of ‘‘medical and other health 

services’’ in section 1861(s)(8) of the 

Act. Prosthetic devices are defined as 

devices (other than dental) which 

replace all or part of an internal body 

organ, including replacement of such 

devices. Examples of prosthetic devices 

include cochlear implants, electrical 

continence aids, electrical nerve 

stimulators, and tracheostomy speaking 

valves. 

2. DMEPOS Payment Rules—Advance 

Determination of Coverage 

Section 1834(a)(15) of the Act 

authorizes the Secretary to develop and 

periodically update a list of DMEPOS 

that the Secretary determines, on the 

basis of prior payment experience, are 

frequently subject to unnecessary 

utilization and to develop a prior 

authorization process for these items. 

This proposed rule would implement 

that authority by interpreting 

‘‘frequently subject to unnecessary 

utilization,’’ by specifying a list of items 

that meet our proposed criteria, and by 

proposing a prior authorization process. 

B. Improper Payments for DMEPOS 

Items 

Payment made for the furnishing of an 

item that does not meet one or more of 

Medicare’s coverage, coding, and 

payment rules is an improper payment. 

The Comprehensive Error Rate Testing 

(CERT) program measures improper 

payments in the Medicare Fee-ForService (FFS) program. CERT is 

designed to comply with the Improper 

Payments Elimination and Recovery Act 

of 2010 (IPERA) (Pub. L. 111–204). For 

the 2012 reporting period, the CERT 

program determined that DMEPOS 

claims had an improper payment rate of 

66 percent, accounting for 

approximately 20 percent of the overall 

Medicare FFS improper payment rate. 

This is significant since Medicare FFS 

DMEPOS expenditures represent 

approximately 3 percent of all Medicare 

FFS expenditures. The projected 

improper payment amount for DMEPOS 

during the 2012 reporting period was 

approximately $6.4 billion. It is 

important to note that the improper 

payment rate is not a ‘‘fraud rate,’’ but 

is a measurement of payments that did 

not meet Medicare requirements. The 

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Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 30513 

1Medicare Fee-for-Service 2012 Improper 

Payments Report. Retrieved February 2014 from 

http://www.cms.gov/Research-Statistics-Data-andSystems/Monitoring-Programs/Medicare-FFSCompliance-Programs/CERT/Downloads/MedicareFee-for-Service-2012-Improper-PaymentsReport.pdf. 

CERT program cannot label a claim 

fraudulent. The CERT program develops 

improper payment rates for those items 

for which at least 30 claims are included 

in their sample. Since the CERT 

program uses random samples to select 

claims across providers and suppliers, 

reviewers are often unable to see 

provider billing patterns that indicate 

potential fraud when making payment 

determinations. 

The CERT program uses the following 

categories for improper payment 

determinations: 

• No Documentation: Claims are 

placed into this category when either 

the provider or supplier fails to respond 

to repeated requests for the medical 

records or the provider or supplier 

responds that they do not have the 

requested documentation. 

• Insufficient Documentation: Claims 

are placed into this category when the 

medical documentation submitted is 

inadequate to support payment for the 

services billed. In other words, the 

medical reviewers could not conclude 

that some of the allowed services were 

actually provided, provided at the level 

billed, and/or that the services were 

medically necessary. Claims are also 

placed into this category when a 

specific documentation element that is 

required as a condition of payment is 

missing, such as a physician signature 

on an order, or a form that is required 

to be completed in its entirety. 

• Medical Necessity: Claims are 

placed into this category when the 

medical reviewers receive adequate 

documentation from the medical 

records submitted and can make an 

informed decision that the services 

billed were not medically necessary 

based upon Medicare coverage policies. 

• Incorrect Coding: Claims are placed 

into this category when the provider or 

supplier submits medical 

documentation supporting one of the 

following: 

++ A different code than that billed. 

++ That the service was performed by 

someone other than the billing provider 

or supplier. 

++ That the billed service was 

unbundled. 

++ That a beneficiary was discharged 

to a site other than the one coded on a 

claim. 

• Other: Claims are placed into this 

category if they do not fit into any of the 

other categories (for example, a 

duplicate payment error or a noncovered or unallowable service). 

Medicare pays for DMEPOS items 

only if the beneficiary’s medical record 

contains sufficient documentation of the 

beneficiary’s medical condition to 

support the need for the type and 

quantity of items ordered. In addition, 

all required documentation elements 

outlined in Medicare policies must be 

present for the claim to be paid. For the 

2012 reporting period, approximately 94 

percent of DMEPOS improper payments 

were due to insufficient 

documentation.1 Without sufficient 

documentation, Medicare is unable to 

determine if the item is medically 

necessary for the beneficiary or whether 

unnecessary utilization is occurring. 

II. Provisions of the Proposed 

Regulations 

A. Proposed Prior Authorization for 

Certain DMEPOS Items 

We strive to ensure access to care for 

beneficiaries while also protecting the 

solvency of the Medicare Trust Funds. 

Given the unnecessary utilization of 

DMEPOS items and the corresponding 

high DMEPOS improper payment rate, 

we propose to establish a prior 

authorization process for DMEPOS 

items that are frequently subject to 

unnecessary utilization. Prior 

authorization is already used in other 

health care programs to ensure proper 

payment, such as in TRICARE, certain 

Medicaid programs, and the private 

sector. We believe a prior authorization 

process would ensure beneficiaries 

receive medically necessary care while 

minimizing the risk of improper 

payments and therefore protecting the 

Medicare Trust Fund. 

We propose to define ‘‘unnecessary 

utilization’’ as the furnishing of items 

that do not comply with one or more of 

Medicare’s coverage, coding and 

payment rules, as applicable. In 

accordance with section 1834(a)(15)(A) 

of the Act we propose to use ‘‘prior 

payment experience’’ to establish which 

items are ‘‘frequently’’ subject to 

unnecessary utilization. The 

Government Accountability Office 

(GAO), the Department of Health and 

Human Services’ (HHS) Office of 

Inspector General (OIG), and CMS 

through CERT reports publish analyses 

of prior payment data and identify 

Medicare DMEPOS items that have high 

improper payment rates. As discussed 

in greater detail later in this proposed 

rule, since the findings in these reports 

are the result of analysis of prior 

payment experience, we propose to use 

these reports to establish which items 

are frequently subject to unnecessary 

utilization. 

We believe using a prior authorization 

process would help to ensure items 

frequently subject to unnecessary 

utilization are furnished in compliance 

with applicable Medicare coverage, 

coding and payment rules before they 

are delivered. This would safeguard 

against unnecessary utilization while 

also ensuring beneficiaries’ access to 

medically necessary items. We believe 

this is an effective way to reduce or 

prevent improper payments for 

unnecessary DMEPOS items. 

B. Proposed Criteria for Inclusion on the 

Master List of DMEPOS Items Frequently 

Subject to Unnecessary Utilization 

(Master List) 

In Table 4, we provide our proposed 

Master List of initial items that, based 

on our criteria, are frequently subject to 

unnecessary utilization, hereafter 

referred to as the ‘‘Master List’’. We 

welcome comments on these criteria. 

We propose to include an item on the 

initial Master List if the item appears on 

the DMEPOS Fee Schedule list, meets 

one of the two criteria described in the 

paragraphs that follow, and has an 

average purchase fee of $1,000 or greater 

or an average rental fee schedule of $100 

or greater. We refer to these dollar 

amounts as the payment threshold. The 

two criteria for inclusion on the list, 

either of which must be met, are as 

follows: 

• The item has been identified in a 

GAO or HHS OIG report that is national 

in scope and published in 2007 or later 

as having a high rate of fraud or 

unnecessary utilization. We are using 

reports dated from 2007 or later because 

the GAO and OIG do not always repeat 

analysis of specific items annually. It is 

necessary to look back a number of 

years to capture findings on a variety of 

DMEPOS items. The GAO audits agency 

operations to determine whether federal 

funds are being spent efficiently and 

effectively as well as identifies areas 

where Medicare may be vulnerable to 

fraud and/or improper payments. 

Section 1834(a)(15) of the Act directs 

the Secretary to use prior payment 

experience as a basis for identifying 

DMEPOS items frequently subject to 

unnecessary utilization. We believe 

utilizing GAO evaluations that identify 

DMEPOS items as having a high rate of 

fraud or unnecessary utilization 

accomplishes this directive because 

GAO’s analysis includes an evaluation 

of paid claims history. 

The OIG provides independent and 

objective oversight that promotes 

economy, efficiency, and effectiveness 

in the programs and operations of HHS. 

OIG’s mission to protect the integrity of 

HHS programs is carried out through a 

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30514 Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 

network of audits, investigations, and 

inspections. The OIG audits and 

evaluates the performance of HHS 

programs and their participants. In some 

cases, OIG reports disclose aberrant 

billing utilization data or high 

incidences of improper payments for 

particular items or services. We have 

concluded that nationwide findings by 

OIG or by GAO of potentially high rates 

of fraud, unnecessary utilization, or 

aberrant or improper billings, combined 

with the payment thresholds established 

here, are good indicators that an item is 

‘‘frequently subject to unnecessary 

utilization’’ as set out in section 

1834(a)(15) of the Act. 

• The item is listed in the 2011 or 

later Comprehensive Error Rate Testing 

(CERT) program’s Annual Medicare FFS 

Improper Payment Rate Report DME 

Service Specific Overpayment Rate 

Appendix (hereafter referred to as CERT 

DME Appendix). This report describes 

the background of the Medicare FFS and 

CERT programs, the incidence and rates 

of improper payments and the common 

causes of these errors. Because the CERT 

program reviews a representative 

random sample of claims each year, we 

are using the most recent published 

report at the time of the writing of this 

proposed rule. We believe limiting this 

criterion to items listed in the 2011 or 

later CERT DME Appendix (and also 

meeting the payment threshold) 

accomplishes the intent of section 

1834(a)(15) of the Act. Interested parties 

can access the CERT reports at http://

cms.gov/Research-Statistics-Data-andSystems/Monitoring-Programs/CERT/

CERT-Reports.html. 

As noted previously, in addition to 

these two criteria, we propose to use a 

payment threshold. This threshold 

would allow us to focus our limited 

resources on items for which prior 

authorization will result in the largest 

potential savings for the Medicare Trust 

Fund. The DMEPOS Fee Schedule is 

updated annually and lists Medicare 

allowable pricing for DMEPOS, 

including the full payment amount for 

capped rental items. For administrative 

simplicity, we would not annually 

adjust the average purchase fee of 

$1,000 or greater or the average monthly 

rental fee schedule of $100 or greater 

threshold for inflation. Any changes to 

this threshold would be proposed 

through notice and comment 

rulemaking. We welcome comment on 

this threshold. 

We propose that the Master List be 

self-updating annually. That is, items on 

the DMEPOS Fee Schedule that meet 

the payment threshold are added to the 

list when the item is listed in a future 

OIG and/or GAO report of a national 

scope or a future CERT DME Appendix. 

We propose that items remain on the 

Master List for 10 years from the date 

the item was added to the Master List. 

Based on our prior payment history, we 

believe 10 years is an appropriate length 

of time for an item to remain on the list. 

We selected a 10-year timeframe 

because we believe that 10 years 

without a finding that the item has a 

potentially high rate of fraud, 

unnecessary utilization or aberrant or 

improper billing makes the original 

placement no longer current. For 

example, DMEPOS items may evolve as 

a result of emerging technology making 

the item on the Master List obsolete 

after 10 years. In addition, we propose 

items be removed from the Master List 

and replaced by their equivalent when 

the Healthcare Common Procedure 

Coding System (HCPCs) codes 

representing the item has been 

discontinued and cross-walked to an 

equivalent item. We further propose that 

an item would be removed from the list 

sooner than 10 years if the purchase 

amount drops below the payment 

threshold (an average purchase fee of 

$1,000 or greater or an average monthly 

rental fee schedule of $100 or greater). 

DMEPOS items aging off the Master List 

because they have been on the list for 

10 years can remain on or be added back 

to the Master List if a subsequent GAO, 

OIG, or CERT DME Appendix report 

identifies the item to be frequently 

subject to unnecessary utilization. If an 

item on the Master List is identified by 

a GAO, OIG, or CERT DME Appendix 

report while on the Master List, we will 

follow the update process and the item 

will remain on the list for 10 years from 

the update. We propose to notify the 

public annually of any additions and 

deletions from the Master List by 

posting the notification in the Federal 

Register and on the CMS Prior 

Authorization Web site. 

We believe these criteria would 

balance our responsibilities to ensure 

beneficiary access to care and protect 

the Medicare Trust Fund while not 

placing an undue burden on 

practitioners and suppliers. All covered 

DMEPOS items, regardless of whether 

they are on the Master List, would 

remain subject to Medicare payment, 

documentation, coverage, and coding 

rules. 

C. Proposed List of DMEPOS Items 

Frequently Subject to Unnecessary 

Utilization (Master List) 

1. Proposed Initial Master List of 

DMEPOS Items Frequently Subject to 

Unnecessary Utilization (Master List) 

There have been several reports, 

national in scope, published by the HHS 

OIG since 2007 identifying DMEPOS 

items that meet the payment threshold 

and are frequently subject to 

questionable utilization. They are as 

follows: 

• An August 2011 report titled 

‘‘Questionable Billing by Suppliers of 

Lower Limb Prostheses’’ found that 

between 2005 and 2009, Medicare 

spending for lower limb prostheses 

increased 27 percent, from $517 million 

to $655 million. The number of 

Medicare beneficiaries receiving lower 

limb prostheses decreased by 2.5 

percent, from almost 76,000 to about 

74,000. The report cited several 

examples of unnecessary utilization. 

