Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules and Regulations 52629 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 424 

[CMS–6036–F] 

RIN 0938–AO90 

Medicare Program; Establishing 

Additional Medicare Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Supplier 

Enrollment Safeguards 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule will clarify, 

expand, and add to the existing 

enrollment requirements that Durable 

Medical Equipment and Prosthetics, 

Orthotics, and Supplies (DMEPOS) 

suppliers must meet to establish and 

maintain billing privileges in the 

Medicare program. 

DATES: These regulations are effective 

on September 27, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Barry Bromberg, (410) 786–9953 for 

general issues, on-site inspections, 

maintaining ordering and referring 

documentation, and hours of operation. 

Kimberly McPhillips, (410) 786–5374 

for issues related to compliance with 

applicable laws, appropriate sites, direct 

solicitation, oxygen suppliers, and 

prohibition on sharing a practice 

location. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. General Overview 

Medicare services are furnished by 

two types of entities, providers, and 

suppliers. At § 400.202, the term 

‘‘provider’’ is defined as a hospital, a 

critical access hospital (CAH), a skilled 

nursing facility (SNF), a comprehensive 

outpatient rehabilitation facility (CORF), 

a home health agency (HHA), or a 

hospice that has in effect an agreement 

to participate in Medicare, or a clinic, a 

rehabilitation agency, or a public health 

agency that has in effect a similar 

agreement but only to furnish outpatient 

physical therapy or speech pathology 

services, or a community mental health 

center that has in effect a similar 

agreement but only to furnish partial 

hospitalization services. The term 

‘‘provider’’ is also defined in sections 

1861(u) and 1866(e) of the Social 

Security Act (the Act). 

For purposes of the DMEPOS supplier 

standards, the term ‘‘supplier’’ is defined 

in § 424.57(a) as an entity or individual, 

including a physician or Part A 

provider, that sells or rents Part B 

covered DMEPOS items to Medicare 

beneficiaries that meet the DMEPOS 

supplier standards. This final rule 

applies to all DMEPOS suppliers and 

amends the DMEPOS supplier standards 

set forth at § 424.57(c). Those 

individuals or entities that do not 

furnish DMEPOS items but furnish 

other types of health care services only 

(for example, physician services or 

nurse practitioner services) would not 

be subject to this requirement. A 

supplier that furnishes durable medical 

equipment, prosthetics, orthotics, and 

suppliers (DMEPOS) is one category of 

supplier. Other supplier categories may 

include, for example, physicians, nurse 

practitioners, and physical therapists. If 

a supplier, such as a physician or 

physical therapist, also provides 

DMEPOS to a patient, then the supplier 

is also considered to be a DMEPOS 

supplier. The term ‘‘DMEPOS’’ 

encompasses the types of items 

included in the definition of medical 

equipment and supplies in section 

1834(j)(5) of the Act. 

In FY 2007, the Medicare program 

spent more than $10 billion for 

DMEPOS supplies, and in March 2008, 

there were 113,154 individual DMEPOS 

suppliers. However, due to the 

affiliation of some DMEPOS suppliers 

with chains, there were 65,984 unique 

billing numbers. The largest 

concentrations of DMEPOS suppliers 

were located in five States: California 

(approximately 9 percent), Texas 

(approximately 7 percent), Florida 

(approximately 7 percent), New York 

(approximately 6 percent) and 

Pennsylvania (approximately 5 percent). 

We believe that approximately 20 

percent of the DMEPOS suppliers are 

located in rural areas throughout the 

United States and that the vast majority 

of DMEPOS suppliers are small entities 

(based on Medicare reimbursement 

alone). 

The term ‘‘durable medical 

equipment’’ is defined at section 1861(n) 

of the Act. This definition, in part, 

excludes from coverage as DMEPOS, 

items furnished in SNFs and hospitals. 

Also, the term DMEPOS is included in 

the definition of ‘‘medical and other 

health services’’ in section 1861(s)(6) of 

the Act. Furthermore, the term is 

defined in § 414.202 as equipment 

furnished by a supplier or a HHA that— 

• Can withstand repeated use; 

• Is primarily and customarily used 

to serve a medical purpose; 

• Generally is not useful to an 

individual in the absence of an illness 

or injury; and 

• Is for use in the home. 

Examples of DMEPOS supplies include 

items such as blood glucose monitors, 

hospital beds, nebulizers, oxygen 

delivery systems, and wheelchairs. 

Prosthetic devices are included in the 

definition of ‘‘medical and other health 

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

Act. Prosthetic devices are defined in 

this section of the Act as ‘‘devices (other 

than dental) which replace all or part of 

an internal body organ (including 

colostomy bags and supplies directly 

related to colostomy care), including 

replacement of such devices, and 

including one pair of conventional 

eyeglasses or contact lenses furnished 

subsequent to each cataract surgery with 

insertion of an intraocular lens.’’ Other 

examples of prosthetic devices include 

cardiac pacemakers, cochlear implants, 

electrical continence aids, electrical 

nerve stimulators, and tracheostomy 

speaking valves. 

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

for the coverage of ‘‘leg, arm, back, and 

neck braces, and artificial legs, arms, 

and eyes, including replacement of 

required because of a change in the 

patient’s physical condition.’’ As 

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

Act, these items are often referred to as 

‘‘orthotics and prosthetics.’’ Under 

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

prosthetic devices do not include 

parenteral and enteral nutrition 

nutrients and implantable items payable 

under section 1833(t) of the Act.’’ 

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

‘‘surgical dressings, splints, casts, and 

other devices used for reduction of 

fractures and dislocation’’ as one of the 

‘‘medical and other health services’’ that 

is covered by Medicare. Other items that 

may be furnished by suppliers would 

include (among others): 

• Prescription drugs used in 

immunosuppressive therapy furnished 

to an individual who receives an organ 

transplant for which payment is made 

under this title, and that are furnished 

within a certain time period after the 

date of the transplant procedure as 

noted at section 1861(s)(2)(j) of the Act. 

• Extra-depth shoes with inserts or 

custom molded shoes with inserts for an 

individual with diabetes as listed at 

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

• Home dialysis supplies and 

equipment, self-care home dialysis 

support services, and institutional 

dialysis services and supplies included 

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

• Oral drugs prescribed for use as an 

anticancer therapeutic agent as specified 

in section 1861(s)(2)(Q) of the Act. 

• Self-administered erythropoietin as 

described in section 1861(s)(2)(O) of the 

Act. 

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52630 Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules and Regulations 

The National Supplier Clearinghouse 

(NSC) is the Center for Medicare & 

Medicaid Services’ (CMS) designated 

national enrollment contractor for 

DMEPOS suppliers. The primary 

functions of the NSC are to: (1) Ensure 

that only qualified suppliers of 

DMEPOS are enrolled or remain 

enrolled in the Medicare program; 

(2) process enrollment application in 

timely and accurate manner; and 

(3) take the necessary actions to revoke 

enrolled suppliers who no longer meet 

supplier standards. 

B. Statutory Authority 

Various sections of the Act and the 

regulations require providers and 

suppliers to furnish information 

concerning the amounts due and the 

identification of individuals or entities 

that furnish medical services to 

beneficiaries before payment can be 

made. The following is an overview of 

the sections that grant this authority: 

• Sections 1102 and 1871 of the Act 

provide general authority for the 

Secretary of Health and Human Services 

(the Secretary) to prescribe regulations 

for the efficient administration of the 

Medicare program. Under this authority, 

this final rule will require the collection 

of information from providers and 

suppliers for the purpose of enrolling in 

the Medicare program and granting 

privileges to bill the program for health 

care services furnished to Medicare 

beneficiaries. 

• Sections 1814(a), 1815(a), and 

1833(e) of the Act require the 

submission of information necessary to 

determine the amounts due a provider 

or other person. 

• Section 1834(j)(1)(A) of the Act 

states that no payment may be made for 

items furnished by a supplier of medical 

equipment and supplies unless such 

supplier obtains (and renews at such 

intervals as the Secretary may require) 

a supplier number. In order to obtain a 

supplier billing number, a supplier must 

comply with certain supplier standards 

as identified by the Secretary. 

• Section 1842(r) of the Act requires 

CMS to establish a system for furnishing 

a unique identifier for each physician 

who furnishes services for which 

payment may be made. To complete 

this, we need to collect information 

unique to that physician. 

• Section 1862(e)(1) of the Act states 

that no payment may be made when an 

item or service was at the medical 

direction of an individual or entity that 

is excluded in accordance with sections 

1128, 1128A, 1156, or 1842(j)(2) of the 

Act. 

• Section 4312 of the Balanced 

Budget Act of 1997 (BBA) (Pub. L. 105– 

33) amended section 1834 of the Act to 

require that certain Medicare supplies of 

durable medical equipment, prosthetics, 

and supplies (DMEPOS) to furnish CMS 

with a surety bond in an amount not 

less than $50,000. 

• Section 4313 of the BBA amended 

sections 1124(a)(1) and 1124A of the Act 

to require disclosure of both the 

Employer Identification Number (EIN) 

and Social Security Number (SSN) of 

each provider or supplier, each person 

with ownership or control interest in 

the provider or supplier, any 

subcontractor in which the provider or 

supplier directly or indirectly has a 5 

percent or more ownership interest, and 

any managing employees including 

Directors and Board Members of 

corporations and non-profit 

organizations and charities. The ‘‘Report 

to Congress on Steps Taken to Assure 

Confidentiality of Social Security 

Account Numbers as Required by the 

Balanced Budget Act’’ was signed by the 

Secretary and sent to the Congress on 

January 26, 1999. This report outlines 

the provisions of a mandatory collection 

of SSNs and EINs effective on or after 

April 26, 1999. 

• Section 31001(i)(1) of the Debt 

Collection Improvement Act of 1996 

(DCIA) (Pub. L. 104–134) amended 

section 7701 of 31 U.S.C. by adding 

paragraph (c) to require that any person 

or entity doing business with the 

Federal Government must provide their 

Tax Identification Number (TIN). 

• Section 936(a) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173) amended section 1866 of 

the Act by adding a new subsection 

(j)(1) to require the Secretary to establish 

a process for the enrollment of providers 

of services and suppliers. 

• Section 302(a)(1) of MMA amended 

the Act to require the Secretary to 

develop quality standards for DMEPOS 

suppliers. 

• Section 154(b) of the MIPPA 

amended the Act to establish a deadline 

for DMEPOS accreditation. 

Section 6405(a) of the Affordable Care 

Act (ACA) requires that in order for 

payment for services to be made, a 

physician who orders DME for 

individuals must be a Medicare 

participating physician enrolled under 

section 1866(j) of the Act or an eligible 

professional under section 1848(k)(3)(B) 

of the Act that is enrolled under section 

1866(j) of the Act. 

We are authorized to collect 

information on the Medicare enrollment 

application (that is, the CMS–855, 

(Office of Management and Budget 

(OMB) approval number 0938–0685)) to 

ensure that correct payments are made 

to providers and suppliers under the 

Medicare program as established by 

Title XVIII of the Act. 

II. Provisions of the Proposed Rule 

In the January 25, 2008 Federal 

Register (73 FR 4503), we published a 

proposed rule that clarified, revised, 

and added to the DMEPOS supplier 

standards in § 424.57. 

In § 424.57(c)(1), we proposed to 

revise this supplier standard by adding 

language to clarify that a DMEPOS 

supplier must be licensed to provide 

licensed service(s) and cannot contract 

with an individual or entity to provide 

the licensed service(s). 

The purpose of this standard is to 

ensure that DMEPOS suppliers obtain 

and maintain the necessary State 

licenses required to furnish the services 

provided to Medicare beneficiaries. In 

addition, we believe that each DMEPOS 

supplier is responsible for determining 

what licenses are required to operate a 

DMEPOS supplier’s business. While the 

NSC maintains information regarding 

State licensure laws, we do not believe 

that the NSC is responsible for notifying 

any supplier of what licenses are 

required or that any changes have 

occurred in the State licensing 

requirements. We believe that we are 

enrolling DMEPOS suppliers, not third 

party agents that subcontract their 

operations to suppliers that are not 

enrolled or cannot enroll in the 

Medicare program. Therefore, to ensure 

that only qualified suppliers are 

enrolled or maintain enrollment in the 

Medicare program, we maintain that a 

DMEPOS supplier must be licensed to 

provide licensed service(s) and cannot 

contract with an individual or entity to 

provide the licensed service(s). 

In § 424.57(c)(7), we proposed to 

clarify the supplier standard for 

maintaining a physical facility on an 

appropriate site. Specially, we proposed 

to clarify the term, ‘‘appropriate site.’’ In 

addition, we stated that an ‘‘appropriate 

site’’ applies to ‘‘closed door’’ businesses, 

(such as pharmacies/suppliers 

providing services only to beneficiaries 

residing in a nursing home). We also 

solicited comments on whether we 

should establish a minimum square 

footage requirement to the definition of 

an appropriate site and what, if any, 

appropriate exceptions would apply to 

a minimum square footage requirement. 

The supplier location must be 

accessible during posted business hours 

to beneficiaries and to CMS, and must 

maintain a visible sign and posted hours 

of operation. We believe that all 

DMEPOS suppliers must have a 

permanent, durable sign that is visible 

at the main entrance of the facility and 

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Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules and Regulations 52631 

positioned so that it is visible to the 

public, including customers using 

wheelchairs. 

In § 424.57(c)(8), we proposed to 

clarify this provision by revising (c)(8) 

to read as follows: ‘‘Permits CMS, the 

NSC, or agents of CMS or the NSC to 

conduct on-site inspections to ascertain 

supplier compliance with the 

requirements of this section.’’ If the NSC 

or its agents are unable to perform a site 

visit during a supplier’s posted business 

hours, the NSC would deny billing 

privileges for prospective applicants or 

would revoke the billing privileges of 

DMEPOS suppliers enrolled in the 

Medicare program. 

In § 424.57(c)(9), we proposed to 

revise this supplier standard to exclude 

the use of cell phones and beepers/ 

pagers as a method of receiving calls or 

using ‘‘call forwarding’’ to forward a call 

to a cell phone or beeper/pager from the 

public or beneficiaries during the 

supplier’s posted hours of operation. We 

maintain that DMEPOS suppliers who 

are utilizing cell phones, call 

forwarding, beeper numbers, pagers, 

answering services or other methods to 

receive telephone calls in a location 

other than the place of business for 

business calls during their posted hours 

of operations are not in compliance with 

this standard and that DMEPOS 

suppliers who exclusively use 

answering machines or answering 

services during their posted hours of 

operations are not in compliance with 

this standard. Therefore, we revised this 

standard to read, ‘‘Maintains a primary 

business telephone that is operating at 

the appropriate site listed under the 

name of the business locally or toll-free 

for beneficiaries. The use of cellular 

phones, beeper numbers, and pagers as 

the primary business phone is 

prohibited. Additionally, DMEPOS 

suppliers are prohibited from 

forwarding calls from the primary 

business telephone listed under the 

name of the business to a cellular 

phone, or a beeper/pager. The exclusive 

use of answering machines, answering 

services or facsimile machine (or 

combination of these options) cannot be 

used as the primary business telephone 

during posted operating hours.’’ 

In § 424.57(c)(10), we proposed to 

revise this provision to specify that the 

DMEPOS supplier has a comprehensive 

liability insurance policy in the amount 

of at least $300,000 per incident that 

covers both the supplier’s place of 

business and all customers and 

employees of the supplier and ensures 

that insurance policy must remain in 

force at all times. In addition, we 

proposed that a DMEPOS supplier must 

list the NSC as a certificate holder on 

the policy and notify the NSC in writing 

within 30 days of any policy changes or 

cancellations. 

In § 424.57(c)(11), we proposed to 

revise this supplier standard to clarify 

that suppliers cannot directly solicit 

patients, which includes, but is not 

limited to, a prohibition on telephone, 

computer e-mail or instant messaging, 

coercive response Internet advertising 

on sites unrelated to DMEPOS products, 

or in-person contacts. We also proposed 

that DMEPOS supplier may only contact 

the Medicare beneficiary under the 

current provisions at § 424.57(c)(11)(i) 

through (iii). We believe that if CMS or 

the NSC through on-site inspection 

obtains or develops evidence that a 

DMEPOS supplier has made prohibited 

contacts with Medicare beneficiaries in 

violation of the provisions found in this 

section that CMS or the NSC may revoke 

that supplier’s billing privileges, and 

may determine if such billing may be for 

fraudulent or unnecessary supplies. 

In § 424.57(c)(12), we proposed to 

revise the provision to clarify its intent. 

Specifically, we proposed that a 

DMEPOS supplier: (1) Is responsible for 

maintaining proof of the delivery in the 

beneficiary’s file; (2) must furnish 

information to beneficiaries at the time 

of delivery of items as to how the 

beneficiary can contact the supplier by 

telephone; (3) must provide the 

beneficiary with instructions on how to 

safely and effectively use the equipment 

or contract this service to a qualified 

individual; (4) is responsible for 

providing instruction on the safe and 

effective use of the equipment that 

should be completed at the time of 

delivery; and (5) must document that 

this instruction has taken place. Our 

proposal was based on the belief that a 

DMEPOS supplier is solely responsible 

for delivery of Medicare-covered items 

and for instruction on the use of those 

items. While we believe that a DMEPOS 

supplier may choose to contract out the 

delivery of Medicare-covered items to 

another individual or entity, the 

DMEPOS supplier has ultimate 

responsibility for ensuring delivery in 

accordance with this standard and for 

maintaining all necessary 

documentation to demonstrate that the 

beneficiary received the Medicarecovered item and appropriate 

instructions for its use. We believe that 

our revised interpretation of this section 

will help to ensure that instructions for 

the safe and appropriate use of products 

will be given to beneficiaries. 

In § 424.57(c)(27), we proposed a new 

standard that specified that the 

DMEPOS supplier must obtain oxygen 

from a State-licensed oxygen supplier. 

To ensure that DMEPOS suppliers meet 

and maintain this standard, we believe 

that DMEPOS suppliers who are 

supplying oxygen must contract with a 

supplier licensed by the State to provide 

them with oxygen. Obviously, this 

standard does not apply when the State 

does not license oxygen suppliers. We 

understand that in certain areas, 

DMEPOS suppliers may obtain oxygen 

from oxygen suppliers in other States. 

However, when a DMEPOS supplier is 

located in a State where licensure is 

required, then they must obtain their 

oxygen from a State-licensed oxygen 

supplier, regardless of which State the 

oxygen supplier obtained their 

licensure. We believe that this standard 

would help to protect Medicare 

beneficiaries and promote quality in the 

furnishing of oxygen. 

In § 424.57(c)(28), we proposed a new 

supplier standard that states that the 

supplier is required to maintain 

ordering and referring documentation, 

including the National Provider 

Identifier, received from a physician, 

nurse practitioner, physician assistant, 

clinical social worker, or certified nurse 

midwife, for 7 years after the claim has 

been paid. We maintain that a DMEPOS 

supplier should retain the necessary 

ordering and referring documentation 

received from physicians, nurse 

practitioners, physician assistants, 

clinical social workers, or certified 

nurse midwives to assure themselves 

that coverage criterion for an item has 

been met. If the information in the 

patient’s medical record does not 

adequately support the medical 

necessity for the item, the supplier is 

liable for the dollar amount involved 

unless a properly executed Advance 

Beneficiary Notice of possible denial 

has been obtained. 

In § 424.57(c)(29), we proposed a new 

standard that specifies that the supplier 

is prohibited from sharing a practice 

location with another Medicare 

supplier. In addition, we solicited 

comments on whether we should 

establish an exception to this space 

sharing proposal for physicians and 

nonphysician practitioners and the 

circumstances which warrant an 

exception since we are aware that 

physicians and other licensed 

nonphysician practitioners may obtain 

their own DMEPOS supplier number 

and furnish DMEPOS from their office. 

We believe that allowing a DMEPOS 

supplier to commingle its practice 

location with another DMEPOS supplier 

effectively limits the ability of CMS and 

the NSC to ensure that each DMEPOS 

supplier meets all of the supplier 

standards specified at § 424.57. Since 

we are aware that physicians and other 

licensed nonphysician practitioners 

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52632 Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules and Regulations 

may obtain their own DMEPOS supplier 

number and furnish DMEPOS from their 

office, we solicited comments on 

whether we should establish an 

exception to this space sharing proposal 

for physicians and nonphysician 

practitioners and the circumstances 

which warrant an exception. 

In § 424.57(c)(30), we proposed a new 

supplier standard that would require a 

DMEPOS supplier to be open to the 

public a minimum of 30 hours per 

week, except for those DMEPOS 

suppliers who are working with custommade or fitted orthotics and prosthetics. 

We believe that most legitimate 

DMEPOS suppliers are open to the 

public for more than 40 hours per week 

and that all legitimate DMEPOS would 

need to be open a minimum of at least 

30 hours per week in order to attract, 

retain, and serve Medicare beneficiaries. 

Given that Medicare beneficiaries may 

not be able to find transportation during 

limited operating hours, the DMEPOS 

supplier must be open and available for 

periods long enough for beneficiaries to 

readily access their facility. We believe 

that most legitimate DMEPOS suppliers 

are open to the public for more than 40 

hours per week and that all legitimate 

DMEPOS would need to be open a 

minimum of at least 30 hours per week 

in order to attract, retain, and serve 

Medicare beneficiaries. To ensure that 

DMEPOS suppliers are able to report 

any change in their posted business 

hours, we are proposing to revise the 

CMS–855S Medicare enrollment 

application to accommodate this 

proposed change. 

In § 424.57(c)(31), we proposed to add 

a new supplier standard that specified 

that a DMEPOS supplier could not have 

Internal Revenue Service (IRS) or a State 

taxing authority tax delinquency. We 

also proposed to define a ‘‘tax 

delinquency’’ as meaning an amount of 

money owed to the United States or a 

State: a conviction or civil judgment for 

tax evasion, a criminal or civil charge of 

tax evasion, or the filing of a tax lien. 

In § 424.57(d), we proposed to 

redesignate the current text as paragraph 

(d)(1) and proposed adding a new 

paragraph that specified that ‘‘CMS, the 

NSC, or CMS designated contractor 

establishes a Medicare overpayment 

from the date of an adverse legal action 

or felony conviction (including felony 

convictions within the 10 years 

preceding enrollment or revalidation of 

enrollment) that precludes payment. In 

addition, we proposed that any 

overpayment assessed by CMS or its 

designated contractor due to a lack of 

reporting would follow the existing 

rules governing Medicare overpayments 

set forth at § 405.350 et seq. We believe 

that § 424.57(d)(2) is necessary because 

some DMEPOS suppliers fail to report 

adverse legal actions and felony 

convictions to the NSC within the 30 

days of the reportable event. Since it is 

essential that DMEPOS suppliers notify 

the NSC of all adverse legal actions and 

felony convictions within 30 days of the 

reportable event, we believe that it is 

essential to establish this new provision. 

This new provision would allow the 

CMS, the NSC, or a designated Medicare 

contractor the authority to assess and 

collect an overpayment from the time of 

the reportable event. In addition, the 

CMS, the NSC, or a designated CMS 

contractor would revoke the DMEPOS 

supplier’s Medicare billing privileges, in 

accordance with § 424.57(d)(1), if the 

legal adverse action or felony conviction 

precludes participation in or payment 

from the Medicare program. 

III. Analysis of and Responses to Public 

Comments 

In the January 25, 2008 Federal 

Register (73 FR 4503), we published a 

proposed rule that clarified, revised, 

and added to the DMEPOS supplier 

standards in § 424.57. 

We received 208 timely comments in 

response to the proposed rule. In this 

section of the final rule we present a 

summary of our proposals and address 

the comments received on these 

proposals. 

A. Clarifications and Revisions of 

Existing DMEPOS Supplier Standards 

1. Licensure Requirements 

In § 424.57(c)(1), we proposed to 

revise this supplier standard by adding 

language to clarify that a DMEPOS 

supplier must be licensed to provide 

licensed service(s) and cannot contract 

with an individual or entity to provide 

the licensed service(s). These licensed 

services include but are not limited to 

supplying oxygen or a general DMEPOS 

license. 

Comment: A commenter believes the 

NSC should maintain and make 

available, a list of each State’s licensing 

requirements. 

Response: The National Supplier 

Clearinghouse (NSC) does maintain 

information regarding State licensure 

laws for DMEPOS suppliers on its Web 

site (see http://www.palmettogba.com/ 

nsc). However, the DMEPOS supplier is 

ultimately responsible for determining 

what business, product and other 

applicable licenses are required for his 

or her business, regardless of the 

accuracy of the information provided on 

the NSC Web site. We also believe it is 

the business owner’s responsibility to be 

aware of any changes in the State 

licensing requirements for his or her 

business. During the enrollment and 

reenrollment process the NSC verifies 

that the DMEPOS supplier is in 

compliance with all applicable State 

licensing requirements. 

Comment: Several commenters 

supported requiring DMEPOS suppliers 

to be licensed for all services they 

provide and that DMEPOS suppliers 

should not be allowed to contract out 

for these services. In addition, one 

commenter stated that the changes 

proposed to the licensure requirement 

for Medicare suppliers are necessary 

and beneficial. 

Response: We agree and are revising 

§ 424.57(c)(1)(ii)(C) to address the 

commenters’ concern regarding 

contracting out of services. In addition, 

this requirement applies to the 

competitive bidding program as 

governed by part 414, subpart F. 

Comment: A commenter believes that 

because of the complexity of State 

licensing requirements, it is too severe 

to revoke all billing numbers when 

licensing requirements are not met in 

only one State. 

Response: We do not believe that 

there are any exceptions to State 

licensing requirements, unless the State 

in which the DMEPOS supplier 

furnishes services provides for such an 

exception, and that exception does not 

conflict with Federal law. Moreover, 

while a DMEPOS supplier can enroll 

using a single tax identification number 

(TIN) for one or more practice locations, 

a DMEPOS supplier also may obtain 

different TINs for each practice location. 

If the DMEPOS supplier makes the 

business decision to enroll multiple 

practice locations under the same TIN, 

a revocation by the NSC of this TIN will 

necessitate the revocation of related 

businesses associated with that TIN. 

Comment: One commenter stated that 

restricting licensed professionals to W– 

2 employees likely will increase overall 

operating expenses and requested that 

we clarify that licensed professionals 

may be hired as either part-time or fulltime employees. 

Response: We agree and have revised 

§ 424.57(c)(1)(ii) to clarify that the 

licensed professionals must be part-time 

or full-time employees. 

Comment: A commenter stated that 

§ 424.57(c)(1)(ii) as written, would allow 

DMEPOS suppliers to contract with 

nonlicensed individuals to avoid 

contracting with licensed individuals. 