One finding, billing for prostheses when 

the beneficiary had no claims from the 

referring physician, raised questions 

about whether the physician ever 

evaluated the beneficiary and whether 

the billed devices were medically 

necessary. Another finding related to 

billing for a high percentage of 

beneficiaries with no history of an 

amputation or missing limb also raised 

questions about medical necessity. 

These findings based on prior payment 

history indicate that certain lower limb 

prostheses are frequently subject to 

questionable utilization. 

• A July 2011 report titled ‘‘Most 

Power Wheelchairs in the Medicare 

Program Did Not Meet Medical 

Necessity Guidelines’’ found that 61 

percent of power wheelchairs provided 

in the first half of 2007 were medically 

unnecessary or lacked sufficient 

documentation to determine medical 

necessity. This accounted for $95 

million of the $189 million allowed 

DMEPOS claims in that period of time. 

There were two previous OIG OEI 

reports based on the same sample of 

claims that found noncompliance 

problems with documentation 

requirements and coding requirements 

(‘‘Medicare Power Wheelchair Claims 

Frequently Did Not Meet Documentation 

Requirements’’ and ‘‘Miscoded Claims 

for Power Wheelchairs in the Medicare 

Program.’’) Across all three reports, it 

was found that 80 percent of claims did 

not meet Medicare requirements for the 

sample period in 2007. 

• An August 2009 report titled 

‘‘Inappropriate Medicare Payment for 

Pressure Reducing Support Surfaces’’ 

found that 86 percent of claims for 

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Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 30515 

group 2 pressure reducing support 

surfaces did not meet Medicare coverage 

criteria for the first half of 2007. This 

amounted to an estimated $33 million 

in improper payments during that time. 

• A June 2007 report titled ‘‘Medicare 

Payments for Negative Pressure Wound 

Therapy Pumps in 2004’’ found that 24 

percent of negative pressure wound 

therapy pumps did not meet Medicare 

coverage criteria in 2004. This 

amounted to an estimated $21 million 

in improper payments. Further the 

report found that in 44 percent of the 

claims with medical records and 

supplier prepared statement, the 

information on the supplier prepared 

statement was not supported by the 

medical record. 

There have not been any GAO reports 

on any specific DMEPOS item(s) since 

2007. 

The 2011 CERT DME Appendix is set 

forth in Table 1. 

TABLE 1—2011 ANNUAL MEDICARE FFS IMPROPER PAYMENT RATE REPORT DME SERVICE SPECIFIC OVERPAYMENT

RATE APPENDIX

Service billed to DME (HCPCS) 

Number of 

claims in 

sample 

Number of 

lines in sample 

Dollars 

overpaid 

in sample 

Total dollars 

paid in sample 

Projected dollars 

overpaid 

Overpayment 

rate 

(percent) 

All Codes With Less Than 30 Claims 1,769 2,742 $300,255 $531,107 $2,212,120,825 57.8 

Oxygen concentrator (E1390) ............ 1,258 1,293 148,631 193,810 1,133,180,723 77.7 

Blood glucose/reagent strips (A4253) 1,457 1,466 126,344 150,622 929,031,554 84.4 

Hosp bed semi-electr w/Matt (E0260) 227 232 19,078 21,779 135,908,667 88.5 

Budesonide non-comp unit (J7626) ... 72 74 13,555 24,420 106,061,471 57.9 

Tacrolimus oral per 1 MG (J7507) .... 68 72 16,147 31,803 104,040,006 52.4 

Lancets per box (A4259) ................... 852 858 12,940 15,323 99,822,219 84.8 

Cont airway pressure device (E0601) 303 318 12,665 21,987 98,014,011 60.1 

Portable gaseous 02 (E0431) ............ 634 658 12,774 16,517 97,194,278 77.4 

Diab shoe for density insert (A5500) 125 136 11,949 15,420 88,965,667 78.2 

Multi den insert direct form (A5512) .. 78 84 9,561 11,631 71,586,004 81.8 

Enteral feed supp pump per d 

(B4035) ........................................... 67 68 8,452 14,853 66,560,532 58.2 

RAD w/o backup non-inv Intfc 

(E0470) ........................................... 68 75 9,264 13,079 64,412,596 69.8 

CPAP full face mask (A7030) ............ 81 81 8,336 12,774 64,248,424 65.6 

Nasal application device (A7034) ...... 145 145 9,043 14,366 62,469,031 62.0 

High strength ltwt whlchr (K0004) ..... 84 88 7,870 8,315 61,980,799 94.9 

Disp fee inhal drugs/30 days (Q0513) 386 389 7,590 12,210 57,749,018 62.0 

Multi den insert custom mold (A5513) 45 52 7,333 9,366 54,355,934 80.5 

Lightweight wheelchair (K0003) ......... 114 115 6,995 7,503 52,201,255 92.6 

Mycophenolate mofetil oral (J7517) .. 43 43 7,669 12,566 49,929,224 64.1 

All Other Codes ................................. 3,482 4,795 125,245 194,402 943,311,918 65.9 

Combined ........................................... 8,110 13,784 881,693 1,333,852 6,553,144,155 67.4 

The 2012 CERT DME Appendix is set 

forth in Table 2. 

TABLE 2—2012 ANNUAL MEDICARE FFS IMPROPER PAYMENT RATE REPORT DME SERVICE SPECIFIC OVERPAYMENT

RATE APPENDIX

Service Billed to DME (HCPCS) 

Number of 

claims in 

sample 

Number of 

lines in sample 

Dollars 

overpaid 

in sample 

Total dollars 

paid in sample 

Projected dollars 

overpaid 

Overpayment 

rate 

(percent) 

All Codes With Less Than 30 Claims 2,354 3,738 $1,256,083 $2,231,572 $1,536,420,429 51.9 

Oxygen concentrator (E1390) ............ 1,286 1,317 156,295 194,294 1,168,366,128 80.9 

Blood glucose/reagent strips (A4253) 1,255 1,263 103,521 129,283 906,250,472 80.6 

PWC gp 2 std cap chair (K0823) ...... 999 1,002 513,426 553,349 201,693,896 97.3 

Hosp bed semi-electr w/matt (E0260) 283 289 23,544 27,437 137,852,967 87.2 

Lancets per box (A4259) ................... 742 748 10,761 13,088 98,992,634 83.1 

Tacrolimus oral per 1 MG (J7507) .... 58 63 12,118 23,120 97,807,986 54.3 

Portable gaseous 02 (E0431) ............ 590 608 12,296 15,203 96,375,515 80.9 

Cont airway pressure device (E0601) 210 213 7,914 14,860 80,812,581 50.0 

Budesonide non-comp unit (J7626) ... 100 105 13,453 24,905 78,369,581 54.1 

Neg press wound therapy pump 

(E2402) ........................................... 39 39 17,464 47,731 72,189,807 51.0 

Enteral feed supp pump per d 

(B4035) ........................................... 91 92 10,283 19,145 70,291,185 54.8 

Nasal application device (A7034) ...... 121 122 8,030 12,254 70,244,578 65.3 

Diab shoe for density insert (A5500) 97 102 8,271 11,594 68,920,996 73.2 

RAD w/o backup non-inv intfc 

(E0470) ........................................... 68 75 9,166 13,213 63,658,439 69.6 

Disp fee inhal drugs/30 days (Q0513) 413 413 7,392 13,068 58,594,189 57.0 

CPAP full face mask (A7030) ............ 75 75 7,308 11,524 57,481,278 59.3 

High strength ltwt whlchr (K0004) ..... 80 83 7,826 8,016 56,257,539 97.7 

Lightweight wheelchair (K0003) ......... 99 110 6,250 6,821 55,809,106 94.2 

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30516 Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 

TABLE 2—2012 ANNUAL MEDICARE FFS IMPROPER PAYMENT RATE REPORT DME SERVICE SPECIFIC OVERPAYMENT

RATE APPENDIX—Continued 

Service Billed to DME (HCPCS) 

Number of 

claims in 

sample 

Number of 

lines in sample 

Dollars 

overpaid 

in sample 

Total dollars 

paid in sample 

Projected dollars 

overpaid 

Overpayment 

rate 

(percent) 

Multi den insert direct form (A5512) .. 61 63 6,805 8,548 55,671,152 79.4 

All Other Codes ................................. 5,311 9,107 1,735,735 2,669,607 1,380,908,350 64.4 

Combined ........................................... 10,117 19,627 3,933,943 6,048,632 6,412,968,806 66.0 

The 2013 CERT DME Appendix is set 

forth in Table 3. 

TABLE 3—2013 ANNUAL MEDICARE FFS IMPROPER PAYMENT RATE REPORT DME SERVICE SPECIFIC OVERPAYMENT

RATE APPENDIX

Service billed to DME (HCPCS) 

Number of 

claims in 

sample 

Number of 

lines in sample 

Dollars 

overpaid 

in sample 

Total dollars 

paid in sample 

Projected dollars 

overpaid 

Overpayment 

rate 

(percent) 

Oxygen concentrator (E1390) ............ 1,212 1,262 $136,312 $181,075 $983,768,125 75.6 

All Codes With Less Than 30 Claims 2,147 3,235 545,968 1,053,401 867,058,104 37.4 

Blood glucose/reagent strips (A4253) 1,131 1,148 85,298 114,282 791,786,761 75.1 

PWC gp 2 std cap chair (K0823) ...... 734 747 181,940 212,803 201,643,982 85.4 

Hosp bed semi-electr w/matt (E0260) 364 386 28,235 34,055 137,106,877 84.1 

Tacrolimus oral per 1MG (J7507) ...... 70 71 11,920 26,692 88,099,443 43.4 

Cont airway pressure devce (E0601) 118 126 4,255 8,732 84,740,816 48.8 

Lancets per box (A4259) ................... 607 615 8,409 11,030 82,958,405 76.3 

Portable gaseous 02 (E0431) ............ 525 567 9,876 13,516 78,011,911 73.2 

Enteral feed supp pump per d 

(B4035) ........................................... 90 90 11,685 18,809 69,222,164 61.7 

Diab shoe for density Insert (A5500) 82 90 7,384 9,580 65,194,062 78.3 

Nasal application device (A7034) ...... 78 79 4,808 8,022 59,780,922 56.8 

Budesonide non-compUnit (J7626) ... 136 141 13,136 33,672 59,537,844 39.0 

CPAP full face mask (A7030) ............ 62 62 5,982 9,206 53,974,803 66.0 

Lightweight wheelchair (K0003) ......... 67 69 4,291 4,606 53,344,568 95.5 

Standard wheelchair (K0001) ............ 74 79 2,736 3,016 52,628,676 92.5 

High strength ltwt whlchr (K0004) ..... 80 91 7,419 9,046 51,690,372 90.9 

LSO sag-coro rigid frame pre (L0631) 62 62 28,990 48,450 51,310,493 60.4 

Multi den insert direct form (A5512) .. 45 48 5,649 6,623 49,722,593 86.0 

Disp fee inhal drugs/30 Days 

(Q0513) .......................................... 424 426 7,062 13,398 47,738,353 53.1 

All Other Codes ................................. 7,274 13,747 3,982,290 7,804,614 1,736,897,848 55.4 

Combined ........................................... 11,204 23,141 5,093,646 9,624,629 5,666,217,120 58.2 

The proposed Master List, in Table 4, 

includes DMEPOS items meeting both 

the payment threshold and utilization 

criteria previously discussed, and their 

Healthcare Common Procedure Coding 

System (HCPCS) codes. 

TABLE 4—PROPOSED MASTER LIST OF DMEPOS ITEMS SUBJECT TO FREQUENT UNNECESSARY UTILIZATION FOR PRIOR

AUTHORIZATION

HCPCS Description 

E0193 ................................... Powered air flotation bed (low air loss therapy). 

E0260 ................................... Hosp bed semi-electr w/matt. 

E0277 ................................... Powered pres-redu air mattrs. 

E0371 ................................... Nonpowered advanced pressure reducing overlay for mattress, standard mattress length and width. 

E0372 ................................... Powered air overlay for mattress, standard mattress length and width. 

E0373 ................................... Nonpowered advanced pressure reducing mattress. 

E0470 ................................... Respiratory assist device, bi-level pressure capability, without backup rate feature, used with noninvasive interface, e.g., nasal or facial mask (intermittent assist device with continuous positive airway pressure device). 

E0601 ................................... Continuous Airway Pressure (CPAP) Device. 

E2402 ................................... Negative pressure wound therapy electrical pump, stationary or portable. 

K0004 ................................... High strength, lightweight wheelchair. 

K0813 ................................... Power wheelchair, group 1 standard, portable, sling/solid seat and back, patient weight capacity up to and including 300 pounds. 

K0814 ................................... Power wheelchair, group 1 standard, portable, captains chair, patient weight capacity up to and including 300 

pounds. 

K0815 ................................... Power wheelchair, group 1 standard, sling/solid seat and back, patient weight capacity up to and including 300 

pounds. 

K0816 ................................... Power wheelchair, group 1 standard, captains chair, patient weight capacity up to and including 300 pounds. 

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Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 30517 

TABLE 4—PROPOSED MASTER LIST OF DMEPOS ITEMS SUBJECT TO FREQUENT UNNECESSARY UTILIZATION FOR PRIOR

AUTHORIZATION—Continued 

HCPCS Description 

K0820 ................................... Power wheelchair, group 2 standard, portable, sling/solid seat/back, patient weight capacity up to and including 

300 pounds. 

K0821 ................................... Power wheelchair, group 2 standard, portable, captains chair, patient weight capacity up to and including 300 

pounds. 

K0822 ................................... Power wheelchair, group 2 standard, sling/solid seat/back, patient weight capacity up to and including 300 

pounds. 

K0823 ................................... Power wheelchair, group 2 standard, captains chair, patient weight capacity up to and including 300 pounds. 

K0824 ................................... Power wheelchair, group 2 heavy duty, sling/solid seat/back, patient weight capacity 301 to 450 pounds. 

K0825 ................................... Power wheelchair, group 2 heavy duty, captains chair, patient weight capacity 301 to 450 pounds. 

K0826 ................................... Power wheelchair, group 2 very heavy duty, sling/solid seat/back, patient weight capacity 451 to 600 pounds. 

K0827 ................................... Power wheelchair, group 2 very heavy duty, captains chair, patient weight capacity 451 to 600 pounds. 

K0828 ................................... Power wheelchair, group 2 extra heavy duty, sling/solid seat/back, patient weight capacity 601 pounds or more. 

K0829 ................................... Power wheelchair, group 2 extra heavy duty, captains chair, patient weight 601 pounds or more. 

K0835 ................................... Power wheelchair, group 2 standard, single power option, sling/solid seat/back, patient weight capacity up to and 

including 300 pounds. 

K0836 ................................... Power wheelchair, group 2 standard, single power option, captains chair, patient weight capacity up to and including 300 pounds. 

K0837 ................................... Power wheelchair, group 2 heavy duty, single power option, sling/solid seat/back, patient weight capacity 301 to 

450 pounds. 

K0838 ................................... Power wheelchair, group 2 heavy duty, single power option, captains chair, patient weight capacity 301 to 450 

pounds. 

K0839 ................................... Power wheelchair, group 2 very heavy duty, single power option sling/solid seat/back, patient weight capacity 451 

to 600 pounds. 

K0840 ................................... Power wheelchair, group 2 extra heavy duty, single power option, sling/solid seat/back, patient weight capacity 

601 pounds or more. 

K0841 ................................... Power wheelchair, group 2 standard, multiple power option, sling/solid seat/back, patient weight capacity up to 

and including 300 pounds. 

K0842 ................................... Power wheelchair, group 2 standard, multiple power option, captains chair, patient weight capacity up to and including 300 pounds. 

K0843 ................................... Power wheelchair, group 2 heavy duty, multiple power option, sling/solid seat/back, patient weight capacity 301 to 

450 pounds. 

K0848 ................................... Power wheelchair, group 3 standard, sling/solid seat/back, patient weight capacity up to and including 300 

pounds. 

K0849 ................................... Power wheelchair, group 3 standard, captains chair, patient weight capacity up to and including 300 pounds. 

K0850 ................................... Power wheelchair, group 3 heavy duty, sling/solid seat/back, patient weight capacity 301 to 450 pounds. 

K0851 ................................... Power wheelchair, group 3 heavy duty, captains chair, patient weight capacity 301 to 450 pounds. 

K0852 ................................... Power wheelchair, group 3 very heavy duty, sling/solid seat/back, patient weight capacity 451 to 600 pounds. 

K0853 ................................... Power wheelchair, group 3 very heavy duty, captains chair, patient weight capacity 451 to 600 pounds. 

K0854 ................................... Power wheelchair, group 3 extra heavy duty, sling/solid seat/back, patient weight capacity 601 pounds or more. 

K0855 ................................... Power wheelchair, group 3 extra heavy duty, captains chair, patient weight capacity 601 pounds or more. 

K0856 ................................... Power wheelchair, group 3 standard, single power option, sling/solid seat/back, patient weight capacity up to and 

including 300 pounds. 

K0857 ................................... Power wheelchair, group 3 standard, single power option, captains chair, patient weight capacity up to and including 300 pounds. 

K0858 ................................... Power wheelchair, group 3 heavy duty, single power option, sling/solid seat/back, patient weight 301 to 450 

pounds. 

K0859 ................................... Power wheelchair, group 3 heavy duty, single power option, captains chair, patient weight capacity 301 to 450 

pounds. 

K0860 ................................... Power wheelchair, group 3 very heavy duty, single power option, sling/solid seat/back, patient weight capacity 

451 to 600 pounds. 

K0861 ................................... Power wheelchair, group 3 standard, multiple power option, sling/solid seat/back, patient weight capacity up to 

and including 300 pounds. 

K0862 ................................... Power wheelchair, group 3 heavy duty, multiple power option, sling/solid seat/back, patient weight capacity 301 to 

450 pounds. 

K0863 ................................... Power wheelchair, group 3 very heavy duty, multiple power option, sling/solid seat/back, patient weight capacity 

451 to 600 pounds. 

K0864 ................................... Power wheelchair, group 3 extra heavy duty, multiple power option, sling/solid seat/back, patient weight capacity 

601 pounds or more. 

L5010 ................................... Partial foot, molded socket, ankle height, with toe filler. 

L5020 ................................... Partial foot, molded socket, tibial tubercle height, with toe filler. 

L5050 ................................... Ankle, symes, molded socket, sach foot. 

L5060 ................................... Ankle, symes, metal frame, molded leather socket, articulated ankle/foot. 

L5100 ................................... Below knee, molded socket, shin, sach foot. 

L5105 ................................... Below knee, plastic socket, joints and thigh lacer, sach foot. 

L5150 ................................... Knee disarticulation (or through knee), molded socket, external knee joints, shin, sach foot. 

L5160 ................................... Knee disarticulation (or through knee), molded socket, bent knee configuration, external knee joints, shin, sach 

foot. 

L5200 ................................... Above knee, molded socket, single axis constant friction knee, shin, sach foot. 

L5210 ................................... Above knee, short prosthesis, no knee joint (‘stubbies’), with foot blocks, no ankle joints, each. 

L5220 ................................... Above knee, short prosthesis, no knee joint (‘stubbies’), with articulated ankle/foot, dynamically aligned, each. 

L5230 ................................... Above knee, for proximal femoral focal deficiency, constant friction knee, shin, sach foot. 

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30518 Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 

TABLE 4—PROPOSED MASTER LIST OF DMEPOS ITEMS SUBJECT TO FREQUENT UNNECESSARY UTILIZATION FOR PRIOR

AUTHORIZATION—Continued 

HCPCS Description 

L5250 ................................... Hip disarticulation, canadian type; molded socket, hip joint, single axis constant friction knee, shin, sach foot. 

L5270 ................................... Hip disarticulation, tilt table type; molded socket, locking hip joint, single axis constant friction knee, shin, sach 

foot. 

L5280 ................................... Hemipelvectomy, canadian type; molded socket, hip joint, single axis constant friction knee, shin, sach foot. 

L5301 ................................... Below knee, molded socket, shin, sach foot, endoskeletal system. 

L5312 ................................... Knee disarticulation (or through knee), molded socket, single axis knee, pylon, sach foot, endoskeletal system. 

L5321 ................................... Above knee, molded socket, open end, sach foot, endoskeletal system, single axis knee. 

L5331 ................................... Hip disarticulation, canadian type, molded socket, endoskeletal system, hip joint, single axis knee, sach foot. 

L5341 ................................... Hemipelvectomy, canadian type, molded socket, endoskeletal system, hip joint, single axis knee, sach foot. 

L5400 ................................... Immediate post surgical or early fitting, application of initial rigid dressing, including fitting, alignment, suspension, 

and one cast change, below knee. 

L5420 ................................... Immediate post surgical or early fitting, application of initial rigid dressing, including fitting, alignment and suspension and one cast change ‘ak’ or knee disarticulation. 

L5500 ................................... Initial, below knee ‘ptb’ type socket, non-alignable system, pylon, no cover, sach foot, plaster socket, direct 

formed. 

L5505 ................................... Initial, above knee—knee disarticulation, ischial level socket, non-alignable system, pylon, no cover, sach foot, 

plaster socket, direct formed. 

L5510 ................................... Preparatory, below knee ‘ptb’ type socket, non-alignable system, pylon, no cover, sach foot, plaster socket, molded to model. 

L5520 ................................... Preparatory, below knee ‘ptb’ type socket, non-alignable system, pylon, no cover, sach foot, thermoplastic or 

equal, direct formed. 

L5530 ................................... Preparatory, below knee ‘ptb’ type socket, non-alignable system, pylon, no cover, sach foot, thermoplastic or 

equal, molded to model. 

L5535 ................................... Preparatory, below knee ‘ptb’ type socket, non-alignable system, no cover, sach foot, prefabricated, adjustable 

open end socket. 

L5540 ................................... Preparatory, below knee ‘ptb’ type socket, non-alignable system, pylon, no cover, sach foot, laminated socket, 

molded to model. 

L5560 ................................... Preparatory, above knee—knee disarticulation, ischial level socket, non-alignable system, pylon, no cover, sach 

foot, plaster socket, molded to model. 

L5570 ................................... Preparatory, above knee—knee disarticulation, ischial level socket, non-alignable system, pylon, no cover, sach 

foot, thermoplastic or equal, direct formed. 

L5580 ................................... Preparatory, above knee—knee disarticulation ischial level socket, non-alignable system, pylon, no cover, sach 

foot, thermoplastic or equal, molded to model. 

L5585 ................................... Preparatory, above knee—knee disarticulation, ischial level socket, non-alignable system, pylon, no cover, sach 

foot, prefabricated adjustable open end socket. 

L5590 ................................... Preparatory, above knee—knee disarticulation ischial level socket, non-alignable system, pylon no cover, sach 

foot, laminated socket, molded to model. 

L5595 ................................... Preparatory, hip disarticulation-hemipelvectomy, pylon, no cover, sach foot, thermoplastic or equal, molded to patient model. 

L5600 ................................... Preparatory, hip disarticulation-hemipelvectomy, pylon, no cover, sach foot, laminated socket, molded to patient 

model. 

L5610 ................................... Addition to lower extremity, endoskeletal system, above knee, hydracadence system. 

L5611 ................................... Addition to lower extremity, endoskeletal system, above knee—knee disarticulation, 4 bar linkage, with friction 

swing phase control. 

L5613 ................................... Addition to lower extremity, endoskeletal system, above knee—knee disarticulation, 4 bar linkage, with hydraulic 

swing phase control. 

L5614 ................................... Addition to lower extremity, exoskeletal system, above knee—knee disarticulation, 4 bar linkage, with pneumatic 

swing phase control. 

L5616 ................................... Addition to lower extremity, endoskeletal system, above knee, universal multiplex system, friction swing phase 

control. 

L5639 ................................... Addition to lower extremity, below knee, wood socket. 

L5643 ................................... Addition to lower extremity, hip disarticulation, flexible inner socket, external frame. 

L5649 ................................... Addition to lower extremity, ischial containment/narrow m-l socket. 

L5651 ................................... Addition to lower extremity, above knee, flexible inner socket, external frame. 

L5681 ................................... Addition to lower extremity, below knee/above knee, custom fabricated socket insert for congenital or atypical 

traumatic amputee, silicone gel, elastomeric or equal, for use with or without locking mechanism, initial only (for 

other than initial, use code l5673 or l5679). 

L5683 ................................... Addition to lower extremity, below knee/above knee, custom fabricated socket insert for other than congenital or 

atypical traumatic amputee, silicone gel, elastomeric or equal, for use with or without locking mechanism, initial 

only (for other than initial, use code l5673 or l5679). 

L5700 ................................... Replacement, socket, below knee, molded to patient model. 

L5701 ................................... Replacement, socket, above knee/knee disarticulation, including attachment plate, molded to patient model. 

L5702 ................................... Replacement, socket, hip disarticulation, including hip joint, molded to patient model.

L5703 ................................... Ankle, symes, molded to patient model, socket without solid ankle cushion heel (sach) foot, replacement only. 

L5705 ................................... Custom shaped protective cover, above knee. 

L5706 ................................... Custom shaped protective cover, knee disarticulation. 

L5707 ................................... Custom shaped protective cover, hip disarticulation. 

L5718 ................................... Addition, exoskeletal knee-shin system, polycentric, friction swing and stance phase control. 

L5722 ................................... Addition, exoskeletal knee-shin system, single axis, pneumatic swing, friction stance phase control. 

L5724 ................................... Addition, exoskeletal knee-shin system, single axis, fluid swing phase control. 

L5726 ................................... Addition, exoskeletal knee-shin system, single axis, external joints fluid swing phase control. 

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Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 30519 

TABLE 4—PROPOSED MASTER LIST OF DMEPOS ITEMS SUBJECT TO FREQUENT UNNECESSARY UTILIZATION FOR PRIOR

AUTHORIZATION—Continued 

HCPCS Description 

L5728 ................................... Addition, exoskeletal knee-shin system, single axis, fluid swing and stance phase control. 