In addition, it would not be financially 

feasible for all DMEPOS suppliers to 

have licensed professionals on staff, and 

therefore, CMS should allow contracting 

for services as long as they are in 

compliance with State requirements. 

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Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules and Regulations 52633 

Response: We do not believe that this 

provision is written in such a way as to 

allow DMEPOS suppliers to contract 

with nonlicensed individuals to avoid 

employing part-time or full-time W–2 

employees. In addition, we believe that 

a DMEPOS supplier who does not have 

a licensed individual on staff (part-time 

or full-time) as a W–2 employee would 

be in violation of § 424.57(c)(1). 

Moreover, while we are concerned with 

the financial burden placed on small 

businesses, we recognize that a certain 

amount of capital is required to 

establish and maintain a business. To 

this end, we believe that enrolled 

DMEPOS suppliers should be required 

to meet State licensing qualifications, 

rather than subcontracting to a thirdparty agent who may or may not be 

qualified. Moreover, since we cannot 

ensure with any degree of certainty, the 

qualifications of a subcontracted 

individual or his or her compliance 

with Federal, State, and local licensure 

requirements, we believe the Medicare 

program and its Medicare beneficiaries 

would be better served if we could 

verify that a DMEPOS supplier meets 

the applicable State licensing 

requirements for a DMEPOS supplier’s 

chosen specialty. 

Comment: One commenter questioned 

whether CMS considers a coemployment arrangement with a 

Professional Employment Organization 

to be compliant or noncompliant with 

this proposed rule. 

Response: We would consider a coemployment arrangement with a 

professional employment organization 

to be compliant with this proposed rule 

provided any licensed services are 

performed by an individual who 

receives a W–2 with the DMEPOS 

supplier’s legal business name on it. For 

situations of co-employment, the W–2 

also may have the legal business name 

of the professional employment 

organization, but this must be in 

addition to the DMEPOS supplier’s legal 

business name. 

Comment: A commenter requested 

that physical therapy clinics be exempt 

from the requirement for State 

certification that applies to DMEPOS 

suppliers because it will affect patient 

access to necessary care if the physical 

therapy clinic in which an individual 

was being treated was not certified as a 

DMEPOS supplier and that it is an 

unnecessary burden to apply the same 

rules to licensed health care 

professionals as supplier companies. 

Response: We believe that enrolled 

DMEPOS suppliers should meet all 

applicable State licensing requirements. 

We do not believe it is an unnecessary 

burden to apply the same rules to 

licensed health care professionals as 

supplier companies; in fact, to do 

otherwise would allow different 

regulatory and compliance standards to 

emerge. Finally, many of the rules of 

licensed health care professionals and 

many of the rules of the supplier 

companies are not duplicative or 

consecutive; rather, they are cumulative. 

Comment: Several commenters 

believe that the licensing requirement 

provision is too restrictive and should 

be revised to state that properly licensed 

personnel are available to furnish the 

offered services. In addition, these 

commenters stated that the current 

language is too broad and would 

include administrative staff. 

Response: This final regulation states 

that a DMEPOS supplier must be in 

compliance with Federal, State, and 

local laws and requirements. It also 

states a DMEPOS supplier cannot 

contract with an individual or other 

entity to provide licensed services. This 

requirement only would apply to a 

DMEPOS supplier’s administrative staff 

if the administrative staff member is 

also responsible for providing a licensed 

service for the DMEPOS supplier. 

Moreover, we are promoting a State’s 

prerogatives on licensure by imposing 

this requirement only in States where 

there are no such rules for contracting 

for licensed services. Rather, we are 

hoping to diminish the chance of 

fraudulent practices by requiring that a 

DMEPOS supplier directly furnish 

licensed services. 

Comment: One commenter believes 

disallowing contracting with 

individuals or entities is unfair to the 

small supplier. 

Response: While we are concerned 

with the potential financial burden that 

this change imposes on small 

businesses, and we will monitor the 

impact of this requirement on small 

businesses. We believe that small 

DMEPOS suppliers should meet the 

applicable State licensing requirements 

for the services they provide. 

Comment: One commenter 

recommended that rather than 

restricting the practice of contracting 

with licensed personnel, CMS should 

require the supplier to purchase 

additional insurance to cover the 

licensed person. 

Response: We believe that a DMEPOS 

supplier must meet the applicable State 

licensing requirements for the services 

they provide to Medicare beneficiaries. 

In addition, while we agree that 

additional insurance may provide 

additional protection for the supplier, it 

does not help to ensure that a Medicare 

beneficiary is receiving quality products 

and instruction from a licensed 

individual and we will allow 

contracting for licensed services only 

when the State where the item or 

service is supplied permits a DMEPOS 

supplier to contract for licensed 

services. Moreover, we believe that 

DMEPOS suppliers participating in 

competitive bidding must maintain all 

applicable State licenses for the 

products and services they are bidding 

on or furnishing in each competitive 

bidding area. In addition, we believe 

that it is the responsibility of DMEPOS 

suppliers participating in competitive 

bidding to ensure that any subcontractor 

obtains and maintains all appropriate 

State licenses in the area where they are 

providing services. We maintain that 

DMEPOS suppliers awarded a 

competitive bidding contract and that 

are subcontracting will be allowed on a 

phase-in basis for licenses services and 

licensed professionals participating in 

competitive bidding. 

Comment: One commenter believes 

that this regulation is in conflict with 

some State licensing requirements, as 

some States permit DMEPOS suppliers 

to comply with its State licensing 

requirements by contracting with an 

individual or other entity to provide the 

licensed service. In addition, the 

commenter states a Federal regulation 

cannot supersede the historic police 

powers of the State unless it was the 

clear and manifest purpose of the 

Congress (see Downhaur v. Somani). 

Response: We agree with this 

commenter because, State licensing 

laws and regulations on the licensure of 

DMEPOS suppliers govern how 

DMEPOS suppliers furnish items within 

a particular State. Therefore, we 

maintain that a DMEPOS supplier can 

contract for licensed services only when 

the State where the licensed service is 

being provided allows for this sort of 

arrangement consistent with 

§ 424.57(c)(1)(ii)(C). 

Comment: A commenter does not 

believe that CMS should be in the 

business of professional licensing. 

Response: It is important to note that 

we require the DMEPOS supplier to be 

State licensed, not to obtain a license 

from CMS. This change will help to 

ensure that DMEPOS suppliers are 

meeting State licensing requirements. 

Comment: Several commenters 

recommended that the provision of not 

contracting out licensed services and 

the W–2 employee provisions of this 

standard only apply when not 

addressed by State licensing 

requirements. 

Response: We agree with these 

commenters. We believe that DMEPOS 

suppliers must meet all applicable State 

licensing requirements and that this 

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standard will only apply when not 

addressed by State licensing 

requirements. 

Comment: Several commenters do not 

believe it should matter if the service is 

furnished by a W–2 employee or a 1099 

contractor so long as both are properly 

licensed with no adverse legal action 

current or pending. 

Response: We agree with these 

commenters because a DMEPOS 

supplier is accountable for meeting the 

applicable State licensing requirements, 

and by requiring that W–2 employees or 

a 1099 contractor (when allowed by 

State law) of the supplier are 

appropriately licensed, the NSC can 

verify that a DMEPOS supplier is 

meeting all applicable State licensing 

requirements. 

Comment: One commenter stated that 

they are opposed to the revisions in 

§ 424.57(c)(1) because it would prevent 

all but the largest DMEPOS suppliers 

from bidding on contracts under the 

DMEPOS competitive bidding program 

because smaller businesses would not 

be able to hire staff all the potential 

licensed professionals as W–2 

employees. 

Response: We want to clarify that the 

employment requirement will not apply 

to contract suppliers participating in the 

competitive bidding program and we 

have reflected this intention in 

§ 424.57(c)(1)(ii)(B). 

Comment: Several commenters 

believe that the proposed rule conflicts 

with the rules for participation in the 

competitive bidding program, as the 

competitive bidding program itself 

allows items and services in a product 

category to be supplied directly or 

through a subcontractor and provides 

safeguards to allow subcontracting. 

Response: We agree with these 

commenters, and have revised 

§ 424.57(c)(1)(ii)(B) to reflect that the 

employment requirement for the 

furnishing of licensed services does not 

apply to contract suppliers participating 

in the competitive bidding program. 

Comment: One commenter stated that 

this regulation conflicts with CMS’ 

accreditation standards which permit 

contracting for licensed services, so long 

as the DMEPOS supplier complies with 

State licensure laws and is ultimately 

responsible for the services provided by 

a contractor. 

Response: We have amended 

§ 424.57(c)(1) to permit contracting for 

licensed services, so long as the State 

where the licensed services are being 

performed allow for such contracting 

and the DMEPOS supplier complies 

with State licensure laws and is 

ultimately responsible for the services 

provided by a contractor. The supplier 

standards in § 424.57 are separate from 

the quality standards which are used by 

accrediting organizations. This 

regulation does not conflict with our 

accreditation standards listed at 

§ 424.57(c)(22) through (c)(25). 

Comment: A commenter stated that 

the proposed rule is unnecessary 

because many of the DMEPOS suppliers 

must be accredited by September 30, 

2009 on top of already having to meet 

the State licensure requirements. 

Moreover, supplier’s ability to use 

subcontractors for the purpose of 

assuring service throughout a 

competitive bidding area would be 

limited which could disadvantage the 

small suppliers compared to large 

suppliers. 

Response: We disagree with these 

commenters because a DMEPOS 

supplier is accountable for meeting the 

applicable State licensing requirements, 

and by requiring DMEPOS suppliers to 

employ individuals who are 

appropriated licensed, the NSC can 

verify that a DMEPOS supplier is 

meeting all applicable State licensing 

requirements. 

Comment: Several commenters stated 

that the standard to prohibit a DMEPOS 

supplier from contracting with an 

individual or other entity to provide the 

licensed service places an unfair burden 

on small suppliers who at times must 

contract with licensed personnel or 

provide specific services to the 

supplier’s patients. Also, this 

requirement makes it seem like CMS is 

singling out DMEPOS suppliers by not 

allowing them the use of staffing 

agencies when demand is great. In 

addition, the commenter believes that 

this standard would restrict suppliers 

that have full time respiratory therapists 

from hiring temporary licensed 

respiratory therapists during times of 

vacation, illness or increased staffing 

needs, and have a detrimental effect on 

patient’s access to care and restrict 

respiratory therapists from performing 

duties in the patient’s home. 

Response: We believe that a DMEPOS 

supplier must be licensed to provide 

licensed services, and therefore, we are 

not adopting any exceptions to this 

provision except where a State permits 

contracting for licensed services. In 

addition, many small businesses 

currently have an owner or W–2 

employee who is licensed to provide a 

service that requires a State licensure. 

We believe that the changes we are 

adopting in this final regulation will not 

have a detrimental effect on patient’s 

access to care and do not restrict 

respiratory therapists from performing 

duties in the patient’s home. Finally, as 

stated previously, we are clarifying that 

DMEPOS supplier may hire a licensed 

W–2 employee on a part-time or fulltime basis and we will permit 

contracting for licensed services, so long 

as the State permits contracting for 

licensed services and the DMEPOS 

supplier complies with State licensure 

laws and is ultimately responsible for 

the services provided by a contractor. 

Comment: One commenter asks how 

disallowing the contracting of licensed 

individuals could affect competitive 

bidding, given that a supplier is 

required to submit a bid for all of the 

oxygen modalities. 

Response: When allowed under State 

law, we will permit contracting for 

licensed services, so long as the 

DMEPOS supplier complies with State 

licensure laws and is ultimately 

responsible for the services provided by 

a contractor. In order for a DMEPOS 

supplier to be able to participate in the 

DMEPOS competitive bidding program, 

the supplier must comply with all of the 

DMEPOS supplier standards and be 

enrolled in the Medicare program as a 

DMEPOS supplier. 

Comment: One commenter asked if 

this rule is requiring all oxygen 

suppliers to directly provide liquid 

oxygen since CMS competitive bidding 

rules allow for contracting in certain 

areas. 

Response: No, all oxygen suppliers do 

not need to directly provide liquid 

oxygen. A supplier can use a qualified 

subcontractor to deliver oxygen. If the 

supplier is not in a competitive bidding 

area and does not furnish liquid oxygen 

as part of their business model and the 

prescription specifically indicates that 

the physician is ordering liquid oxygen, 

the supplier would either need to get 

approval from the ordering physician to 

furnish a different modality or refer the 

beneficiary to another supplier. If a 

physician orders liquid oxygen in areas 

that fall under competitive bidding, 

then the oxygen supplier must supply 

liquid oxygen. 

Comment: A commenter stated that 

the proposed rule would result in 

different Federal requirements for 

hospital-based DMEPOS suppliers based 

solely on the location of the supplier 

and further disadvantage hospitals 

because hospitals generally use 

independent contractors to perform its 

services. 

Response: We disagree with this 

commenter because all DMEPOS 

suppliers, including those based at 

hospitals or operated by other providers, 

are required to meet State licensing 

requirement for the services they 

provide. This change will enable CMS 

or our designated contractor to verify 

that the supplier is meeting the 

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applicable State licensing requirements 

for the services that it furnishes. 

2. Physical Facility—Appropriate Site 

In § 424.57(c)(7), we proposed to 

clarify the supplier standard for 

maintaining a physical facility on an 

appropriate site. Specially, we proposed 

to clarify the term, ‘‘appropriate site.’’ In 

addition, we stated that an ‘‘appropriate 

site’’ applies to ‘‘closed door’’ businesses 

(such as pharmacies/suppliers 

providing services only to beneficiaries 

residing in a nursing home). We also 

solicited comments on whether we 

should establish a minimum square 

footage requirement to the definition of 

an appropriate site and what, if any, 

appropriate exceptions would apply to 

a minimum square footage requirement. 