L5780 ................................... Addition, exoskeletal knee-shin system, single axis, pneumatic/hydra pneumatic swing phase control. 

L5781 ................................... Addition to lower limb prosthesis, vacuum pump, residual limb volume management and moisture evacuation system. 

L5782 ................................... Addition to lower limb prosthesis, vacuum pump, residual limb volume management and moisture evacuation system, heavy duty. 

L5795 ................................... Addition, exoskeletal system, hip disarticulation, ultra-light material (titanium, carbon fiber or equal). 

L5814 ................................... Addition, endoskeletal knee-shin system, polycentric, hydraulic swing phase control, mechanical stance phase 

lock. 

L5816 ................................... Addition, endoskeletal knee-shin system, polycentric, mechanical stance phase lock. 

L5818 ................................... Addition, endoskeletal knee-shin system, polycentric, friction swing, and stance phase control. 

L5822 ................................... Addition, endoskeletal knee-shin system, single axis, pneumatic swing, friction stance phase control. 

L5824 ................................... Addition, endoskeletal knee-shin system, single axis, fluid swing phase control. 

L5826 ................................... Addition, endoskeletal knee-shin system, single axis, hydraulic swing phase control, with miniature high activity 

frame. 

L5828 ................................... Addition, endoskeletal knee-shin system, single axis, fluid swing and stance phase control. 

L5830 ................................... Addition, endoskeletal knee-shin system, single axis, pneumatic/swing phase control. 

L5840 ................................... Addition, endoskeletal knee/shin system, 4-bar linkage or multiaxial, pneumatic swing phase control. 

L5845 ................................... Addition, endoskeletal, knee-shin system, stance flexion feature, adjustable. 

L5848 ................................... Addition to endoskeletal knee-shin system, fluid stance extension, dampening feature, with or without 

adjustability. 

L5856 ................................... Addition to lower extremity prosthesis, endoskeletal knee-shin system, microprocessor control feature, swing and 

stance phase, includes electronic sensor(s), any type. 

L5857 ................................... Addition to lower extremity prosthesis, endoskeletal knee-shin system, microprocessor control feature, swing 

phase only, includes electronic sensor(s), any type. 

L5858 ................................... Addition to lower extremity prosthesis, endoskeletal knee shin system, microprocessor control feature, stance 

phase only, includes electronic sensor(s), any type. 

L5930 ................................... Addition, endoskeletal system, high activity knee control frame. 

L5960 ................................... Addition, endoskeletal system, hip disarticulation, ultra-light material (titanium, carbon fiber or equal). 

L5964 ................................... Addition, endoskeletal system, above knee, flexible protective outer surface covering system. 

L5966 ................................... Addition, endoskeletal system, hip disarticulation, flexible protective outer surface covering system. 

L5968 ................................... Addition to lower limb prosthesis, multiaxial ankle with swing phase active dorsiflexion feature. 

L5973 ................................... Endoskeletal ankle foot system, microprocessor controlled feature, dorsiflexion and/or plantar flexion control, includes power source. 

L5979 ................................... All lower extremity prosthesis, multi-axial ankle, dynamic response foot, one piece system. 

L5980 ................................... All lower extremity prostheses, flex foot system. 

L5981 ................................... All lower extremity prostheses, flex-walk system or equal. 

L5987 ................................... All lower extremity prosthesis, shank foot system with vertical loading pylon. 

L5988 ................................... Addition to lower limb prosthesis, vertical shock reducing pylon feature. 

L5990 ................................... Addition to lower extremity prosthesis, user adjustable heel height. 

D. Proposed Future Process for 

Implementing a Prior Authorization 

Program for Items on the Master List 

Presence on the Master List would not 

automatically require prior 

authorization. We propose 

implementing the prior authorization 

program by limiting the number of items 

from the Master List that are subject to 

prior authorization. In order to balance 

minimizing provider and supplier 

burden with our need to protect the 

Trust Funds, we propose to initially 

implement prior authorization for a 

subset of items on the Master List 

(hereafter referred to as ‘‘Required Prior 

Authorization List’’). We propose that 

we inform the public of the Required 

Prior Authorization List in the Federal 

Register with 60-day notice before 

implementation. 

Additionally, we propose a prior 

authorization program for items on the 

Master List that may be implemented 

nationally or locally. While OIG and/or 

GAO and the CERT DME Appendix 

provide national summary data, the 

reports often include regional data as 

well. We may elect to limit the prior 

authorization requirement to a 

particular region of the country if claims 

data analysis or OIG/GAO reports show 

that unnecessary utilization of the 

selected item(s) is concentrated in a 

particular region. Alternately, we may 

elect to implement prior authorization 

nationally if claims data analysis shows 

that unnecessary utilization of the 

selected item(s) is widespread and 

occurring across multiple geographic 

areas. 

We also propose to have the authority 

to suspend or cease the prior 

authorization requirement program 

generally, or for a particular item or 

items at any time, without undertaking 

a separate rulemaking. For example, we 

may need to suspend or cease the prior 

authorization program due to new 

payment policies, which may render the 

prior authorization requirement obsolete 

or remove the item from Medicare 

coverage. If we suspend or cease the 

prior authorization requirement, we 

would post notification of the 

suspension on the CMS Prior 

Authorization Web site, contractor Web 

sites, publications, and bulletins and 

include the date of suspension. 

We note that this proposal would 

apply in competitive bidding areas 

because CMS conditions of payment 

apply under the Medicare DMEPOS 

Competitive Bidding Program. 

In summary, because the Master List 

would be self-updating, we propose that 

we would annually publish notification 

of any additions or deletions to the 

Master List in the Federal Register and 

on the CMS Prior Authorization Web 

site. In addition, we propose to 

periodically publish notification of 

additions and deletions to the Required 

Prior Authorization List (including 

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30520 Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 

changes to the geographic regions in 

which prior authorization occurs) in the 

Federal Register and on the CMS Prior 

Authorization Web site. The 

announcement would appear in the 

Federal Register and there would be at 

least 60 days notice before prior 

authorization is required. This proposed 

rule does not announce the first items 

on the Required Prior Authorization 

List. We seek public comment on the: 

(1) Number of items selected for initial 

implementation; (2) number of future 

items selected for implementation; and 

(3) frequency in which we would select 

the items. 

Since the proposed Master List 

contains DMEPOS items currently 

included in the CMS Prior 

Authorization of Power Mobility Device 

(PMD) Demonstration, we would not 

require prior authorization for PMDs 

under this proposed rule, at least until 

the demonstration was complete. This 

proposed rule would not affect the 

current Prior Authorization of PMD 

Demonstration. 

The proposed prior authorization 

process would not create new clinical 

documentation requirements. Instead, it 

would require the same information 

necessary to support Medicare payment, 

just earlier in the process. This would 

ensure that all relevant coverage, 

coding, and clinical documentation 

requirements are met before the item is 

furnished to the beneficiary and before 

the claim is submitted for payment. 

Prior to furnishing the item and prior 

to submitting the claim for processing, 

a prior authorization requester would 

submit evidence that the item complies 

with all coverage, coding, and payment 

rules. Information regarding Medicare 

coverage, coding, and payment rules for 

DMEPOS items is found in the Act, our 

regulations, National Coverage 

Determinations (NCDs), Local Coverage 

Determinations (LCD), CMS manuals 

and transmittals, as well as Durable 

Medical Equipment Medicare 

Administrative Contractors’ (DME 

MAC’) Web sites. All coverage, coding, 

and payment rules would apply. 

Medicare coverage, coding, and 

payment rules applicable to items on 

the Required Prior Authorization List 

would also be posted on the CMS Prior 

Authorization Web site. Further, this 

proposed rule would not change who 

creates the required clinical 

documentation. For example, clinical 

documentation that is required to be 

created by a practitioner would still be 

required to be created by the 

practitioner. Similarly, documentation 

requiring supplier origination, (for 

example, product description), would 

still be generated by the supplier. 

CMS or its contractors would review 

the prior authorization request to 

determine whether the item ordered for 

the beneficiary complies with 

applicable coverage, coding, and 

payment rules. After receipt of all 

applicable required Medicare 

documentation, CMS or its contractors 

would conduct a medical review and 

communicate a decision that 

provisionally affirms or non-affirms the 

request. A provisional affirmation is a 

preliminary finding that a future claim 

meets Medicare’s coverage, coding, and 

payment rules. Claims receiving a 

provisional affirmation may still be 

denied based on technical requirements 

that can only be evaluated after the 

claim has been submitted for formal 

processing. For example, a finding that 

a claim is a duplicate claim can only be 

made after the claim has been submitted 

for formal processing. Claims receiving 

a provisional affirmation may also be 

denied based on information not 

available at the time of a prior 

authorization request (that is, proof of 

delivery). A prior authorization request 

that is non-affirmed under section 

1834(a)(15) of the Act is not an initial 

determination on a claim for payment 

for items furnished, and therefore would 

not be appealable. We propose to make 

this distinction clear by adding a new 

paragraph (t) to § 405.926 stating that a 

contractor’s prior determination of 

coverage is not an initial determination. 

Claims receiving a non-affirmative 

decision, as well as claims for items 

subject to prior authorization but for 

which no prior authorization was 

requested would be denied if submitted 

for processing. A requester who submits 

a claim for which there was a nonaffirmative decision or for which no 

prior authorization request was obtained 

is afforded appeal rights. 

CMS or its contractors would make 

reasonable efforts to communicate the 

decision within 10 days of receipt of all 

applicable information. However, final 

timelines for communicating an 

affirmed or non-affirmed decision to the 

requester would be described in CMS 

manual and on the CMS Prior 

Authorization Web site. We propose to 

allow unlimited resubmissions. 

To address circumstances where 

applying the standard timeframe for 

making a prior authorization decision 

could seriously jeopardize the life or 

health of the beneficiary, we propose an 

exception to the initial review timeline. 

We are proposing that if CMS or its 

contractor agrees that using the standard 

timeframes for review places the 

beneficiary at risk as previously 

described, then we would allow an 

expedited review of the prior 

authorization request and communicate 

an expedited decision. In these 

situations, CMS or its contractors would 

make reasonable efforts to communicate 

the decision within 2 business days of 

receipt of all applicable Medicare 

required documentation. This process 

would be further defined in CMS 

guidance and posted on the CMS Prior 

Authorization Web site. A prior 

authorization request for an expedited 

review would include documentation 

that shows that applying the standard 

timeframe for making a decision could 

seriously jeopardize the life or health of 

the beneficiary. We are soliciting public 

comment on whether the proposed 

process would meet our objective of 

ensuring beneficiary access to care and 

protecting the Medicare Trust Funds 

without placing undue burden on 

practitioners and suppliers. 

We propose to automatically deny 

payment for a claim for an item on the 

Required Prior Authorization List that is 

submitted without an affirmative prior 

authorization decision. We believe 

section 1834(a)(15) of the Act authorizes 

the Secretary to make an affirmative 

prior authorization decision a condition 

of payment for items on the Required 

Prior Authorization List. As discussed 

earlier, section 1834 (a)(15)(A) of the 

Act authorizes the Secretary to develop 

and update a list of DMEPOS items 

frequently subject to unnecessary 

utilization. Section 1834(a)(15)(C) of the 

Act, titled ‘‘Determinations Of Coverage 

In Advance,’’ allows the Secretary to 

determine in advance of delivery 

whether payment should be made for an 

item on the list developed by the 

Secretary. We believe that Congress 

intended section 1834(a)(15) of the Act 

to establish an advanced determination 

process (that is, a prior authorization 

process) as a condition of payment for 

items on the list developed by the 

Secretary. Absent this potential penalty 

for noncompliance with the prior 

authorization process, section 

1834(a)(15) of the Act would be 

rendered moot, as suppliers would not 

be required to seek an advance decision 

of coverage for these items. A 

mandatory prior authorization process 

for these items best ensures that CMS 

effectuates Congress’ intent of reducing 

unnecessary utilization for the items 

identified by the Secretary pursuant to 

section 1834(a)(15)(A) of the Act. Thus, 

if this proposed rule is finalized, prior 

authorization would become a condition 

of payment for the items on the 

Required Prior Authorization List. 

We propose to permit a requester to 

resubmit a prior authorization request if 

the initial request was non-affirmed. 

Prior authorization requests would be 

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reviewed, and a decision of a 

provisional affirmative or nonaffirmative would be communicated to 

the affected parties in the same manner 

as an initial request. We would consider 

a request for the same beneficiary for the 

same HCPCS code in a 6-month period 

of time to be a resubmission. A request 

outside of those parameters would be 

treated as a new initial request. We seek 

public comment on the number of 

resubmitted prior authorization requests 

allowed. This supports CMS’s objective 

to satisfy our overall goal of enabling 

beneficiary access to care while 

protecting the Medicare Trust Fund. For 

the purpose of this proposed rule, we 

suggest that Medicare or its contractor 

make a reasonable effort to render an 

affirmative or non-affirmative decision 

within 10 days of receiving the initial 

request, 2 days for an expedited request 

or 20 days for a resubmission. We also 

seek public comment on suggested 

timeframes for provisionally affirmative 

or non-affirmative decisions on 

resubmitted prior authorization 

requests. Additional information about 

timeframes for all decisions would be 

described in CMS guidance to its 

contractors. The following illustrates 

possible prior authorization scenarios: 

Scenario 1: A requester submits to 

CMS (or its contractor) a prior 

authorization request along with all 

required documentation. CMS (or its 

contractor) finds that the request meets 

all applicable Medicare requirements. 

CMS (or its contractor) would 

communicate a provisional affirmative 

decision to the affected parties. The 

supplier would submit the claim 

following receipt of a provisional 

affirmative decision, and the claim 

would be paid, as long as all other 

requirements were met. 

In the preceding example, the granted 

affirmative decision is provisional 

because payment decisions can only be 

made after all requirements are 

evaluated. For example, a claim could 

have received a provisional affirmative 

prior authorization decision. However, 

after submission, the claim could be 

denied due to technical payment 

reasons, such as the claim was a 

duplicate claim or the claim was for a 

deceased beneficiary. In addition, 

certain documentation needed in 

support of the claim, such as proof of 

delivery, cannot be reviewed on a prior 

authorization request. 

Scenario 2: A requester submits to 

CMS (or its contractor) a prior 

authorization request. CMS (or its 

contractor) conducts a medical review 

of submitted documentation and 

determines that the request and 

submitted documentation does not 

comply with one or more applicable 

coverage, coding, and payment rules. 

CMS (or its contractor) communicates a 

decision that provisionally non-affirms 

the request. A provisional nonaffirmation is a preliminary finding that 

a future claim associated with the 

submitted documentation and prior 

authorization request would be denied 

if submitted because the associated 

request and submitted documentation 

did not meet one or more of Medicare’s 

coverage, coding, and payment rules. 

CMS (or its contractor) would 

communicate a non-affirmative decision 

to the affected parties. The 

communication to the affected parties 

would identify which Medicare 

coverage, coding or payment rule(s) was 

not supported in the request and 

submitted documentation and thus 

served as the basis for the nonaffirmative decision. The requester 

could resubmit the prior authorization 

request. If the claim is submitted for 

payment without a provisional 

affirmative decision, it would be 

automatically denied. The supplier 

would assume liability if the item was 

furnished after receiving a nonaffirmative decision, unless conditions 

for assigning liability to the beneficiary 

or Medicare, (as described in section 

1879(h)(2) of the Act for assigned claims 

and section 1834(j)(4) of the Act for nonassigned claims and as discussed in 

section II.E. of this proposed rule) are 

met. A prior authorization request that 

is non-affirmed under section 

1834(a)(15) of the Act is not an initial 

decision on a claim for payment for 

items furnished, and therefore would 

not be appealable. However, a claim for 

which a non-affirmative prior 

authorization decision was received, 

submitted and subsequently denied 

could be appealed. 

Scenario 3: A claim is submitted 

without a prior authorization decision. 

The claim would be denied because 

there was no prior authorization 

request, which is a condition of 

payment. The supplier is liable unless 

the conditions described at section 

1879(h)(2) of the Act for assigned claims 

and section 1834(j)(4) of the Act for nonassigned claims (and discussed in 

section II.E. of this proposed rule) are 

met. 

E. Liability 

A request for prior authorization must 

be submitted prior to furnishing the 

item to the beneficiary and prior to 

submitting the claim for processing. 

When a claim for an item on the 

Required Prior Authorization List is 

submitted and denied, the contractor 

determines liability for the denied item 

based on sections 1834(j)(4) of the Act 

for non-assigned claims and 1879(h)(2) 

of the Act for assigned claims. Under 

these sections, any expenses incurred 

for the denied item or service are the 

responsibility of the supplier unless 

liability is transferred to the beneficiary 

in instances where beneficiaries are 

given an Advanced Beneficiary Notice 

of Noncoverage (ABN), Form CMS–R– 

131, because the beneficiary knows or 

could be expected to know that payment 

would not be made. Sections 1834(j)(4) 

and 1879(h)(2) of the Act, both of which 

reference the refund procedures in 

section 1834(a)(18)(A) of the Act, 

address liability decisions made after 

assessing actual or expected knowledge, 

based on all the relevant facts pertaining 

to each particular denial. 

The limitation on liability provision 

in section 1879 of the Act establishes a 

process for determining financial 

liability for certain denials of items or 

services. In the case of assigned DME 

that is subject to the prior authorization 

requirement established in this rule, 

under section 1879(h) of the Act, a 

supplier is presumed to be financially 

liable for a claim denied if there is no 

affirmative prior authorization. The 

same holds true for non-assigned DME 

under section 1834(j)(4) of the Act. If the 

supplier collected any monies from the 

beneficiary for such denied items, the 

supplier is required to refund such 

monies. Under section 1879(a) of the 

Act, the determination of financial 

liability for certain categories of denied 

claims is based on actual or constructive 

knowledge that Medicare is not 

expected to cover or make payment for 

such denied items or services. In 

general, the supplier is held financially 

liable under section 1879 of the Act 

because it is expected to be familiar 

with Medicare coverage and payment 

requirements. However, as explained 

later in this section, under sections 

1879(h) and 1834(a)(18) of the Act, 

liability may be shifted from the 

supplier to the beneficiary if the 

supplier delivers a valid Advanced 

Beneficiary Notice of Noncoverage 

(ABN), Form CMS–R–131, to the 

beneficiary. Similarly, under section 

1879(a) of the Act, if the supplier 

believes, for example, that an item may 

not be considered medically reasonable 

and necessary under section 

1862(a)(1)(A) of the Act, the supplier 

may shift financial liability to the 

beneficiary by delivering a valid ABN to 

the beneficiary. 

After promulgation of the prior 

authorization requirement through a 

possible final rule, CMS or its contractor 

would presume that the supplier knew 

that Medicare would automatically deny 

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the claim for which the supplier failed 

to request a prior authorization, per 

section 1834(a)(15) of the Act. However, 

CMS or its contractor would generally 

presume that the Medicare beneficiary 

does not know, and cannot reasonably 

be expected to know, that Medicare will 

deny, or has denied, payment in 

advance under section 1834(a)(15) of the 

Act. 

Under sections 1834(j)(4) and 

1879(h)(2) of the Act, when a 

beneficiary receives an item or service 

and does not know that CMS or its 

contractor may deny the claim based on 

an unmet prior authorization 

requirement, the supplier is financially 

liable for the denied claim and is 

obligated to refund any payments 

received from the beneficiary. In cases 

where the beneficiary insists on getting 

the item without the prior authorization 

decision or while the decision is 

pending, or in cases where the prior 

authorization decision is non-affirmed, 

the supplier must issue an Advanced 

Beneficiary Notice of Noncoverage 

(ABN) to the beneficiary, in order to 

shift liability to the beneficiary. If the 

beneficiary agrees to pay for the item 

when signing the ABN, liability rests 

with the beneficiary if Medicare does, in 

fact, deny the claim. The ABN notifies 

the beneficiary that an item usually 

covered by Medicare may not be paid 

for in this instance. When completing 

the ABN, the supplier must provide a 

valid and understandable reason why 

Medicare may deny payment so that the 

beneficiary realizes that Medicare 

coverage of the item could be supported 

if a prior authorization affirmation is 

obtained by the supplier. The ABN must 

not be used to bypass the prior 

authorization process, and our policy 

prohibits routine ABN issuance. In 

order for the ABN to be considered 

valid, the ABN must be issued to the 

beneficiary before the beneficiary 

receives the item or services. 

Detailed requirements for valid ABN 

issuance can be found in the Medicare 

Claims Processing Manual (Internet 

Only Manual (IOM) 100–04): http://

www.cms.gov/Regulations and 

Guidance/Guidance/Manuals/

Downloads/clm104c30.pdf. This section 

will be updated to provide standard 

language that suppliers must include on 

ABNs issued for items requiring prior 

authorization. If an ABN is not given to 

the beneficiary in the manner described 

in CMS’ claims processing manual, 

financial liability for the denied claim 

will not be shifted to the beneficiary. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs). 

In § 414.234(c), we would require, as 

a condition of payment for certain 

DMEPOS items frequently subject to 

unnecessary utilization, that a prior 

authorization request be submitted prior 

to the submission of a claim. 

For purposes of this proposed rule, 

we are defining unnecessary utilization 

as the furnishing of items or services 

that do not comply with one or more of 

Medicare’s clinical documentation, 

coverage, payment and coding rules, as 

applicable. Items frequently subject to 

unnecessary utilization are those 

identified by evaluation of past payment 

experience. Specifically, and for the 

purpose of this proposed rule, an item 

frequently subject to unnecessary 

utilization is identified as having a high 

incidence of fraud, improper payments 

or unnecessary utilization in GAO or 

OIG reports or the CERT DME 

Appendix, has an average purchase fee 

of $1,000 or greater or an average rental 

fee schedule of $100 or greater, and is 

listed on the DMEPOS fee schedule. 

Payment made when the item does not 

meet Medicare policy is an improper 

payment. It is important to keep in mind 

that all fraud is considered to be 

improper payment, but not all improper 

payments are fraud. 

Prior authorization would require 

information to support a Medicare 

provisional payment decision earlier in 

the process, before the item is delivered. 

This would ensure that all relevant 

clinical and/or medical documentation 

requirements are met before the item is 

delivered to the beneficiary and before 

the claim is submitted for payment. A 

prior authorization request would 

include evidence that the request for 

payment complies with Medicare 

clinical documentation, coverage, 

payment, and coding rules. All 

documentation requirements specified 

in policy would still apply. This 

proposed rule would not change who 

originates the documentation. 

This proposed rule would implement 

prior authorization, a tool utilized by 

private sector health care payers to 

prevent unnecessary utilization of 

certain DMEPOS items. In 2012, the 

total utilization for all items listed in the 

Master List was nearly $1.3 billion. The 

Master List includes DMEPOS items 

frequently subject to unnecessary 

utilization meeting criteria described 

earlier in this proposed rule. Presence of 

an item(s) on the Master List would not 

automatically result in that item being 

subject to prior authorization. In order 

to balance minimizing provider and 

supplier burden with our need to 

protect the Trust Funds, we propose to 

initially implement prior authorization 

for a subset of items on the Master List. 

This subset of items would be called the 

Required Prior Authorization List. We 

seek public comment on the number of 

items selected for initial 

implementation of the prior 

authorization requirement. 

In 2012, there were over 1.7 million 

beneficiaries receiving an item from the 

Master List. Cost, utilization and 

improper payment rates of items on the 

Master List vary greatly. It is important 

to note that not all items on the Master 

List have a known improper payment 

rate since their Master List inclusion 

may have been based on a 2007 or later 

OIG/GAO report and not the CERT 

Report DME appendix. As discussed 

earlier, the CERT program develops 

improper payment rates for those items 

for which at least 30 claims are included 

in their sample. Consequently, DMEPOS 

items have an associated improper 

payment rate if at least 30 claims for 

that code were included in the CERT 

sample. 

To estimate the impact of this 

proposed rule within a range of 

programmatic activity, we isolated those 

items on the Master List that had an 

associated improper payment rate. We 

then excluded power mobility devices 

from the list since they are currently 

subject to prior authorization under a 

CMS demonstration and thus not 

eligible to be selected from the Master 

List until the demonstration is 

completed. We ranked the remaining 25 

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items by average improper payment 

dollars per line. Using 2013 CERT data, 

we developed low, primary, and high 

estimates of potentially affected claims 

for each year for the first 10 years of the 

program, if implemented as proposed. 

We base our low estimate of affected 

claims on the possible number of claims 

we can subject to the prior authorization 

requirements based on selecting Master 

List items with the highest average 

improper payment dollars per line. For 

example, during the 2013 CERT 

reporting period Medicare paid for the 

top two DMEPOS items on the Master 

List associated with the highest 

improper payment dollars per line 

nearly 7,500 times. We believe limiting 

prior authorization to the top two items 

results in a low programmatic activity 

compared to implementing prior 

authorization for all items in the Master 

List. Consequently we use 7,500 as our 

low estimate of potentially affected 

claims for our 10-year projection (see 

Table 5). We did not account for 

Medicare growth or ramp up activities 

for our low estimate since we selected 

7,500 to represent the minimum level of 

program activity regardless of other 

factors. Based on the 2013 CERT data, 

if we avoided 100 percent of payment 

errors for the top 2 items, we would 

realize the largest gain on investment. 

Again, it is important to note that the 

average error ranking could change 

every year since it is based on the 

acquired CERT sample. Thus the top 

two items with the highest average 

improper payments could change every 

year. 

Based on the 2013 CERT data, CMS 

paid for the top 22 DMEPOS items on 

the Master List with the highest average 

improper payments nearly 400,000 

times. If we avoid 100 percent of 

improper payments for the top 22 

Master List DMEPOS items with the 

highest average improper payments, we 

realize a significantly lower gain on 

investment. Subjecting 22 items to prior 

authorization results in high 

programmatic activity, thus we used 

500,000 as our highest estimate of 

affected claims for years 8 through 10 in 

our projections (CYs 2022 through 2024 

Table 5). We believe 500,000 accounts 

for Medicare growth as well as the 

potential variability in ranking the 

highest average improper payments of 

Master List DMEPOS items which may 

result in higher than 400,000 claim 

counts. 