Comment: One commenter 

recommended that a minimum square 

footage requirement be established so 

the suppliers cannot qualify for 

participation in the Medicare program 

with unsuitable locations. This 

commenter stated that square footage 

should be adequate to store the 

necessary inventory. 

Response: We appreciate this 

comment and have adopted a minimum 

square footage requirement of 200 

square feet in § 424.57(c)(7). We agree 

with this commenter that a DMEPOS 

supplier must maintain a minimum area 

of space for inventory, storage, and 

including patient records. 

Comment: Several commenters stated 

that the variability between suppliers 

and services provided are too great to 

set a minimum number of square feet 

required to attain a supplier number. 

Response: We appreciate these 

comments and considered them in 

establishing minimum square footage 

requirements within § 424.57(c)(7). 

Comment: A number of commenters 

opposed the establishment of a specific 

square footage requirement for supplier’ 

physical locations. 

Response: Since many DMEPOS 

suppliers who do not have a minimum 

square footage have been determined in 

the past to be fraudulent suppliers or 

have provided less than sufficient 

services to Medicare beneficiaries, we 

believe that a minimum square footage 

requirement is necessary to ensure that 

DMEPOS suppliers are operating a 

legitimate business. However, based on 

public comments, we were concerned 

that establishing a minimum square 

footage requirement of 500 square feet 

may impose an undue burden for some 

suppliers. Accordingly, based on public 

comments and our review of existing 

supplier operations, we are adopting a 

minimum square footage of 200 square 

feet per practice location. We believe 

that 200 square feet represents the 

smallest practice location that can be 

used to meet the supplier standards in 

§ 424.57. Specifically, we would expect 

that most practice locations have space 

for inventory, storage, including patient 

records, a desk and chairs, and in most 

cases a restroom for employees and 

customers. 

Comment: One commenter 

recommended that we clarify that 

DMEPOS suppliers may continue to 

utilize centralized business centers to 

house beneficiary and other business 

records and centralized customer call 

centers are permissible under this 

revised standard. 

Response: We believe that it is 

necessary to have prompt access to 

delivery, maintenance, and beneficiary 

records at the supplier’s facility where 

the beneficiary receives services. This 

enables the beneficiary to promptly 

obtain necessary information and for 

CMS and our agents to perform a review 

of the records. We agree that the use of 

a centralized business center by a 

multisite supplier to house these 

records when the information in the 

records can be furnished to the 

beneficiary or CMS and our agents, or 

both. For example, the supplier location 

could use a computer terminal to access 

the records which are being stored off 

site. Then, it could express mail the 

documents requested. 

Comment: A commenter stated that it 

is not economically feasible for a small 

supplier to maintain a storefront. 

Response: We do not require that a 

DMEPOS supplier maintain a storefront, 

and if the DMEPOS supplier chooses to 

maintain a storefront, it may be coupled 

with its storage space for DMEPOS. 

However, if the supplier is in a 

commercial building, the sign can be 

posted at the entrance of the building. 

We believe that it is essential for our 

beneficiaries and site reviewers to be 

able to promptly locate the supplier. 

Therefore, the signage must be readily 

visible to the general public. We 

understand the concerns that additional 

costs may be incurred for small 

businesses. However we believe that the 

majority of our DMEPOS suppliers 

already meet this requirement. 

Additionally, those DMEPOS suppliers 

with less than the 200 square foot 

minimum space and who have entered 

into a long term lease before the 

publication of this final rule will have 

time to transition into a new location, as 

explained later in this rule. 

Comment: Several commenters stated 

that they do not support CMS’ proposal 

to micromanage a supplier’s business 

operation by dictating size, hours, 

staffing, and access via a single standard 

without exception for the specific 

services being furnished. 

Response: We believe that the 

provisions of § 424.57(c)(7) are designed 

to ensure that DMEPOS suppliers 

conform to generally accepted business 

practices employed by quality suppliers. 

Comment: Several commenters 

believe it would be in CMS’s best 

interest to retain the current policy 

which allows for a central record storage 

location for multi-State DME suppliers. 

Response: We agree that multistate 

DME suppliers can maintain central 

record storage locations and have 

amended the regulations text in 

§ 424.57(c)(7)(i) to reflect this concern. 

Comment: One commenter stated that 

there can be a problem with the 

requirement of external signage when it 

conflicts with local zoning ordinances. 

Response: We believe that prospective 

suppliers of DMEPOS and existing 

suppliers of DMEPOS must understand 

and comply with the supplier standards 

found in this section. Accordingly, 

prospective suppliers of DMEPOS 

should ensure that their practice 

location meets the requirements found 

in § 424.57(c)(7) and the other supplier 

standards found in this section prior to 

buying or entering into a leasing 

arrangement for a given practice 

location. For example, if the owner of 

prospective supplier of DMEPOS knows 

or should have known that local zoning 

ordinances preclude the establishment 

of home-business in a residential 

neighborhood, then the prospective 

supplier of DMEPOS should make the 

business decision to: (1) Obtain a waiver 

to the local zoning ordinance in advance 

of submitting their enrollment 

application to the NSC; or (2) select a 

different practice location that will 

ensure the supplier’s compliance with 

the requirements specified in 

§ 424.57(c)(7). 

Comment: One commenter stated that 

it may not be possible to fulfill the 

signage requirement because the owner 

of the building may not allow the 

posting of the sign, and that the patients 

that they see are by appointment only so 

posting a sign with office hours is not 

necessary. 

Response: As previously stated, we 

believe that prospective suppliers of 

DMEPOS and existing suppliers of 

DMEPOS must understand and comply 

with the supplier standards found in 

this section. Accordingly, prospective 

suppliers of DMEPOS should ensure 

that their practice location meets the 

requirements found in § 424.57(c)(7) 

and the other supplier standards found 

in this section prior to buying or 

entering into a leasing arrangement for 

a given practice location. Accordingly, 

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we disagree with this commenter, and 

believe that it is essential that the 

beneficiaries and CMS agents can 

clearly see where the supplier is located 

and the supplier’s hours of operation. If 

the building owner will not allow the 

posting of hours of operation, then the 

DMEPOS supplier should consider the 

supplier site to be inappropriate for a 

business that serves Medicare 

beneficiaries. Even for suppliers that 

take appointments, we believe that 

proper signage and posted hours are 

required for proper beneficiary 

information. 

Comment: One commenter believes it 

is not always possible to give the NSC 

prior notice to a change in the hours of 

operation. 

Response: While we understand that 

suppliers have 30 days to notify the 

NSC of change in posted business hours, 

we do not believe that legitimate 

suppliers routinely change their posted 

hours of operation frequently. Moreover, 

there is nothing in our current rules or 

within this final regulation which 

precludes a DMEPOS supplier from 

notifying the NSC prior to or at the time 

a change of posted business hours are 

implemented. 

Comment: A commenter stated that 

size and space requirements are already 

established in the accreditation process, 

and therefore, are unnecessary as a 

separate supplier standard. 

Response: Since the requirements 

included within accreditation standards 

set forth in § 424.57(c)(21) through 

§ 424.57(c)(25) and quality standards are 

independent of the supplier standards 

in § 424.57, we believe that it is 

appropriate to establish a minimum 

square footage requirement to assist us 

in determining whether a DMEPOS 

supplier is operating a legitimate 

business as neither of the 

aforementioned sets of standards 

include a provision for minimum square 

footage. 

Comment: One commenter requested 

what defines a permanent, durable sign 

and noted that sometimes it may be 

necessary to have permanent signage 

attached to the glass panel of a facility. 

Response: While we have not defined 

what constitutes a permanent durable 

sign, there is no requirement that a 

permanent sign be or not be attached to 

a glass panel. 

Comment: Several commenters 

suggested that an exemption should be 

granted when it is necessary for the 

office to be temporarily closed during 

posted office hours to account for 

holidays, natural disasters, short-term 

closures, patient deliveries, 

emergencies, and other unforeseen 

occurrences. 

Response: We note that we have 

always made exceptions concerning 

posted hours for disasters and 

emergencies and Federal and State 

holidays. However, while we recognize 

that personal emergencies do occur, we 

believe that suppliers should be 

available during posted business hours. 

Moreover, we believe that a DMEPOS 

supplier should do its best to plan and 

staff for temporary absences. 

Comment: One commenter believes 

the minimum square footage 

requirement causes potential issues for 

orthotic and prosthetic suppliers since 

the lab area is separate from the patient 

area and is often located off-site. The 

patient interaction area is most 

important, but since this area can be as 

small as 80 square feet, the size 

requirement should not be imposed as 

to orthotic and prosthetic suppliers. 

Response: We agree with the concerns 

raised by this commenter and have 

adopted an exception to § 424.57(c)(7) 

for State-licensed orthotic and 

prosthetic personnel in private practice 

as one of the exceptions to this 

provision. 

Comment: One commenter suggests 

that rather than mandating a certain 

amount of square footage, an alternative 

could be a rule indicating that the office 

space must consist of an ADA accessible 

reception area, a minimum of one 

examination room and a restroom, 

unless there is a common area restroom. 

Response: We believe that it would be 

very difficult for us to develop 

specifications for these items. Moreover, 

we believe that doing so would likely be 

more restrictive for some types of 

suppliers. 

Comment: One commenter notes that 

in most leased spaces, especially in 

medical buildings, the signage locations 

are predetermined, and therefore, the 

commenters do not believe a quality 

standard should mandate signage on the 

exterior of the building. 

Response: We believe that the sign 

must be visible at the main entrance of 

the facility and visible to the public. 

Therefore, in a public medical building, 

the sign could be posted in the main 

lobby entrance if access to the lobby is 

available to the general public. 

Comment: One commenter 

recommended that if CMS does set 

minimum square footage requirements 

that we give suppliers time for the 

expiration of current leases and to 

obtain a new location or ‘‘grandfather’’ 

locations already in use. 

Response: We agree with this 

commenter and will establish a 3-year 

phase-in period for those existing 

suppliers of DMEPOS who have signed 

leases, including long-term leases, on or 

before the publication date of this final 

rule. We believe that this phase-in 

period will provide small businesses 

with sufficient time to identify a 

practice location that meets the 

minimum square footage requirement. 

We will make this requirement effective 

for existing DMEPOS suppliers 3 years 

from the effective date of this regulation. 

However, we do not believe that it is 

appropriate to establish a similar 

requirement for prospective suppliers of 

DMEPOS, including those suppliers 

who have a pending enrollment 

application with the NSC. 

Consequently, we expect prospective 

DMEPOS suppliers to comply with this 

requirement as of the effective date of 

this regulation. As prospective DMEPOS 

suppliers seek billing privileges after the 

effective date of this regulation, we 

expect them to comply with this 

requirement in order to be enrolled in 

Medicare. 

Comment: One commenter is 

concerned that the minimum square 

footage requirement may be over 

interpreted as a means to shut down 

legitimate suppliers (for example, a 

legitimate supplier being 25 feet short 

after the rule becomes effective but 

having a 5-year lease to fulfill). 

Response: We proposed the minimum 

square footage as a basis for ensuring 

that legitimate suppliers are meeting the 

supplier standards in § 424.57 and that 

these suppliers are providing quality 

products and services to Medicare 

beneficiaries. As stated previously, we 

will impose this requirement on those 

suppliers who have entered into leases, 

including long-term leases, on or before 

the date of publication of this final rule. 

Accordingly, we maintain that DMEPOS 

suppliers who had entered into lease 

arrangements of 1 year or less must 

come into compliance with this 

provision at the end of their current 

lease. Similarly, DMEPOS suppliers 

who have entered into leasing 

arrangements of more than 1 year but 

less than 3 years must come into 

compliance with this standard at the 

end of their current lease; and that all 

existing DMEPOS suppliers must come 

into compliance with this standard 

within 3 years of the effective date of 

this final rule. 

Finally, while we are establishing a 

transition period for implementation of 

this requirement for DMEPOS suppliers 

already enrolled in the Medicare 

program, we are not adopting a 

transition period for DMEPOS suppliers 

enrolling a new practice location, 

reactivating the billing privileges for a 

DMEPOS supplier previously enrolled 

in the Medicare program or for DMEPOS 

suppliers changing their existing 

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practice location or selling their existing 

practice location. 

Comment: One commenter notes that 

licensing and accrediting bodies inspect 

suppliers’ facilities to assure the 

supplier has a legally defined means of 

providing care. The commenter believes 

that Medicare should have no role in 

determining the appropriateness of a 

supplier’s facility. 

Response: While we agree that 

licensing and accreditation are essential 

elements for ensuring quality of care, we 

disagree with the commenter that CMS 

or our designated contractor should 

have no role in determining the 

appropriateness of a supplier’s facility. 

Since the implementation of the 

DMEPOS supplier standards in October 

of 2000, we have played an important 

role in determining the appropriateness 

of a supplier’s facility via regulation at 

§ 424.57. 

Comment: One commenter questioned 

why the square footage matters if a 

supplier meets all requirements and has 

Medicare beneficiaries coming to the 

supplier’s physical location where 

products are stocked and provided. 

Response: We maintain that an 

appropriate amount of square footage is 

generally necessary to ensure that the 

facility can meet its obligations to a 

beneficiary which include an area for 

the beneficiary to sit, or room for a 

wheelchair and room for it to turn/move 

around, as well as room for stock and 

for the equipment necessary for running 

a business. In addition, in the past many 

suppliers with very minimal square 

footage have been determined to be 

fraudulent or have provided inferior 

service to Medicare beneficiaries. 

Comment: One commenter questioned 

whether it is CMS’ intent to require 

suppliers to be a retail-type business by 

mandating minimum square footage 

which needlessly drives up the cost of 

doing business for nonretail suppliers. 

Response: While ‘‘closed door’’ 

businesses are eligible to participate in 

the Medicare program, we believe that 

it is necessary to include a minimum 

square footage into what is considered 

an appropriate site. We understand 

there may be concern that this 

requirement may cause a change in 

business practices for smaller suppliers 

and could possibly result in increased 

costs. However, we believe that most 

DMEPOS suppliers are already meeting 

this standard. 

Comment: A commenter stated that 

the minimum square footage 

requirement is not appropriate because 

the Federal rule would preempt State or 

local land use or supplier laws already 

in place and will not take into account 

the supplier’s operations or the needs of 

the beneficiaries being serviced. 

Response: We disagree with this 

commenter. While we are not 

preempting State and local land use 

laws, we are establishing criteria to 

enroll in the Medicare program as a 

DMEPOS supplier. We believe that this 

revised criterion will help to ensure that 

Medicare beneficiaries receive quality 

services from quality suppliers. 

Comment: A commenter stated that 

the minimum square footage 

requirement is unnecessary for 

suppliers’ facilities that are not intended 

for beneficiary access and that this 

proposed standard blurs the distinction 

between a classic retail establishment 

and a service facility dedicated to the 

provision of supplies and equipment to 

patients in their homes. In addition, the 

commenter requests that CMS consider 

different business models for supplier 

standards, including suppliers that 

provide quality items and services to 

beneficiaries, but do not operate 

facilities intended to be stores for inperson access. 

Response: We disagree with this 

commenter. Since most DMEPOS 

suppliers are not solely service 

facilities, we believe that these enrolled 

suppliers must provide reasonable 

access for Medicare beneficiaries in the 

event that a beneficiary has a problem 

or requires prompt service. It is also 

essential that CMS or our agents have 

access during posted hours of 

operations to ensure that the supplier 

continues to meet the supplier 

standards in § 424.57. 

Comment: A commenter suggests that 

CMS consider that the appropriate size 

of a facility is based on the services 

provided, the size of the organization 

and the status of the location. 

Response: We appreciate this 

comment and have considered these 

factors in adopting a minimum square 

footage requirement for DMEPOS 

suppliers. As noted previously, we 

maintain that an appropriate amount of 

square footage is generally necessary to 

ensure that the facility can meet its 

obligations to a beneficiary which 

include an area for the beneficiary to sit, 

or room for a wheelchair and room for 

it to turn/move around, as well as space 

for inventory, patient records and 

equipment necessary for running a 

business. 

3. On-Site Inspections 

In § 424.57(c)(8), we proposed to 

clarify this provision by revising (c)(8) 

to read as follows: ‘‘Permits CMS, the 

NSC, or agents of CMS or the NSC to 

conduct on-site inspections to ascertain 

supplier compliance with the 

requirements of this section.’’ 

Comment: One commenter 

recommended that instead of revoking a 

supplier’s billing privileges when a site 

visit cannot be conducted, the NSC 

should ‘‘suspend’’ the billing privileges 

pending further investigation to 

determine if the entity is a legitimate 

supplier. 

Response: We do not have statutory or 

regulatory authority to suspend billing 

privileges under those circumstances. 

However, we note that DMEPOS 

suppliers are afforded appeal rights if 

their billing privileges are revoked. 

Comment: A commenter believes 

routine on-site visits should be by 

appointment to ensure proper person(s) 

are available. 

Response: We disagree with this 

commenter. While we understand that 

proper staff may not always be on-site 

when unannounced site visits occur, it 

is necessary for all DMEPOS suppliers 

to be open during posted hours of 

operations. The revised language only 

clarifies who is authorized to conduct 

the on-site visit. Moreover, we believe 

that unannounced site visits are 

necessary to ensure that a DMEPOS 

supplier is continually meeting the 

supplier standards in § 424.57. 

Comment: Several commenters 

believed that it would be unjust to deny 

or revoke based on one site visit during 

posted hours because the business could 

be closed for a legitimate reason on the 

day of the visit, the mandated staff may 

be on call, or that another emergency 

situation may occur that would prevent 

a DMEPOS supplier from being open 

during posted hours of operation. 

Response: While we understand that 

unexpected or emergency business 

closings can occur, we believe that it is 

essential that DMEPOS suppliers 

establish practices and procedures to 

address unexpected or emergency 

situations. In addition, we understand 

the nature of unforeseen emergencies 

and when warranted, the NSC will 

conduct an unannounced follow-up 

visit prior to denying or revoking billing 

privileges. 

Comment: One commenter believes 

this requirement constitutes over 

regulating by the government. 

Response: We disagree with the 

commenter. We have found 

unannounced on-site visits to be a very 

effective tool in combating fraud and 

abuse and to protect the Medicare Trust 

Fund from unscrupulous suppliers. 

Moreover, CMS and our designated 

contractor, the NSC, have conducted 

unannounced on-site visits since 2000 

to ensure compliance with those 

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standards which only can be verified by 

visual inspection. 

4. Business Telephone Operations 

In § 424.57(c)(9), we proposed a 

revision of this standard so that it would 

read, ‘‘Maintains a primary business 

telephone that is operating at the 

appropriate site listed under the name 

of the business locally or toll-free for 

beneficiaries. The use of cellular 

phones, beeper numbers, and pagers is 

prohibited. Additionally, DMEPOS 

suppliers are prohibited from 

forwarding calls from the primary 

business telephone listed under the 

name of the business to a cellular 

phone, or a beeper/pager. The exclusive 

use of answering machines, answering 

services or facsimile machine (or 

combination of these options) cannot be 

used as the primary business telephone 

during posted operating hours.’’ 

Comment: One commenter requested 

that we clarify that all call forwarding 

to a main business office number when 

multiple office locations exist would be 

permitted. 

Response: While we appreciate this 

comment, we do not believe that it is 

appropriate for a DMEPOS supplier to 

forward calls from one practice location 

to a main business office number when 

multiple practice locations exists. 

Comment: One commenter stated that 

preventing the use of alternative 

technologies during business hours 

would have an adverse effect on the 

quality of services that suppliers are 

able to furnish to Medicare 

beneficiaries. 

Response: While we appreciate this 

comment, we believe that the supplier 

standards in § 424.57(c)(9) are not 

overly prescriptive and help to ensure 

that the DMEPOS supplier is 

operational during posted hours of 

operations. 

5. Comprehensive Liability Insurance 

In § 424.57(c)(10), we proposed a 

revision to this provision to specify that 

the DMEPOS supplier has a 

comprehensive liability insurance 

policy in the amount of at least 

$300,000 per incident that covers both 

the supplier’s place of business and all 

customers and employees of the 

supplier and ensures that insurance 

policy must remain in force at all times. 

In addition, we proposed that a 

DMEPOS supplier must list the NSC as 

a certificate holder on the policy and 

notify the NSC in writing within 30 

days of any policy changes or 

cancellations. Although we are not 

finalizing the proposed revision in this 

final rule, we will consider this 

provision in a future rulemaking. 

6. Solicitation of Beneficiaries 

In § 424.57(c)(11), we proposed to 

revise this supplier standard to clarify 

that suppliers and their agents cannot 

make a direct solicitation of Medicare 

beneficiaries, which includes, but is not 

limited to, telephone, computer, e-mail, 

instant messaging, or in-person contacts, 

except under the current provisions at 

§ 424.57(c)(11)(i) through (iii). 

Comment: One commenter 

recommended that we retract the 

proposed provision and allow the 

current telephone standard to remain 

unchanged. This commenter also stated 

that a supplier is not ‘‘cold calling’’ the 

beneficiary when the supplier has 

received a verbal order from a physician 

and requested that we clarify that a 

supplier is not violating this standard if 

the supplier contacts a beneficiary via 

telephone after it has received a verbal 

order from the beneficiary’s treating 

physician. 

Response: We do not agree. We 

believe that it is inappropriate for a 

DMEPOS supplier to contact a 

beneficiary based solely on a physician 

order. In the situation described by the 

commenter, the contact is without the 

beneficiary’s knowledge that the 

physician would be contacting a 

supplier on the beneficiaries behalf and 

would be prohibited unless one of the 

current provisions in § 424.57(c)(11)(i) 

through (iii) applied. However, if a 

physician contacts the supplier on 

behalf of the beneficiary’s with the 

beneficiary’s knowledge, and then a 

supplier contacts the beneficiary to 

confirm or gather information needed to 

provide that particular covered item 

(including the delivery and billing 

information), then that contact would 

not be considered a direct solicitation 

for the purpose of this standard. This is 

the case even if the physician has not 

specified the precise DMEPOS supplier 

that will be contacting the beneficiary 

regarding the item referred by that 

physician. 

Comment: One commenter stated that 

CMS lacks the statutory authority to 

expand on the longstanding statutory 

and regulatory prohibition on 

unsolicited telephone contacts to further 

types of speech. 

Response: We disagree with the 

commenter’s assertion that we are trying 

to expand on the statutory authority 

which prohibits unsolicited telephone 

contacts set forth in section 1834(a)(17) 

of the Act. We believe that we have the 

statutory authority to clarify and revise 

the supplier standard in § 424.57(c)(11). 

Specifically, section 1834(j)(1)(B) of the 

Act gives the Secretary the authority to 

establish additional supplier standards. 

In addition, section 1871 of the Act 

provides the Secretary the right to 

prescribe regulations as may be 

necessary to carry out the 

administration of the Medicare program. 

Moreover, we believe that it is necessary 

to review, clarify, and, if necessary, 

revise existing regulatory standards to 

address changes in practice by DMEPOS 

suppliers in order to protect Medicare 

beneficiaries and the Medicare Trust 

Funds. 

Comment: Several commenters stated 

that our proposal to clarify and revise 

§ 424.57(c)(11) violated First 

Amendment protections by 

unconstitutionally restricting 

commercial speech. In addition, this 

commenter stated that, ‘‘Business 

solicitation by DME suppliers is clearly 

a form of commercial speech as any 

business has the right to market its 

products to potential customers. 

Advertising by suppliers of medical 

equipment is not inherently misleading 

and can be an important method of 

informing beneficiaries of products and 

services that are covered or accessible 

under their Medicare coverage.’’ 

Response: We disagree that the 

revisions that we are adopting in 

§ 424.57(c)(11) of this final rule deny or 

abridge First Amendment rights. 

Specifically, this revised standard does 

not change or alter a DMEPOS 

supplier’s ability to advertise its 

products and services to the general 

public or Medicare beneficiaries 

generally. As such, television, radio, 

and Internet advertisements are 

permitted. In addition, DMEPOS 

suppliers may advertise their products 

or services at health fairs, community 

events, or the DMEPOS supplier’s Web 

site. This provision seeks to prohibit a 

supplier from making direct 

solicitations with Medicare beneficiaries 

without their consent. 

Comment: One commenter stated that 

the proposed change to § 424.57(c)(11) 

would harm Medicare beneficiaries and 

all healthcare consumers. This 

commenter also stated that this proposal 

would have the effect of limiting 

consumer education, price comparison, 

and overall choice. 

Response: We disagree with this 

commenter that the changes we are 

adopting in this final rule will limit 

consumer education, price comparison 

or overall choice because suppliers can 

continue to educate the public about the 

advantages of their products or services 

through marketing practices that help to 

educate and inform the public and 

Medicare beneficiaries about their 

healthcare choices. 

Comment: One commenter stated that 

if a beneficiary visited a retail store, on 

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their on volition, to seek information on 

DMEPOS products, that the proposed 

change would prohibit the supplier 

from providing information or 

education that the beneficiary 

requested. 

Response: We disagree that a 

DMEPOS supplier could not provide 

information or education when the 

beneficiary contacts the DMEPOS 

supplier for information. The revised 

supplier standard in § 424.57(c)(11) 

states that DMEPOS suppliers must 

agree not to directly solicit patients, 

except as permitted under the current 

provisions in § 424.57(c)(11)(i) through 

(iii). Accordingly, if the Medicare 

beneficiary initially contacts the 

DMEPOS supplier, then the supplier’s 

contact with the beneficiary would not 

be a direct solicitation and the supplier 

may, therefore, discuss, educate, and 

inform the Medicare beneficiary about 

the various products and alternatives 

available to that beneficiary. 

Comment: One commenter stated that 

we did not adequately define, ‘‘directly 

solicit’’ or ‘‘coercive internet 

advertising.’’ 

Response: We appreciate the request 

for clarification. We believe that ‘‘direct 

solicitation’’ occurs when a DMEPOS 

supplier or its agents directly contacts 

an individual Medicare beneficiary by 

telephone, e-mail, instant messaging, or 

in-person contact without his or her 

consent for the purpose of marketing the 

DMEPOS supplier’s health care 

products or services or both. In 

addition, we removed the reference to 

‘‘coercive response internet advertising’’ 

from this rule in order to ensure that 

this standard is clear and 

understandable. 

Comment: One commenter asked if 

internet advertising such as internet 

‘‘yellow pages,’’ the use of Google 

AdWords, appearance in search engine 

results or other ‘‘keyword’’ 

advertisements informing the public of 

products and services provided by a 

supplier would constitute coercive 

response Internet advertising. 