Based on the 2013 CERT data, there 

were over 200,000 Medicare payments 

made for the top 16 Master List 

DMEPOS items with the highest average 

improper payments. If we avoid 100 

percent of improper payments for the 

top 16 Master List DMEPOS items with 

the highest improper payments, we 

realize a moderate gain on investment. 

We derive at our primary estimate (see 

Table 5) by averaging the low and high 

estimate of potential claims affected. 

Subjecting 16 items to prior 

authorization results in moderate 

programmatic activity, thus we used 

253,750 as our primary estimate of 

affected claims for years 8 through 10 in 

our projections (CYs 2022 through 2024 

(see Table 5)). We believe the primary 

estimates accounts for Medicare growth 

as well as the potential variability in 

ranking the highest improper payment 

rates of Master List DMEPOS items 

which may result in higher than 200,000 

claim counts. 

We provide the preceding discussion 

to explain how we arrived at the 

estimated number potential claims 

affected. However, we note that other 

factors may contribute to the number of 

claims ultimately affected. For example, 

future policies, regulations or response 

to stakeholder needs may be factored 

into the Master List item selection(s) 

and consequently impact the number of 

claims ultimately affected. 

As noted earlier, Table 5 lists our 

estimated range of potentially affected 

claims. 

TABLE 5—RANGE OF ESTIMATES OF POTENTIALLY AFFECTED CLAIMS

Estimate 

Number of potentially affected claims 

CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 

Low ........................... 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 

Primary ..................... 8,750 53,750 53,750 128,750 128,750 128,750 128,750 253,750 253,750 253,750 

High .......................... 10,000 100,000 100,000 250,000 250,000 250,000 250,000 500,000 500,000 500,000 

If implemented, this proposed rule 

would allow unlimited resubmissions of 

prior authorization requests. To account 

for unlimited resubmissions, we 

multiplied the low, primary, and high 

estimates of potentially affected claims 

in Table 5 by 2.25. We selected 2.25 as 

the multiplier based on preliminary 

analysis of resubmitted prior 

authorization requests in the CMS Prior 

Authorization of Power Mobility Device 

(PMD) Demonstration. Once multiplied 

by 2.25, the value no longer reflects 

estimated individual affected claims. 

Rather, the value represents the 

estimated number of potential cases 

(potential claims plus resubmission(s) of 

associated prior authorization requests). 

Table 6 provides low, primary and 

high estimates of potentially affected 

cases (claims and resubmissions of 

associated prior authorization requests). 

The average of the high estimate of 

potentially affected cases in years 1 

through 3 is 157,500 ((22,500 + 225,000 

+ 225,000)/3) cases per year for the first 

3 years. 

TABLE 6—RANGE OF POTENTIALLY AFFECTED CASES

[Potential claims and resubmissions of associated prior authorization requests] 

Estimate 

Number of potentially affected claims 

CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 

Low ........................... 16,875 16,875 16,875 16,875 16,875 16,875 16,875 16,875 16,875 16,875 

Primary ..................... 19,688 120,938 120,938 289,688 289,688 289,688 289,688 570,938 570,938 570,938 

High .......................... 22,500 225,000 225,000 562,500 562,500 562,500 562,500 1,125,000 1,125,000 1,125,000 

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2Based on Bureau of Labor Statistics information 

(29–2070 Medical Record and Health Information 

Technician 2012). 

We estimate that the private sector’s 

per-case time burden attributed to 

submitting documentation and 

associated clerical activities in support 

of a prior authorization request is 

equivalent to that of submitting 

documentation and clerical activities 

associated for prepayment review, 

which is 0.5 hours. We apply this timeburden estimate to initial submissions, 

resubmissions, and expedited requests 

(that is, affected cases). The total high 

estimated burden for the first year is 

11,250 hours (22,500 × 0.5 hours) and 

the total high estimated burden per year 

for years 2 and 3 is 112,500 hours 

(225,000 × 0.5 hours). Table 7 lists the 

low, primary, and high estimated time 

burden associated with potentially 

affected cases. 

TABLE 7—TIME BURDEN ASSOCIATED WITH POTENTIALLY AFFECTED CASES

Estimate 

Number of hours 

CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 

Low .......................................... 8,437.50 8,437.50 8,437.50 8,437.50 8,437.50 8,437.50 8,437.50 8,437.50 8,437.50 8,437.50 

Primary .................................... 9,843.75 60,468.75 60,468.75 144,843.75 144,843.75 144,843.75 144,843.75 285,468.75 285,468.75 285,468.75 

High ......................................... 11,250.00 112,500.00 112,500.00 281,250.00 281,250.00 281,250.00 281,250.00 562,500.00 562,500.00 562,500.00 

We then multiply the time burden 

estimate to an average loaded hourly 

rate of $35.36 (actual hourly rate of 

$17.86 + fringe benefits) 2 to equate the 

burden in dollars. The high time-burden 

for the first year is 11,250 hours and 

multiplied by the hourly rate of $35.36, 

we arrive at a high cost estimate of 

$397,800. Using the same approach, the 

total estimated high cost per year for 

years 2 and 3 is $3,978,000. The average 

of the high estimate annual cost for 

years 1 through 3 is $2.8 million Table 

8 lists the range estimate of PRA burden 

in dollars. This impact is allocated 

across providers and suppliers 

nationwide. 

TABLE 8—RANGE ESTIMATE OF PRA BURDEN IN DOLLARS

Estimate 

PRA burden 

(in dollars) 

CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 

Low ........................................................ 298,350 298,350 298,350 298,350 298,350 298,350 298,350 298,350 298,350 298,350 

Primary .................................................. 348,075 2,138,175 2,138,175 5,121,675 5,121,675 5,121,675 5,121,675 10,094,175 10,094,175 10,094,175 

High ....................................................... 397,800 3,978,000 3,978,000 3,978,000 9,945,000 9,945,000 9,945,000 19,890,000 19,890,000 19,890,000 

We also estimate the cost of mailing 

medical records to be $5 per request for 

prior authorization. However, many of 

the records are received via fax 

machines which have lower associated 

costs than traditional mail. 

Additionally, we offer electronic 

submission of medical documentation 

(esMD) to providers and suppliers who 

wish to use a less expensive alternative 

for sending in medical documents. 

Additional information on esMD can be 

found at www.cms.gov/esMD. 

In instances when the supplier must 

first obtain the medical records from a 

health care provider, we estimate that 

the mailing costs are doubled ($10), as 

records are transferred from provider to 

supplier, and then to CMS or its 

contractors. We estimate that there are 

22,500 cases (high estimate cases, see 

Table 6) for which the mailing costs 

could be doubled in the first year. 

However, it is reasonable to believe that 

less than half (11,250) of the medical 

records are mailed in. Therefore, we 

estimate the costs are $112,500 (11,250 

× $10) for the first year. The total high 

estimated mailing cost for years 2 and 

3 is $4,500,000, or $2,250,000 per year. 

We believe that the requirements 

expressed in this proposed rule meet the 

utility and clarity standards. We 

welcome comment on this assumption 

and on ways to minimize the burden on 

affected parties. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–6050–P, Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Analysis 

A. Statement of Need 

This proposed rule codifies section 

1834(a)(15)(A) and (C) of the Act to 

monitor payments for certain DMEPOS 

items by creating a requirement for 

advance decision as a condition of 

payment. This new requirement aims to 

reduce the unnecessary utilization and 

the resulting overpayment for certain 

DMEPOS items. 

B. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (February 2, 

2012), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96 

354), section 1102(b) of the Act, section 

202 of the Unfunded Mandates Reform 

Act of 1995 (March 22, 1995; Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999) and the 

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Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

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

Since the effect of this rule may possibly 

redistribute more than $100 million in 

years 8 through 10, it may have an 

economically significant impact if the 

high estimates are realized. Per 

Executive Order 12866, we have 

prepared a regulatory impact analysis 

that, to the best of our ability, presents 

the costs and benefits of this proposed 

rule. The RFA requires agencies to 

analyze options for regulatory relief of 

small entities. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of less than $7.0 million to $35.5 

million in any 1 year. For details see the 

Small Business Administration’s (SBA) 

Web site at: www.sba.gov/content/tablesmall-business-size-standards (refer to 

the 62 sector). Individuals and states are 

not included in the definition of a small 

entity. 

The RFA requires that we analyze 

regulatory options for small businesses 

and other entities. We prepare a 

regulatory flexibility analysis unless we 

certify that a rule would not have a 

significant economic impact on a 

substantial number of small entities. 

The analysis must include a justification 

concerning the reason action is being 

taken, the kinds and number of small 

entities that the rule affects, and an 

explanation of any meaningful options 

that achieve the objectives with less 

significant adverse economic impact on 

the small entities. 

For purposes of the RFA, physicians, 

non-physician practitioners (NPPs), and 

suppliers including independent 

diagnostic treatment facilities (IDTFs) 

are considered small businesses if they 

generate revenues of $10 million or less 

based on SBA size standards. 

Approximately 95 percent of physicians 

are considered to be small entities. 

There are over 1 million physicians, 

other practitioners, and medical 

suppliers that receive Medicare 

payment under the physician fee 

schedule (PFS). 

Because we acknowledge that many of 

the affected entities are small entities, 

the analysis discussed throughout the 

preamble of this proposed rule 

constitutes our regulatory flexibility 

analysis for the remaining provisions 

and addresses comments received on 

these issues. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area for 

Medicare payment regulations and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined, 

and the Secretary certifies, that this 

proposed rule would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits on state, local, or 

tribal governments or on the private 

sector before issuing any rule whose 

mandates require spending in any 1 year 

of $100 million in 1995 dollars, updated 

annually for inflation. In 2014, that 

threshold is approximately $141 

million. This proposed rule would not 

impose a mandate that will result in the 

expenditure by State, local, and Tribal 

Governments, in the aggregate, or by the 

private sector, of more than $141 

million in any one year. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on state and local 

governments, preempts state law, or 

otherwise has federalism implications. 

Since this proposed rule does not 

impose any costs on state or local 

governments, the requirements of 

Executive Order 13132 are not 

applicable. 

We have prepared the following 

analysis, which together with the 

information provided in the rest of this 

preamble, meets all assessment 

requirements. The analysis explains the 

rationale for and purposes of this 

proposed rule, details the costs and 

benefits of the rule, and presents the 

measures we would use to minimize the 

burden on small entities. We are 

unaware of any relevant federal rules 

that duplicate, overlap, or conflict with 

this proposed rule. The relevant 

sections of this proposed rule contain a 

description of significant alternatives if 

applicable. 

As discussed under the section III. of 

this proposed rule (Collection of 

Information Requirements section), the 

number of Master List items selected to 

be subject to the prior authorization 

requirement created if this proposed 

rule is finalized is dependent on 

multiple factors. Consequently, we are 

proposing a range of estimates to 

illustrate various implementation 

scenarios, as described in section III. of 

this proposed rule. 

We believe there are a number of 

factors that may contribute to the 

potential growth assumed in the 

scenarios presented. For example, as the 

DMEPOS community acclimates to 

using prior authorization as part of their 

billing practice, there may be greater 

systemic or other processing efficiencies 

to allow more extensive 

implementation. 

The overall economic impact of this 

provision on the health care sector is 

dependent on the number of claims 

affected. For the purpose of this 

narrative analysis, we use the ‘‘primary’’ 

estimate to project costs. However, 

Table 9 lists both the low and high 

estimated cost projections, as well as the 

primary cost estimate. 

The values populating Table 9 were 

obtained from Table 10, Private Sector 

Cost and Table 11, Medicare Cost, 

which can be found in following pages. 

Together, Tables 10 and 11 combine to 

convey the overall economic impact to 

the health sector, which is illustrated in 

Table 9 appropriately titled, Overall 

Economic Impact to the Health Sector. 

Based on the estimate, the overall 

economic impact of this proposed rule 

is approximately $1.3 million in the first 

year. The 5-year impact is 

approximately $57 million and the 10- 

year impact is approximately $212 

million, mostly driven by the increased 

number of items subjected to prior 

authorization after the first year. 

Additional administrative paperwork 

costs to private sector providers and an 

increase in Medicare spending to 

conduct reviews combine to create the 

financial impact. However, this impact 

is offset by some savings. We believe 

there are likely to be other benefits and 

cost savings that result from the 

DMEPOS prior authorization 

requirement. However, many of those 

benefits are difficult to quantify. For 

instance, we expect to see savings in the 

form of reduced unnecessary utilization, 

fraud, waste, and abuse, including a 

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reduction in improper Medicare fee-forservice payments (note that not all improper payments are fraudulent). We 

are soliciting comment on the potential 

increased costs and benefits associated 

with this provision. 

TABLE 9—OVERALL ECONOMIC IMPACT TO HEALTH SECTOR

[In dollars] 

Year 1 5 years 10 years 

Private Sector Cost ......................................... Low Claim Estimation .................................... 298,350 1,491,750 2,938,500 

Primary Claim Estimation ............................... 348,075 14,867,775 55,393,650 

High Estimation .............................................. 397,800 28,243,800 107,803,800 

Medicare Cost ................................................. Low Claim Estimation .................................... 843,750 4,218,750 8,437,500 

Primary Claim Estimation ............................... 984,375 42,046,875 156,656,250 

High Claim Estimation .................................... 1,125,000 79,875,000 304,875,000 

Total Economic Impact to Health Sector ........ Low Claim Estimation .................................... 1,142,100 5,710,500 11,376,000 

Primary Claim Estimation ............................... 1,332,450 56,914,650 212,049,900 

High Claim Estimation .................................... 1,522,800 108,118,800 412,678,800 

The definition of small entity in the 

RFA includes non-profit organizations. 