Response: As noted previously, we 

removed the reference to ‘‘coercive 

response Internet advertising’’ from this 

final rule in order to ensure that this 

standard is clear and understandable. 

We believe that advertising techniques 

such as internet yellow pages, Google 

AdWords, and search engine keyword 

result-driven advertising are techniques 

used by businesses to educate and 

inform the public about a company and 

its products. In addition, these practices 

are normally considered mass 

advertising. Accordingly, web site 

advertisements that are intended to 

market a DMEPOS supplier to the 

general public are permissible and are 

not considered direct solicitation for the 

purpose of this standard. 

Comment: Several commenters would 

like CMS to clarify the restrictions on a 

supplier who may contact a Medicare 

recipient about noncovered items 

because it appears to limit a supplier’s 

legitimate marketing activities such as 

web pages describing various products, 

services and inserts to periodical 

publications dealing with various 

products and services. 

Response: We do not agree that this 

standard limits a supplier’s legitimate 

marketing activities. We believe that 

DMEPOS suppliers can continue to 

conduct mass advertising. For the 

purposes of this final rule, we believe 

direct solicitation targets Medicare 

beneficiaries without their consent. 

Accordingly, we believe that direct 

solicitation is significantly different in 

scope than general advertising. Again, 

these solicitations are one on one in 

nature and not the same as general 

advertising to the public and also apply 

to noncovered items if they are being 

solicited by a Medicare enrolled 

DMEPOS supplier. 

Comment: One commenter asks if a 

web site dedicated to short-term cash 

rentals of not readily-accessible portable 

oxygen concentrators for travel use 

(using an Advance Beneficiary Notices 

(ABN) if the customer is a Medicare 

beneficiary) violates the provisions 

outlined in the proposed rule. 

Response: We believe, for the purpose 

of this standard, a web site dedicated to 

short-term cash rentals of not-readily 

accessible portable oxygen 

concentrators for travel use to be of use 

to the general public. Using ABNs if the 

customer is a Medicare beneficiary 

would be required for the supplier to 

not be held liable for the charge under 

section 1879 of the Act. Using ABNs 

assists the beneficiaries in making 

informed decisions about the product. A 

dedicated web site that can be freely 

accessed by the general public, at the 

consumer’s choice, is not considered 

direct solicitation for the purpose of this 

standard. 

Comment: Several commenters 

suggested that the standard is 

satisfactory as it exists and that 

changing it as proposed would be overly 

restrictive, burdensome, and could 

prevent patients from receiving 

important information. 

Response: We believe the revision of 

this standard was necessary to include 

current trends and technological 

advances, such as door-to-door 

solicitation, electronic mail, and instant 

messaging. However, we do not believe 

this provision would prohibit DMEPOS 

suppliers from contacting Medicare 

beneficiaries in the situations described 

in the current provisions in 

§ 424.57(c)(11)(i) through (iii). For 

example, a supplier could contact a 

beneficiary with whom they already 

have an established business 

relationship or for legitimate reasons, 

such as annual fitting reminders, 

updating or verifying information from 

previously serviced beneficiaries. 

Comment: Several commenters 

recommended that we add another 

reason for the DMEPOS supplier to 

contact the patient, namely when the 

physician places the DMEPOS order 

(written or verbal) on behalf of the 

patient. 

Response: As noted previously, a 

DMEPOS supplier may not contact a 

beneficiary based solely on a physician 

order. However, a supplier may contact 

a beneficiary if a physician contacts a 

DMEPOS supplier on behalf of a 

beneficiary with the beneficiary’s 

knowledge, and then a supplier contacts 

the beneficiary to confirm or gather 

information needed to provide that 

particular covered item (including 

delivery and billing information). In that 

instance, the contact would not be 

considered a direct solicitation and 

therefore, would not implicate the 

standard set forth at § 424.57(c)(11). 

Please note that the beneficiary need 

only be aware that a DMEPOS supplier 

will be contacting him/her regarding the 

prescribed covered item, recognizing 

that the appropriate supplier may not 

have been identified at the time of the 

consultation. 

Comment: A commenter stated that 

prohibiting a supplier from directly 

soliciting patients, including ‘‘in-person 

contacts’’ improperly restrains free 

speech and disadvantages a small 

supplier by limiting a supplier to mass 

media advertising, which is only 

financially feasible to large suppliers. 

The commenter also stated that the 

beneficiary will be adversely affected 

because, under the proposed rule, a 

member of the hospital staff would need 

to obtain written permission from the 

beneficiary and transmit that permission 

to the supplier before the supplier could 

initiate the service causing unnecessary 

waiting periods. 

Response: We believe that a ‘‘direct 

solicitation’’ occurs when a DMEPOS 

supplier or their agent contacts an 

individual Medicare beneficiary without 

their consent for the purpose of 

marketing the DMEPOS supplier’s 

health care products or services or both; 

therefore we are clarifying our 

regulations by adding the definition of 

‘‘direct solicitation’’ to § 424.57(a). These 

types of direct solicitations are one on 

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one in nature and not the same as 

advertising to the public in a general 

marketing campaign. Finally, we do not 

believe Medicare beneficiaries will be 

adversely affected by this provision’s 

contact restrictions causing unnecessary 

waiting periods prior to a DMEPOS 

supplier’s initiation of services. As long 

as the beneficiary has completed a 

consent form giving the hospital staff 

member permission to share the 

beneficiary’s information with the 

DMEPOS supplier for the purpose of 

initiating service, the hospital staff 

person can order the service on the 

beneficiary’s behalf. Hospitals or other 

entities use consent forms for the 

purpose of ordering medical supplies or 

services on behalf of patients as 

standard operating procedure to ensure 

compliance with the Privacy Act and its 

implementing regulations. 

7. Product Delivery and Beneficiary 

Instructions 

In § 424.57, we proposed to revise 

paragraph (c)(12) provision to clarify its 

intent. Specifically, we proposed that a 

DMEPOS supplier: (1) Is responsible for 

maintaining proof of the delivery in the 

beneficiary’s file; (2) must furnish 

information to beneficiaries at the time 

of delivery of items as to how the 

beneficiary can contact the supplier by 

telephone; (3) must provide the 

beneficiary with instructions on how to 

safely and effectively use the equipment 

or contract this service to a qualified 

individual; (4) is responsible for 

providing instruction on the safe and 

effective use of the equipment that 

should be completed at the time of 

delivery; and (5) must document that 

this instruction has taken place. We are 

continuing to review the public 

comments received on this provision 

and we will consider finalizing this 

provision in a future rulemaking effort. 

B. New DMEPOS Supplier Standards 

1. Obtaining Oxygen 

In § 424.57(c)(27), we proposed a new 

standard that specified that the 

DMEPOS supplier must obtain oxygen 

from a State-licensed oxygen supplier. 

In addition, we stated that the proposed 

new standard would not apply when the 

State does not license oxygen suppliers. 

Comment: One commenter stated that 

they generally agree that DMEPOS 

suppliers should obtain oxygen from 

appropriately licensed oxygen supply 

companies, but requested that we clarify 

that the supplier standard in 

§ 424.57(c)(27) does not preclude 

suppliers from subcontracting the pickup and delivery of liquid and gaseous 

oxygen cylinders. 

Response: It is our intention to ensure 

that oxygen suppliers promote quality 

in the furnishing of oxygen or oxygenrelated equipment, and, in doing so, 

protect Medicare beneficiaries against 

substandard product(s) or poor service. 

The pick-up and delivery of liquid and 

gaseous oxygen cylinders does not 

interfere with our intentions for this 

provision. Therefore, oxygen suppliers 

may continue to subcontract the pick-up 

and delivery of oxygen and oxygenrelated products. 

Comment: A commenter stated that 

there is confusion regarding who needs 

to be licensed for specific services and 

believes the provisions in 

§ 424.57(c)(27) needs greater specificity 

and detail. 

Response: We appreciate this 

comment and have revised 

§ 424.57(c)(27) to address this concern. 

We have clarified in this section that 

DMEPOS suppliers are responsible for 

knowing which licenses are required for 

the DMEPOS that they supply. 

Comment: One commenter 

interpreted the proposed rule as 

requiring an oxygen supplier to get their 

oxygen from an in-State licensed oxygen 

supplier. 

Response: This final rule will require 

licensed oxygen suppliers to get their 

oxygen and oxygen-related equipment 

from other licensed or State-certified 

oxygen suppliers. However, if an oxygen 

supplier’s physical location is in a State 

that does not require oxygen licensure 

or certification, then the oxygen 

supplier is not required to get its oxygen 

or oxygen-related equipment from other 

licensed oxygen suppliers. It is not our 

intention to restrict Medicare 

beneficiaries’ oxygen supplier choices. 

Comment: One commenter 

interpreted this standard as requiring an 

in-State oxygen license for out-of-State 

suppliers and believes this limits access 

for Medicare beneficiaries. 

Response: We do not require oxygen 

licensure or certification for oxygen 

suppliers whose physical locations are 

in States that do not require oxygen 

licensure or certification. However, this 

provision does restrict unlicensed 

oxygen suppliers from supplying 

oxygen and oxygen-related equipment 

to oxygen suppliers whose physical 

locations are in States that require 

oxygen licensure or certification. 

Comment: A commenter suggested 

adding ‘‘if applicable’’ to this provision 

because not all States license oxygen 

suppliers. 

Response: We agree and will revise 

§ 424.57(c)(27) to incorporate language 

regarding applicability to States that 

license oxygen suppliers. 

Comment: One commenter 

recommended that we incorporate the 

proposed standard in § 424.57(c)(27) 

into the revised supplier standard in 

§ 424.57(c)(1). 

Response: We disagree with this 

commenter and have adopted a new 

supplier standard in § 424.57(c)(27). 

2. Ordering and Referring 

Documentation 

In § 424.57(c)(28), we proposed a new 

supplier standard that states that the 

supplier is required to maintain 

ordering and referring documentation, 

including the National Provider 

Identifier, received from a physician, 

nurse practitioner, physician assistant, 

clinical social worker, or certified nurse 

midwife, for 7 years after the claim has 

been paid. 

Comment: One commenter stated that 

it would be more practical and 

reasonable to base any records retention 

policy on the date of service and 

lengthen the retention period to 10 

years, which is the guideline used by 

many in the industry. This commenter 

stated that this change would capture 

CMS’ concerns about availability of 

records and cause fewer disruptions to 

the supplier recordkeeping practices. 

Another commenter believes that record 

retention should mirror that of industry 

or State standards such as the State 

Board of Pharmacy which is typically 3 

years. 

Response: We appreciate the 

commenter’ suggestions. However with 

the enactment of section of 6406(a) of 

the ACA, we published an interim final 

rule with comment in the May 5, 2010 

Federal Register (75 FR 24437), which 

established 7 year retention period 

based on the date of service in 

§ 424.516(f). Moreover, we believe that 

this retention policy is consistent with 

the policy established at § 424.516(f) in 

the November 19, 2008 final rule (73 FR 

69726) entitled ‘‘Medicare Program; 

Payment Policies Under the Physician 

Fee Schedule and Other Revisions to 

Part B for CY2009; E-Prescribing 

Exemption for Computer-Generated 

Facsimile Transmissions; and Payment 

for Certain Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

(DMEPOS)’’. Finally, in § 424.57(c)(28), 

we establish that suppliers are required 

to maintain ordering and referring 

documentation consistent with the 

provisions found in § 424.516(f). 

Comment: One commenter stated that 

it would be more practical and 

reasonable to base any records retention 

policy on the date of service. 

Response: We concur with this 

commenter and have revised this 

supplier standard to reflect that records 

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should be based on the date of service 

and not the date of payment. 

Comment: One commenter is 

concerned about why CMS would 

develop a supplier safeguard mandating 

records retention based upon the date 

the claim was paid when all business 

transactions are based upon the date of 

service or date equipment was provided. 

The addition of a new date would 

require systems modification just for 

managing records and the purge 

process. 

Response: As stated previously, we 

have revised this standard to base any 

records retention policy on the date of 

service. 

Comment: Some commenters stated 

that the Health Insurance Portability 

and Accountability Act of 1996 (HIPAA) 

(Pub. L. 104–191) and State laws govern 

the manner in which medical records 

need to be kept and urged CMS to 

retract the new standard in 

§ 424.57(c)(28). 

Response: The HIPAA record 

retention policy codified at 45 CFR 

164.530 relates to a covered entities 

privacy policies and procedures (for 

example, administrative records of 

complaints, notices, and other 

administrative actions or procedures); 

and therefore, does not preclude us from 

establishing a documentation retention 

standard. In addition, since Medicare is 

a Federal program, it is not subject to 

State law. We note that section 6406(a) 

of the ACA (Pub. L. 111–148) amends 

section 1842(h) of the Act by adding a 

new paragraph (9) which states the 

following: 

The Secretary may revoke enrollment, for 

a period of not more than one year for each 

act, for a physician or supplier under section 

1866(j) if such physician or supplier fails to 

maintain and, upon request of the Secretary, 

provide access to documentation relating to 

written orders or requests for payment for 

durable medical equipment, certifications for 

home health services, or referrals for other 

items or services written or ordered by such 

physician or supplier under this title, as 

specified by the Secretary. 