Per the RFA’s use of the term, most 

suppliers and providers are small 

entities. Likewise, the vast majority of 

physician and nurse practitioner (NP) 

practices are considered small 

businesses according to the SBA’s size 

standards total revenues of $10 million 

or less in any 1 year. While the 

economic costs and benefits of this rule 

are substantial in the aggregate, the 

economic impact on individual entities 

would be relatively small. We estimate 

that 90 to 95 percent of DMEPOS 

suppliers and practitioners who order 

DMEPOS are small entities under the 

RFA definition. The rationale behind 

requiring prior authorization of covered 

DMEPOS items is to ensure the 

beneficiary’s medical condition 

warrants the item of DMEPOS before the 

item is delivered. The impact on these 

suppliers could be significant; if 

finalized, the proposed rule would 

change the billing practices of DMEPOS 

suppliers. We believe that the purpose 

of the statute and this proposed rule is 

to avoid unnecessary utilization of 

DMEPOS items, thus we do not view 

decreased revenues from items subject 

to unnecessary utilization by DMEPOS 

providers and suppliers to be a 

condition that we must mitigate. We 

believe that the effect on legitimate 

suppliers and practitioners would be 

minimal. This proposed rule would 

offer an additional protection to a 

supplier’s cash flow as the supplier 

would know in advance if the Medicare 

requirements are met. 

C. Anticipated Effects 

1. Costs 

a. Private Sector Costs 

We do not believe that this proposed 

rule would significantly affect the 

number of legitimate claims submitted 

for these items. However, we do expect 

a decrease in the overall amount paid 

for DMEPOS items resulting from a 

reduction in unnecessary utilization of 

DMEPOS items requiring prior 

authorization. 

As described in section III. of this 

proposed rule, we propose to rely on a 

criterion-driven approach to select items 

that would require prior authorization. 

In accordance with our proposals, we 

would select certain items from the 

Master List to require prior 

authorization by placing them on the 

Required List. As discussed previously, 

it is impossible to specify the number of 

items on the Required List in advance. 

Similarly, it is not possible to specify 

the resulting numbers of affected claims 

and medical reviews in advance. 

Consequently, we are proposing a range 

of estimates to capture various possible 

scenarios. 

If funded for the high estimation of 

potentially affected claims, we could 

grow the program and affect as many as 

500,000 claims by years 8 through 10. 

This estimate accounts for initial prior 

authorization requests only. 

Resubmissions after a non-affirmative 

decision is rendered on an initial 

request are not included in the high 

estimation of potential claims affected. 

If the program grew to impact as many 

as 500,000 claims, the potentially 

impacted cases (claims and 

resubmissions) total would be 

1,125,000. This potential growth 

accounts for the large fiscal increase 

shown in the program impact analysis. 

We estimate that the private sector’s 

per-case time burden attributed to 

submitting documentation and 

associated clerical activities in support 

of a prior authorization request is 

equivalent to that of submitting 

documentation and clerical activities 

associated for prepayment review, 

which is 0.5 hours. We apply this timeburden estimate to initial submissions, 

resubmissions, and expedited requests 

(cases). (See Tables 7 and 8 of this 

proposed rule.) 

TABLE 10—PRIVATE SECTOR COST

Estimate 

Cost 

(in dollars) 

CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 

Low .................................. 298,350 298,350 298,350 298,350 298,350 298,350 298,350 298,350 298,350 298,350 

Primary ............................ 348,075 2,138,175 2,138,175 5,121,675 5,121,675 5,121,675 5,121,675 10,094,175 10,094,175 10,094,175 

High ................................. 397,800 3,978,000 3,978,000 3,978,000 9,945,000 9,945,000 9,945,000 19,890,000 19,890,000 19,890,000 

b. Medicare Costs 

Medicare would incur additional 

costs associated with processing the 

prior authorization requests. Applying 

the same logic previously described, we 

develop a range of potential costs that 

are dependent on the extent of 

implementation. We use the range of 

potentially affected cases (claims and 

resubmissions) in Table 6 and multiply 

it by $50, the estimated cost to review 

each request. Table 11 lists the cost 

range estimates. 

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TABLE 11—MEDICARE COST

Estimate 

Cost 

(in dollars) 

CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024 

Low ...................... 843,750 843,750 843,750 843,750 843,750 843,750 843,750 843,750 843,750 843,750 

Primary ................ 984,375 6,046,875 6,046,875 14,484,375 14,484,375 14,484,375 14,484,375 28,546,875 28,546,875 28,546,875

High ..................... 1,125,000 11,250,000 11,250,000 28,125,000 28,125,000 28,125,000 28,125,000 56,250,000 56,250,000 56,250,000 

c. Beneficiary Costs 

As will be discussed in the next 

section, we expect a reduction in the 

utilization of Medicare DMEPOS items 

when such utilization does not comply 

with one or more of Medicare’s 

coverage, coding and payment rules. 

Although these rules are designed to 

permit utilization that is medically 

necessary, DMEPOS items that are not 

medically necessary may still provide 

convenience or usefulness for 

beneficiaries; any rule-induced loss of 

such convenience or usefulness 

constitutes a cost of the rule that we 

lack data to quantify. 

2. Benefits 

There would be quantifiable benefits 

because we expect a reduction in the 

unnecessary utilization of those 

Medicare DMEPOS items subject to 

prior authorization. It is difficult to 

project the decrease in unnecessary 

utilization. However, we will be closely 

monitoring utilization and billing 

practices. The benefits include a 

changed billing practice that also 

enhances the coordination of care for 

the beneficiary. For example, requiring 

prior authorization for certain items 

ensures that the primary care provider 

and the supplier collaborate more 

frequently to order and deliver the most 

appropriate DMEPOS item meeting the 

needs of the beneficiary. Improper 

payments made because the practitioner 

did not order the DMEPOS, or because 

the practitioner did not evaluate the 

patient, would likely be reduced by the 

requirement that a supplier submit 

clinical documentation created by the 

practitioner as part of its prior 

authorization request. 

We believe it is more reasonable to 

require practitioners and suppliers to 

adopt new practices for fewer items at 

a time, rather than institute large scale 

change all at once. In addition, during 

the ramp up of the program in year 1, 

we will be doing education and outreach. Consequently, we estimate a 

smaller volume of items in year 1. 

Our Office of the Actuary has 

provided the following budgetary cash 

impact possibilities based on the 

President’s 2015 Budget baseline with 

an assumed October 1, 2014 effective 

date. The impacts are specific to the 

three scenarios in our potentially 

affected claim range: The low, primary, 

and high estimation of potentially 

affected claims (see Table 5). 

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TABLE 12—CY BUDGETARY IMPACT (WITH

MANAGED

CARE) ESTIMATE IN

MILLIONS

Type of scenario 

Calendar year 

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 

2015– 

2019 

(5-year 

impact) 

2015– 

2024 

(10-year 

impact) 

Scenario 1: Assume Low Number 

of Claims.

Number of Part B Claims ...... 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 ................ ................

Part B Costs & Benefits: 

Benefits (in millions) .............. ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥50 ¥100 Premium Offset * (in millions) 0 0 0 0 0 0 0 0 0 0 0 0 Total Part B (in millions) ....... ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥10 ¥50 ¥100 

Scenario 2: Assume Primary Number of Claims. Number of Part B Claims ...... 8,750 53,750 53,750 128,750 128,750 128,750 128,750 253,750 253,750 253,750 ................ ................

Part B Costs & Benefits: 

Benefits ($ in millions) ........... ¥10 ¥40 ¥60 ¥70 ¥80 ¥80 ¥80 ¥100 ¥120 ¥120 ¥260 ¥760 Premium Offset ($ in millions) 0 10 10 20 20 20 20 20 30 30 60 180 Total Part B ($ in millions) .... ¥10 ¥30 ¥50 ¥50 ¥60 ¥60 ¥60 ¥80 ¥90 ¥90 ¥200 ¥580 

Scenario 3: Assume High Number 

of Claims.

Number of Part B Claims ...... 10,000 100,000 100,000 250,000 250,000 250,000 250,000 500,000 500,000 500,000 ................ ................

Part B Costs & Benefits: 

Benefits ($ in millions) ........... ¥10 ¥50 ¥70 ¥90 ¥110 ¥110 ¥110 ¥140 ¥150 ¥150 ¥330 ¥990 Premium Offset ($ in millions) 0 10 20 20 30 30 30 30 40 40 80 250 Total Part B ($ in millions) .... ¥10 ¥40 ¥50 ¥70 ¥80 ¥80 ¥80 ¥110 ¥110 ¥110 ¥250 ¥740 

* Premium offset is an expected change in premium resulting from the proposed rule. 

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D. Alternatives Considered 

1. No Regulatory Action 

As previously discussed, each item on 

the Master List is high cost and 

frequently subject to unnecessary 

utilization. In addition, each item has 

been either the subject of a previous OIG 

or GAO report or has appeared on a 

CERT DME Appendix (2011 or later) of 

DMEPOS items with high improper 

payment rates. Together, utilization of 

items on the Master List accounted for 

$1.3 billion. The status quo is not a 

desirable alternative to this proposed 

rule because current payment practices 

have not affected unnecessary 

utilization appreciably. Evidence of this 

is found in the CERT improper payment 

rates for all DMEPOS, which have 

remained high for the last several years 

(67 percent in 2011, 66 percent in 2012). 

By creating a Master List of DMEPOS 

high cost items known to be the subject 

of GAO/OIG reports and/or high 

improper payment rates, we hope to 

positively affect unnecessary utilization 

and improper payments for DMEPOS in 

general. 

2. Defer to Medicare Administrative 

Contractors (MACs) 

Another alternative we considered 

was to allow MACs processing Medicare 

claims to design safeguards that 

positively affect improper payment rates 

and unnecessary utilization. However, 

in recent years we have required MACs 

to create strategies aimed at reducing 

improper payment and over utilization. 

While MACs have complied with this 

requirement, we have not seen sufficient 

effect on the improper payment rate and 

over utilization. The reason is that 

MACs are limited in their resources and 

authority. Often unforeseen issues or 

statutory requirements cause the MACs 

to reprioritize their work and respond to 

CMS direction to focus on an issue not 

previously on their strategy. In addition, 

their current practice of pre-payment or 

post-payment manual medical reviews 

are costly, and thus are used on a very 

small percentage of claims. Both create 

burdens for the claim submitter. For 

example, in a pre-payment medical 

review, the claim submitter has already 

furnished the item or service. Payment 

is held until the claim submitter 

supplies the MAC with requested 

documentation supporting their request 

for payment. Submitters may be 

confused about the type of documents 

being requested and submit incomplete 

documentation. The submitter has only 

one opportunity to submit the 

appropriate documentation and if 

insufficient will not receive their 

payment. In post-payment reviews, the 

submitter has furnished the item or 

service and has received payment. 

Similar to pre-payment reviews, the 

submitter may be confused about the 

documents needed to support the 

payment. If the payment is denied, the 

MAC is obligated to recover the 

payment. Claim submitters have told us 

that returning payment, or requesting an 

appeal to defend the payment is 

burdensome and costly. 

By requiring documentation before 

the claim is submitted and before the 

item or service is furnished, the 

submitter and contractor are afforded 

unlimited opportunities to clarify 

requirements to receive a provisionally 

affirmative decision. By addressing this 

process in advance of furnishing the 

item or service or submitting the claim, 

we believe there will be less items and/ 

or services paid improperly and 

unnecessarily utilized, as well as less 

burden on providers. 

E. Accounting Statement and Table 

As required by OMB Circular A4 

(available at http://

www.whitehouse.gov/omb/circulars_

default/), in Table 13 (Accounting 

Statement), we have prepared an 

accounting statement showing the 

estimated expenditures associated with 

this proposed rule. This estimate 

includes the estimated FY 2013 

expenditures. 

TABLE 13—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS, BENEFITS, AND COSTS

Category Primary 

estimate 

Low 

estimate 

High 

estimate 

Units 

Year 

dollars 

Discount 

rate Period covered 

Costs 

Annualized Monetized * ....... 4.9 0.3 8.9 2014 7% 2015–2024 

($million/year) 5.3 0.3 9.6 2014 3% 2015–2024 

Annualized Monetized ** ..... 13.9 0.8 27.0 2014 7% 2015–2024 

($million/year) 14.9 0.8 29.0 2014 3% 2015–2024 

Transfers *** 

Annualized Monetized ......... ¥53.5 ¥10.0 ¥68.1 2014 7% 2015–2024 

($million/year) ¥56.0 ¥10.0 ¥71.4 2014 3% 2015–2024 

From Whom to Whom ........ Federal government to Medicare providers. 

* These costs are associated with the private sector paperwork. 