We also note that section 6406(d) of 

ACA specifies that ‘‘[t]he effective date 

of this provision shall apply to orders, 

certifications and referrals made on or 

after January 1, 2010.’’ Therefore, we 

believe that finalization of our proposed 

record retention requirements at 

§ 424.57(c)(28) is consistent with the 

section 6406(a) of ACA requirement. 

3. Prohibition on Sharing of a Practice 

Location 

In § 424.57(c)(29), we proposed a new 

standard that specifies that the supplier 

is prohibited from sharing a practice 

location with another Medicare 

supplier. In addition, we solicited 

comments on whether we should 

establish an exception to this space 

sharing proposal for physicians and 

nonphysician practitioners and the 

circumstances which warrant an 

exception since we are aware that 

physicians and other licensed 

nonphysician practitioners may obtain 

their own DMEPOS supplier number 

and furnish DMEPOS from their office. 

Comment: One commenter stated that 

the proposed standard is too restrictive 

and could discourage suppliers from 

forming networks under the competitive 

rules and urged CMS to retract the new 

standard in § 424.57(c)(29). 

Response: We do not believe that the 

new standard will restrict the ability of 

suppliers to form networks for the 

purpose of competitive bidding. 

Comment: Several commenters 

requested that we clarify whether a 

‘‘practice location’’ is limited to physical 

space or whether it also encompasses 

equipment or staff and requests 

clarification of the definition of the 

terms ‘‘sharing’’ and ‘‘practice location.’’ 

Response: DMEPOS suppliers list the 

practice location in Section 4 of the 

Medicare enrollment application (CMS– 

855S). For the purposes of this standard, 

sharing a practice location refers to 

sharing of the physical location as 

described on the CMS–855S. In general, 

the practice location is the physical 

space where a DMEPOS supplier 

operates his or her business and meets 

with customers and potential customers. 

Comment: One commenter requested 

that we clarify that the enrolled practice 

location does not include a warehouse, 

storage facility, or repair facility. 

Response: As stated previously, a 

DMEPOS supplier identifies the practice 

location in Section 4 of the CMS–855 

and is a place where a DMEPOS 

supplier operates his or her business 

and meets with customers and potential 

customers. 

Comment: Several commenters 

requested that we clarify that the space 

sharing provision in § 424.57(c)(29) is 

not intended to preclude a physician or 

licensed health professional (who is also 

recognized as a DMEPOS supplier by 

Medicare) from furnishing both 

DMEPOS products and professional 

services to his or her patients in the 

same practice location. 

Response: We appreciate this 

comment and have established an 

exception to this standard for 

physicians and NPPs as defined in the 

statute. Under section 1842(b)(18)(C) of 

the Act, physical and occupational 

therapists may operate as a DMEPOS 

supplier, as well as a licensed 

professional at the same practice 

location if these suppliers are furnishing 

DMEPOS to their own patients as part 

of professional service. 

Comment: One commenter stated that 

if any limitation on sharing practice 

locations is put in place that we should, 

at most, formalize the NSCs practice of 

prohibiting multiple NSC supplier 

numbers at a single address. 

Response: While we have established 

a limited number of exceptions to the 

prohibition of sharing a practice 

location, we agree that the NSC should 

not convey billing privileges to 

suppliers who are not in compliance 

with the provisions of this final rule. 

Moreover, with the implementation of 

the National Provider Identifier (NPI), a 

DMEPOS supplier must obtain a NPI for 

each practice location, unless the 

supplier is a sole proprietorship. 

Accordingly, we believe that this policy 

is consistent with current National 

Supplier Clearinghouse operational 

policy and the provisions for issuing an 

NPI. 

Comment: One commenter agreed 

with the statement in the preamble of 

the proposed rule that stated, ‘‘We do 

not believe that legitimate DMEPOS 

suppliers routinely share practice 

locations with another Medicare 

supplier.’’ 

Response: We appreciate this 

comment and continue to believe that 

legitimate businesses do not share 

practice locations with competitors. 

Comment: One commenter stated that 

if a space sharing agreement passes 

under both the Anti-kickback statute 

and the Stark statute and regulations, 

then they do not believe such 

arrangements should be automatically 

prohibited by a supplier standard. 

Response: We disagree with this 

commenter. While the statutory and 

regulatory provisions referenced 

previously are intended to prohibit 

specific practices, these provisions do 

not address the full range of problems 

that occur when DMEPOS suppliers are 

commingling practice locations. The 

Anti-kickback statute, the Stark statute, 

and our regulations are separate 

authorities and do not preclude us from 

establishing additional DMEPOS 

supplier standards. In addition, we do 

not believe that legitimate DMEPOS 

suppliers share inventory, staffing or a 

practice location with a competing 

DMEPOS supplier. 

Comment: Several commenters 

recommended that physical therapists 

(PTs) be exempt from this provision 

because it would place an undue burden 

on the patient to purchase the limited 

DME items offered in the PT office at 

another location—especially for 

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pediatric PTs or those located in rural 

areas. 

Response: As stated previously, we 

are establishing an exception for 

physical and occupational therapists 

from the provision in § 424.57(c)(29). 

Comment: Several commenters stated 

that there should be an exception to this 

provision when both businesses are 

owned by the same person or entity or 

the DME supplier is a separate unit 

located within or owned by a larger 

health care facility such as a hospital. 

Other commenters stated there should 

be an exception to this provision when 

a pharmacy is operating within a Statelicensed health center because of the 

burden separate locations would put on 

the patients. 

Response: We disagree with 

commenters who stated that we should 

establish an exception based solely on 

ownership. Moreover, unless the owner 

of DMEPOS supplier is a sole 

proprietorship, DMEPOS suppliers are 

required to obtain a unique National 

Provider Identifier for each practice 

location. Accordingly, unless a 

DMEPOS supplier has satisfied an 

exception under § 424.57(c)(29), we do 

not believe that an owner should be 

permitted to establish a sole 

proprietorship and an organizational 

entity at the same practice location. 

Similarly, we do not believe that the 

same owner should be able to obtain 

separate Medicare billing privileges for 

DMEPOS suppliers at the same practice 

location found on the Medicare 

enrollment application. As stated 

previously, we do not believe that 

legitimate businesses share practice 

locations with competitors. However, 

we agree with the commenters who 

stated that there should be an 

exemption when the entity or DME 

supplier is a separate unit located 

within or owned by a larger facility. 

Therefore, we have established 

exceptions to the sharing of space 

limitation found in § 424.57(c)(29). In 

§ 424.57(c)(29)(ii)(C), we have 

established an exception for DMEPOS 

suppliers that have a practice location 

within a Medicare provider that is 

subject to the requirements specified in 

42 CFR 489.2(b). This exception will 

allow a hospital, home health agency 

(HHA), skilled-nursing facility (SNF), or 

other Part A provider that is enrolled in 

Medicare to co-locate with a DMEPOS 

supplier that is owned by that Part A 

provider and is a separate unit. It is 

important to note that these DMEPOS 

suppliers while owned by the Part A 

provider must still meet all of the other 

DMEPOS supplier standards in § 424.57 

to obtain and maintain Medicare billing 

privileges. 

Comment: One commenter asked if 

two entities, with two different ‘‘Doing 

Business As’’ (DBA) names are owned 

by the same parent company would they 

be prohibited from having a common 

location under § 424.57(c)(29). 

Response: As stated previously, we 

have established certain exceptions to 

this provision. However, we do not 

believe that it is a common practice to 

establish multiple DBAs at the same 

practice location. Accordingly, we 

believe that two different DBAs that are 

owned by the same parent company 

would be prohibited from sharing a 

practice location under this provision. 

Comment: One commenter believes 

the regulation text does not properly 

convey the intent of the language in the 

preamble and will result in additional 

micromanagement of DMEPOS 

suppliers by CMS. 

Response: We believe that the 

provisions of this final rule and the 

regulation text are consistent. In 

addition, we believe that the provisions 

as adopted allow CMS or the NSC to 

ensure that DMEPOS suppliers are 

operating in accordance with 

established business practices used by 

legitimate companies. As stated 

previously, we do not believe that 

legitimate DMEPOS suppliers share 

inventory, staffing or operational space 

with their competitors. 

Comment: One commenter believes 

that an orthotic and prosthetic facility 

should be allowed to share space with 

complementary, but not competing 

businesses that may already have a 

Medicare supplier number, specifically 

physicians and physical therapy offices. 

Response: We disagree with this 

commenter. While we have established 

an exception to § 424.57(c)(29) for 

physicians, NPPs, and physical and 

occupational therapists who are 

furnishing items to their own patients as 

part of their professional service, we do 

not believe that a similar exception 

should be established for orthotic and 

prosthetic facilities or personnel 

because they are not individual 

practitioners who are furnishing items 

to their own patients as part of their 

professional service. The facilities in 

question would be sharing space with 

another supplier whereas the exceptions 

noted are supplying their own patients 

as part of their service. 

Comment: Several commenters 

questioned whether the supplier can 

have an office in the same building 

where other hospital-owned Medicare 

suppliers (outpatient pharmacy, 

physician groups) are located if it is 

hospital-owned. 

Response: We agree that a DMEPOS 

supplier may be enrolled within the 

same building owned by a hospital. 

Comment: One commenter does not 

believe co-existing in an office space 

jeopardizes quality supplier standards. 

Response: We disagree because we 

have found that unrelated business 

entities that share the same practice 

location often provide poor quality care 

or, in some case, are associated with 

fraudulent businesses or do not exist. 

Comment: One commenter agrees 

with CMS’ proposal that nonphysician 

DMEPOS suppliers should not share a 

practice location with another Medicare 

supplier, especially if that other 

Medicare supplier is a possible referral 

source. 

Response: We appreciate the support 

for our provision regarding the sharing 

of space and further clarify that the 

Anti-kickback statute, the Stark Statute, 

and our regulations are separate 

authorities apart from the sharing of 

space provisions adopted within this 

final rule. 

Comment: Several commenters 

requested that we not create exceptions 

to this provision for physicians and 

other licensed providers to share space 

as it is a bad idea that creates 

inconsistent application of the 

regulations. In addition, making 

physicians discontinue distributing 

DME from their offices is good and the 

physician, orthotist/prosthetist, and 

physical therapist should have no 

financial relationship to ensure true 

medical necessity. 

Response: We believe that we can 

consistently apply the regulations and 

allow for reasonable exceptions. 

Moreover, we believe that physicians 

can furnish DMEPOS to their own 

patients as part of professional service. 

In addition, in many cases, a physician 

furnishing DMEPOS to their own 

patients can benefit those patients in 

terms of convenience and continuity of 

care. 

Comment: One commenter asks if this 

standard would apply in the 

circumstance where the business owner 

owns a pharmacy and a separate 

DMEPOS company with 2 different 

supplier Medicare numbers sharing the 

same location for retail sales (note— 

both businesses have the same stock 

holders and are held by a separate 

holding company). 

Response: We believe that the 

scenario described is prohibited under 

the provisions of this final regulation. 

Comment: One commenter suggested 

that an exception to this provision be 

made for those physicians/NPPs that 

supply blood glucose monitoring 

devices to their patients. 

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Response: We appreciate this 

comment and as stated previously, we 

are adopting an exception to the 

prohibition on space sharing for 

physician, NPPs, and physical and 

occupational therapists. 

4. Hours of Operation 

In § 424.57(c)(30), we proposed a new 

supplier standard that would require a 

DMEPOS supplier to be open to the 

public a minimum of 30 hours per 

week, except for those DMEPOS 

suppliers who are working with custommade orthotics and prosthetics. 

Comment: Several commenters 

requested that physical therapy 

practices be exempt from posting office 

hours because this would limit the 

services available to the Medicare 

patients. 

Response: We believe that all 

DMEPOS suppliers should have posted 

hours of operation. 

Comment: A commenter stated that it 

would be burdensome for hospitals or 

health systems that owned or controlled 

DMEPOS suppliers to display hours of 

operation and that the proposed 

standard is unnecessary since the 

implementation of mandatory 

accreditation. 

Response: In § 424.57(c)(8), we 

already require that DMEPOS suppliers, 

including those owned or controlled by 

hospitals and health systems, to 

maintain a visible sign and post their 

hours of operation. Accordingly, we 

believe that we are clarifying an existing 

NSC practice by adopting this revised 

standard. Moreover, since accreditation 

primarily focuses on patient care, it 

does not directly address the 

verification of this existing supplier 

standard. 

Comment: One commenter believes 

the requirement that suppliers maintain 

a physical facility that is staffed at all 

times with posted working hours is 

most beneficial. 

Response: We appreciate this 

comment and have adopted a minimum 

number of posted hours of operation for 

DMEPOS suppliers in § 424.57(c)(30). 

Comment: Several commenters stated 

that it is a widespread practice among 

DMEPOS suppliers—large and small— 

to have part-time or ‘‘by appointment 

only’’ hours for some locations, 

especially in rural areas, and asked that 

we reconsider the new supplier 

standard in § 424.57(c)(30) which 

requires suppliers to remain open to the 

public for a minimum of 30 hours a 

week. Some commenters believe 

remaining at the facility for 30 hours per 

week would leave no time for item 

delivery and proposed that CMS 

consider the requirement met as long as 

the hours are posted and the supplier is 

open during those hours. 

Response: We believe that DMEPOS 

suppliers must be open to the public a 

minimum number of hours to ensure 

patient access to services. After a careful 

review of these comments, we continue 

to believe that DMEPOS suppliers must 

be open and available to the public a 

minimum of 30 hours per week. We 

believe that establishing a minimum 

number of hours is in the best interest 

of the Medicare program and Medicare 

patients, especially for those who are 

disabled or with limited means of 

transportation. 