** These costs are associated with the processing the prior authorization requests for Medicare. 

*** Savings to the Medicare program due to the reduced unnecessary utilization, fraud, waste, and abuse. 

F. Conclusion 

The analysis in the previous sections, 

together with the remainder of this 

preamble, provides an initial Regulatory 

Flexibility Analysis. In accordance with 

the provisions of Executive Order 

12866, this regulation was reviewed by 

the Office of Management and Budget. 

List of Subjects 

42 CFR Part 405 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medical 

devices, Medicare, Reporting and 

recordkeeping requirements, Rural 

areas, X-rays. 

42 CFR Part 414 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medicare, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

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Medicaid Services proposes to amend 

42 CFR Chapter IV as set forth below: 

PART 405—FEDERAL HEALTH 

INSURANCE FOR THE AGED AND 

DISABLED 

■ 1. The authority citation for part 405 

continues to read as follows: 

Authority: Secs. 205(a), 1102, 1861, 

1862(a), 1869, 1871, 1874, 1881, and 1886(k) 

of the Social Security Act (42 U.S.C. 405(a), 

1302, 1395x, 1395y(a), 1395ff, 1395hh, 

1395kk, 1395rr and 1395ww(k)), and sec. 353 

of the Public Health Service Act (42 U.S.C. 

263a). 

■ 2. Section 405.926 is amended as 

follows: 

■ a. In the introductory text, removing 

the phrase ‘‘but are not limited to—’’ 

and adding in its place the phrase ‘‘but 

are not limited to the following:’’ 

■ b. In paragraphs (a)(2) and (b) through 

(q), removing ‘‘;’’ and adding in its place 

‘‘.’’. 

■ c. In paragraph (r), removing ‘‘; and’’ 

adding in its place ‘‘.’’. 

■ d. Adding a new paragraph (t). 

The addition reads as follows: 

§ 405.926 Actions that are not initial 

determinations. 

* * * * * 

(t) A contractor’s prior authorization 

determination related to coverage of 

durable medical equipment, prosthetics, 

orthotics, and supplies (DMEPOS). 

PART 414—PAYMENT FOR PART B 

MEDICAL AND OTHER HEALTH 

SERVICES 

■ 3. The authority citation for part 414 

continues to read as follows: 

Authority: Secs. 1102, 1871, and 1881(b)(1) 

of the Social Security Act (42 U.S.C.1302, 

1395hh, and 1395rr(b)(1)). 

■ 4. Subpart D is amended by adding a 

new § 414.234 to read as follows: 

§ 414.234 Prior authorization for items 

frequently subject to unnecessary 

utilization. 

(a) Definitions. For the purpose of this 

section, the following definitions apply: 

Prior authorization is a process 

through which a request for provisional 

affirmation of coverage is submitted to 

CMS or its contractors for review before 

the item is furnished to the beneficiary 

and before the claim is submitted for 

processing. 

Provisional affirmation is a 

preliminary finding that a future claim 

meets Medicare’s coverage, coding, and 

payment rules. 

Unnecessary utilization means the 

furnishing of items that do not comply 

with one or more of Medicare’s 

coverage, coding, and payment rules. 

(b) Master list of items frequently 

subject to unnecessary utilization. (1) 

The Master List of Items Frequently 

Subject to Unnecessary Utilization 

includes items listed on the Durable 

Medical Equipment, Prosthetics, 

Orthotics, and Supplies fee schedule 

with an average purchase fee of $1,000 

or greater or an average rental fee 

schedule of $100 or greater that also 

meet one of the following two criteria: 

(i) The item has been identified as 

having a high rate of fraud or 

unnecessary utilization in a report that 

is national in scope from 2007 or later 

published by any of the following: 

(A) The Office of Inspector General 

(OIG). 

(B) The General Accountability Office 

(GAO). 

(ii) The item is listed in the 2011 or 

later Comprehensive Error Rate Testing 

(CERT) program’s Annual Medicare FeeFor-Service (FFS) Improper Payment 

Rate Report DME Service Specific 

Overpayment Rate Appendix. 

(2) The Master List of DMEPOS Items 

Frequently Subject to Unnecessary 

Utilization is self-updating annually and 

is published in the Federal Register. 

(3) DMEPOS items identified in any of 

the following reports and meeting the 

payment threshold criteria set forth in 

paragraph (b)(1) of this section are 

added to the Master List: 

(i) Future published OIG reports that 

are national in scope. 

(ii) Future published GAO reports. 

(iii) Future Comprehensive Error Rate 

Testing (CERT) program’s Annual 

Medicare FFS Improper Payment Rate 

Report DME Service Specific 

Overpayment Rate Appendix. 

(4) Items remain on the Master List for 

10 years from the date the item was 

added to the Master List. 

(5) Items that are discontinued or are 

no longer covered by Medicare are 

removed from the Master List. 

(6) Items for which the average 

purchase fee and average rental fee is 

reduced to below the inclusion 

threshold of average purchase fee of 

$1,000 or greater or an average rental fee 

schedule of $100 or greater, are removed 

from the list. 

(7) An item is removed from the 

Master List and replaced by its 

equivalent when the Healthcare 

Common Procedure Coding System 

(HCPCS) code representing the item has 

been discontinued and cross-walked to 

an equivalent item. 

(c) Condition of payment—(1) Items 

requiring prior authorization. CMS 

publishes in the Federal Register and 

posts on the CMS Prior Authorization 

Web site a list of items, the Required 

Prior Authorization List, that require 

prior authorization as a condition of 

payment. 

(i) The Required Prior Authorization 

List specified in paragraph (c)(1) of this 

section is selected from the Master List 

of Items Frequently Subject to 

Unnecessary Utilization (as described in 

paragraph (b) of this section). CMS may 

elect to limit the prior authorization 

requirement to a particular region of the 

country if claims data analysis shows 

that unnecessary utilization of the 

selected item(s) is concentrated in a 

particular region. 

(ii) The Required Prior Authorization 

List is effective no less than 60 days 

after publication and posting. 

(2) Denial of claims. (i) CMS or its 

contractors denies a claim for an item 

that requires prior authorization if the 

claim has not received a provisional 

affirmation. 

(ii) Claims receiving a provisional 

affirmation may be denied based on 

either of the following: 

(A) Technical requirements that can 

only be evaluated after the claim has 

been submitted for formal processing. 

(B) Information not available at the 

time of a prior authorization request. 

(d) Submission of prior authorization 

requests. A prior authorization request 

must do the following: 

(1) Include all relevant documentation 

necessary to show that the item meets 

Medicare coverage, coding, and 

payment rules, including all of the 

following: 

(i) Order. 

(ii) Relevant information from the 

beneficiary’s medical record. 

(iii) Relevant supplier produced 

documentation. 

(2) Be submitted before the item is 

furnished to the beneficiary and before 

the claim is submitted for processing. 

(e) Review of prior authorization 

requests. (1) After receipt of a prior 

authorization request, CMS or its 

contractor reviews the prior 

authorization request for compliance 

with Medicare coverage, coding, and 

payment rules. 

(2) If coverage, coding, and payment 

rules are met, CMS or its contractor 

issues a provisional affirmation to the 

requester. 

(3)(i) If coverage, coding, and payment 

rules are not met, CMS or its contractor 

issues a non-affirmative decision to the 

requester. 

(ii) If the requester receives a nonaffirmative decision, the requester may 

resubmit a prior authorization request 

before the item is furnished to the 

beneficiary and before the claim is 

submitted for processing. 

(4) Expedited reviews. (i) A prior 

authorization request for an expedited 

mstockstill on DSK4VPTVN1PROD with PROPOSALS

Federal Register / Vol. 79, No. 102 / Wednesday, May 28, 2014 / Proposed Rules 30531 

review must include documentation 

that shows that processing a prior 

authorization request using a standard 

timeline for review could seriously 

jeopardize the life or health of the 

beneficiary or the beneficiary’s ability to 

regain maximum function. 

(ii) If CMS or its contractor agrees that 

processing a prior authorization request 

using a standard timeline for review 

could seriously jeopardize the life or 

health of the beneficiary or the 

beneficiary’s ability to regain maximum 

function, then CMS or its contractor 

expedites the review of the prior 

authorization request and makes 

reasonable efforts to communicate the 

decision within 2 business days of 

receipt of all applicable Medicare 

required documentation. 

(f) Suspension of prior authorization 

requests. (1) CMS may suspend prior 

authorization requirements generally or 

for a particular item or items at any time 

and without undertaking rulemaking. 

(2) CMS provides notification of the 

suspension of the prior authorization 

requirements via— 

(i) Federal Register notice; and 

(ii) Posting on the CMS prior 

authorization Web site. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: June 12, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: November 20, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

Editorial note: This document was 

received by the Office of the Federal Register 

on May 22, 2014. 

[FR Doc. 2014–12245 Filed 5–22–14; 4:15 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

National Institutes of Health 

42 CFR Part 68b 

RIN 0925–AA10 

[Docket No. NIH–2007–0930] 

National Institutes of Health 

Undergraduate Scholarship Program 

Regarding Professions Needed by 

National Research Institutes 

AGENCY: National Institutes of Health, 

HHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The National Institutes of 

Health (NIH) proposes to issue 

regulations to implement provisions of 

the Public Health Service Act 

authorizing the NIH Undergraduate 

Scholarship Program Regarding 

Professions Needed by National 

Research Institutes (UGSP). The purpose 

of the program is to recruit 

appropriately qualified undergraduate 

students from disadvantaged 

backgrounds to conduct research in the 

intramural research program as 

employees of the NIH by providing 

scholarship support. 

DATES: Comments must be received on 

or before July 28, 2014 to ensure that the 

NIH will be able to consider the 

comments in preparing the final rule. 

ADDRESSES: Individuals and 

organizations interested in submitting 

comments, identified by RIN 0925– 

AA10 and Docket Number NIH–2007– 

0930, may do so by any of the following 

methods: 

Electronic Submissions. You may 

submit electronic comments through the 

Federal eRulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

The NIH is no longer accepting 

comments submitted to the agency by 

email. 

Written Submissions. You may send 

written submissions in the following 

ways: 

• Fax: 301–402–0169. 

• Mail: Attention: Jerry Moore, NIH 

Regulations Officer, National Institutes 

of Health, Office of Management 

Assessment, 6011 Executive Boulevard, 

Suite 601, MSC 7669, Rockville, MD 

20892. 

• Hand Delivery/Courier (for paper, 

disk, or CD–ROM submissions): 

Attention: Jerry Moore, 6011 Executive 

Boulevard, Suite 601, Rockville, MD 

20892. 

Instructions for all Comments. All 

comments received must include the 

agency name, Regulatory Information 

Number (RIN), and the docket number 

for this rulemaking. All comments 

received may be posted without change, 

including any personal information 

provided. 

Docket. For access to the docket to 

read background documents or 

comments received, go to the 

eRulemaking.gov Portal and insert into 

the ‘‘Search’’ box the docket number 

‘‘NIH–2007–0930’’ and follow the 

prompts. 

FOR FURTHER INFORMATION CONTACT: Jerry 

Moore, NIH Regulations Officer, 

telephone 301–496–4607 (not a toll-free 

number). 

SUPPLEMENTARY INFORMATION: On June 

10, 1993, the NIH Revitalization Act of 

1993 (Pub. L. 103–43) was enacted. 

Section 1631 of this law amended the 

Public Health Service (PHS) Act by 

adding section 487D (42 U.S.C. 288–4). 

Section 487D authorizes the Secretary, 

acting through the Director of the NIH, 

to carry out a program of entering into 

contracts with individuals under which 

the Director agrees to provide 

scholarships for pursuing, as 

undergraduates at accredited 

institutions of higher education, 

academic programs appropriate for 

careers in professions needed by the 

NIH. In return, the individuals agree to 

serve as employees of the NIH in 

positions that are needed by the NIH 

and for which the individuals are 

qualified. The individuals must be 

enrolled or accepted for enrollment as 

full-time undergraduates at accredited 

institutions of higher education and 

must be from disadvantaged 

backgrounds. Section 487D of the PHS 

Act further states that, concerning 

penalties for breach of scholarship 

contract, the provisions of section 338E 

of the PHS Act shall apply to the 

program to the same extent and in the 

same manner as such provisions apply 

to the National Health Service Corps 

Loan Repayment Program established in 

section 338B. 

The 1993 amendment of the PHS act 

led to the establishment of the NIH 

Undergraduate Scholarship Program 

Regarding Professions Needed by 

National Research Institutes (UGSP). 

The purpose of the program, since it 

began selecting participants in 1997, is 

to recruit appropriately qualified 

undergraduate students from 

disadvantaged backgrounds to conduct 

research in the intramural research 

program as employees of the NIH by 

providing scholarship support. The 

UGSP provides a diverse and highly 

qualified cadre of individuals seeking 

careers compatible with NIH 

employment opportunities. 

The NIH is proposing to amend title 

42 of the Code of Federal Regulations by 

adding Part 68b to govern the 

administration of the UGSP. The 

proposed rule establishes program 

regulations necessary to implement and 

enforce important aspects of the UGSP. 

In general, the proposed rule specifies 

the scope and purpose of the program, 

the eligibility criteria, the application 

process, the selection criteria, and the 

terms and conditions of the program. 

The rationale used by the NIH in 

developing the eligibility and selection 

criteria of this proposed rule is 

explained as follows. For eligibility, the 

definition for ‘‘Individual from 

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