Comment: Several commenters stated 

that they do not believe that CMS has 

the authority or business expertise to 

dictate the number of hours a DMEPOS 

supplier should operate to be 

considered legitimate when this would 

be determined based on the needs of the 

customer base. 

Response: We believe that section 

1834(j)(1)(B) of the Act gives the 

Secretary the authority to implement 

additional supplier standards. We 

maintain that the requirement that a 

DMEPOS supplier is open a minimum 

number of hours help to ensure that it 

is engaged in furnishing DMEPOS to 

Medicare beneficiaries. In addition, we 

believe that this requirement also may 

help increase access to care for 

Medicare beneficiaries. 

Comment: One commenter 

recommended that we consider 

permitting flexibility in the hours of 

operation so long as they are clearly 

posted and deviations to the posted 

hours are noted with a specific return 

time. 

Response: We disagree with this 

commenter. It is essential for our 

Medicare beneficiaries to have access to 

suppliers during regularly scheduled 

hours. Medicare beneficiaries should 

not be advised that the supplier has 

temporarily changed their hours once 

they have made the effort to visit the 

supplier. Moreover, allowing DMEPOS 

suppliers to constantly change their 

posted hours of operation would make 

it virtually impossible for us to 

determine if a supplier is actually in 

operation. While we recognize that 

emergencies do occur, it is the 

responsibility of the DMEPOS supplier 

to establish staff contingencies to ensure 

that their business remains open to the 

public in spite of a personal emergency. 

Comment: Several commenters 

recommended that we establish an 

exception to the supplier standard in 

§ 424.57(c)(30) for physicians, physical 

therapists, and other licensed health 

professionals holding DMEPOS 

suppliers numbers, especially when 

DMEPOS supplies makes up such a 

small portion of the practice. 

Response: We appreciate these 

comments and have added an exception 

to this supplier standard for physicians 

and licensed non-physician 

practitioners, including physical and 

occupational therapists, that only 

furnish DMEPOS supplies to their own 

patients to § 424.57(c)(30). 

Comment: Several commenters stated 

that it is not economically feasible for a 

small one person supplier to be staff 

during all posted hours of operations 

because they often make house calls. 

Response: While we understand the 

concerns of small suppliers, we believe 

that Medicare beneficiaries and the NSC 

should be able to have access to the 

supplier at regularly posted hours. Also, 

as previously noted, we have 

established exceptions for physicians, 

NPPs, and certain other suppliers. 

Comment: One commenter stated that 

this requirement does not allow a sole 

proprietor, being the only certified fitter 

as well as the owner, to be sick, go on 

vacation, or have a personal emergency 

without violating Medicare standards. 

Response: We agree and have adopted 

an exception to this provision for 

suppliers working with custom-made 

orthotics and prosthetics. 

Comment: Several commenters stated 

that there may be episodic instances 

where DMEPOS suppliers may 

legitimately not be able to be open for 

30 hours per week including inclement 

weather conditions, staffing shortages as 

the result of labor disputes, staff 

illnesses or holiday periods, and various 

other unusual occurrences or natural 

disasters that would prohibit a supplier 

from being open 30 hours in a particular 

week. 

Response: We recognize that 

unforeseen emergencies do occur that 

would require a supplier to make 

temporary changes to scheduled hours. 

The NSC will take these circumstances 

into account. However, we believe that 

DMEPOS suppliers should adhere to its 

posted hours and should develop 

contingencies to remain open when 

personal emergencies or when staffing 

issues occur. 

Comment: One commenter 

recommended that CMS implement an 

exception for physical therapists for the 

posting of office hours. 

Response: We disagree with this 

commenter. We believe a physical 

therapist enrolled as a DMEPOS 

supplier must post its hours of 

operation for beneficiaries so that CMS 

or its agents can perform site visits. 

However, as discussed previously, we 

note that we have established an 

exception for physical therapists in 

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certain circumstances to the supplier 

standard of the 30 hours minimum 

requirement. 

Comment: One commenter suggested 

the language describing the proposed 

change at § 424.57(c)(8) be changed from 

‘‘would deny’’ to ‘‘may deny’’ to allow for 

situations where the NSC or its agents 

are unable to perform a site visit during 

a supplier’s posted business hours. 

Response: While we understand this 

comment, we do not believe that the 

change is needed. 

Comment: One commenter asked for 

clarification of what constitutes custom 

fabricated orthotics and prosthetics. The 

commenter questioned whether it is the 

definition from the competitive bidding 

document or the explanation of each 

product in the HCPCS codes. 

Response: For purposes of the 

regulatory provision, orthotics and 

prosthetics is defined in the HCPCS 

codes related to each product and as 

described in the DMEPOS quality 

standards. 

Comment: One commenter suggested 

an alternative to the proposed provision 

could be for the entire practice (all 

office locations collectively), to be open 

a minimum number of hours which 

would allow for satellite offices in 

remote areas, as well as accommodating 

those therapists in private practice for 

the purpose of limiting their work 

hours. The commenter considers 20 

hours a week to be reasonable. 

Response: Each DMEPOS supplier 

location is separately enrolled, and 

therefore, each location must meet all 

the required supplier standards in 

§ 424.57. 

Comment: A commenter stated that 

requiring DMEPOS suppliers, except 

suppliers of prosthetics and orthotics, to 

be open to the public for at least 30 

hours a week is unnecessary for 

supplier’s facilities that are not intended 

for beneficiary access and that this 

proposed standard blurs the distinction 

between a classic retail establishment 

and a service facility dedicated to the 

provision of supplies and equipment to 

patients in their homes. In addition, the 

commenter requests that CMS consider 

different business models for supplier 

standards, and let the beneficiaries and 

their physicians decide what model may 

work best for them. 

Response: We do not believe these 

arrangements are always in the best 

interest of the patient. We believe that 

all enrolled DMEPOS suppliers, except 

suppliers of prosthetics and orthotics, 

should maintain a minimum number of 

hours open to the public. This will 

ensure that the DMEPOS supplier is 

operational and allows CMS, the NSC or 

agents of CMS or the NSC to conduct 

unannounced site visits to ensure 

compliance with the standards set forth 

at § 424.57. 

Comment: One commenter believes 

the weekly hourly requirement severely 

limits the ability to provide services in 

small towns, because it does not allow 

for the use of ‘‘limited business hour’’ 

satellite facilities. 

Response: After careful review of this 

standard, we have determined that 

requiring a DME supplier to be open 

and available to the public no less than 

30 hours per week is in the best interest 

of the patient, especially for those who 

are disabled or with limited means of 

transportation. 

5. Tax Delinquency 

In § 424.57(c)(31), we proposed 

adding a new supplier standard that 

specified that a DMEPOS supplier could 

not have Internal Revenue Service (IRS) 

or a State taxing authority tax 

delinquency. We also proposed to 

define a ‘‘tax delinquency’’ as meaning 

an amount of money owed to the United 

States or a State: A conviction or civil 

judgment for tax evasion, a criminal or 

civil charge of tax evasion, or the filing 

of a tax lien. 

With the enactment of section 189 of 

the Medicare Improvements for Patients 

and Providers Act (MIPPA) (Pub. L. 

110–275) on July 15, 2008, we are 

deferring the implementation of this 

proposal while we continue to review 

the public comments received on this 

provision and we will consider 

finalizing this provision in a future 

rulemaking effort if we deem it 

necessary. Accordingly, we are not 

adopting this proposed supplier 

standard in this rule and have removed 

the paperwork burden associated with 

this provision. 

6. Medicare Overpayment 

In § 424.57(d), we proposed to 

redesignate the current text as paragraph 

(d)(1) and proposed adding a new 

paragraph that specified that ‘‘CMS, the 

NSC, or CMS designated contractor 

establishes a Medicare overpayment 

from the date of an adverse legal action 

or felony conviction (including felony 

convictions within the 10 years 

preceding enrollment or revalidation of 

enrollment) that precludes payment.’’ In 

addition, we proposed that any 

overpayment assessed by CMS or its 

designated contractor due to a failure to 

report this information would follow the 

existing rules governing Medicare 

overpayments set forth at § 405.350 

et seq. The underlying basis to report 

‘‘adverse legal actions’’ to the NSC are 

found in § 424.530 and § 424.535, which 

state the provisions for denial of 

enrollment and the revocation of billing 

privileges. 

Comment: One commenter stated that 

the term ‘‘adverse legal action’’ was 

vague and requested that we clarify or 

eliminate the authority regarding 

overpayments resulting from adverse 

legal actions in § 424.57(d). The 

commenter stated that no notice was 

provided regarding the types of events 

that would trigger an overpayment 

collection. This commenter further 

stated that before this regulatory 

provision could be finalized, more 

fulsome notice must be given so that 

stakeholders can submit meaningful 

comments. 

Response: We agree and have revised 

§ 424.57(a) to add a definition for the 

term ‘‘final adverse action’’ as meaning 

one or more of the following actions: (1) 

A Medicare-imposed revocation of any 

Medicare billing number; (2) suspension 

or revocation of a license to provide 

health care by any State licensing 

authority; (3) revocation or suspension 

of accreditation; (4) a conviction of a 

Federal or State felony offense (as 

defined in § 424.535(a)(3)(i)) within the 

last 10 years preceding enrollment, 

revalidation, or re-enrollment; or (5) an 

exclusion or debarment from 

participation in a Federal or State health 

care program. This definition is 

narrower than the list of final adverse 

actions contained in Section 3 of the 

CMS–855S which was published on 

March 23, 2009. In fact, we limited the 

definition of ‘‘final adverse action’’ in 

this rule to those actions that currently 

serve as a basis for CMS to revoke a 

supplier’s Medicare billing privileges 

under § 424.535(a). If a final adverse 

action has been imposed upon a 

supplier, then that supplier would not 

be eligible to maintain Medicare billing 

privileges from the date of a final 

adverse action. This provision provides 

CMS or its contractors with the 

discretion to establish an overpayment 

determination (as defined in § 405.350) 

for all Medicare items and services 

furnished from the date of the final 

adverse action. CMS or our contractors 

may reopen all claims paid to the 

supplier on or after the date of the final 

adverse action that had been imposed 

upon that supplier. Moreover, suppliers 

who are assessed overpayments under 

this provision may appeal these 

determinations in accordance with the 

Medicare claims appeal procedures set 

forth in § 405.900 through § 405.1140. 

Comment: One commenter believes 

the requirement to notify the NSC of 

changes is too burdensome. 

Response: We appreciate the 

commenters’ concerns. However, we 

maintain that it is necessary to require 

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DMEPOS suppliers to notify the NSC of 

a final adverse action or other reportable 

change, including change of location, 

change of ownership (including 

authorized and delegated officials) 

within 30 days to mitigate the possible 

impacts associated with these types of 

changes. 

7. Notification of Change in Hours 

Operation 

In § 424.57(c)(32), we are proposing 

that each supplier must report changes 

in hours of operation to the NSC 15 

calendar days prior to the proposed 

change. The burden associated with this 

requirement is the time and effort 

associated with notifying the NSC of the 

change in hours of operation. 

We are not finalizing this provision. 

In section V. of this final rule, we 

respond to the comment received on the 

information collection requirement 

associated with this provision. 

8. Other Issues 

The following is our response to a 

comment that was not on a proposal 

included in this proposed rule: 

Comment: One commenter requested 

that we clarify that § 424.57(c)(26) was 

reserved for the proposed DME surety 

bond standard. 

Response: We note that 

§ 424.57(c)(26) was reserved for the 

proposed DME surety bond standard. 

We also note that the proposed 

provision at § 424.57(c)(26) was 

finalized in the January 2, 2009 final 

rule (74 FR 166) entitled ‘‘Medicare 

Program; Surety Bond Requirement for 

Suppliers of Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS).’’ 

IV. Provisions of the Final Regulations 

This final rule finalizes the provisions 

of the proposed rule with the following 

exceptions: 

• In § 424.57(a), we modified our 

proposal as follows: 

++ Added the definition for the term 

‘‘direct solicitation.’’ 

++ Revised the definition for the term 

‘‘final adverse action’’. We note that the 

definition for this term was added by a 

January 2, 2009 final rule (74 FR 166). 

We revised this term by—(1) replacing 

the semicolons at the end of paragraphs 

(i) through (iv) with periods; (2) revising 

paragraph (iii) by adding the phrase ‘‘as 

stated § 424.58’’ to the end of the 

paragraph; and (3) revising paragraph 

(iv) by removing the word ‘‘or’’ from the 

end of the paragraph. 

• In § 424.57(c)(1), we made the 

following modifications to our proposal: 

++ Added language to clarify that a 

DMEPOS supplier must be licensed to 

provide the licensed service(s) and 

cannot contract with an individual or 

entity to provide the licensed service(s). 

++ Added language to clarify that a 

licensed professional can be a part-time 

or full-time employee. 

• In § 424.57(c)(7), we modified our 

proposal as follows: 

++ Revised the proposed 

introductory text of paragraph (c)(7). 

The language regarding the space for 

storing records and retaining ordering 

and referring documentation was 

modified and redesignated as 

paragraphs (c)(7)(i)(E) and (F), 

respectively. 

++ Added a new paragraph 

(c)(7)(i)(A) that specifies a minimum 

square footage requirement and an 

exception to the minimum square 

footage requirement for State-licensed 

orthotic and prosthetic personnel 

providing custom fabricated orthotics or 

prosthetics in private practice. 

++ Modified and redesignated 

proposed paragraphs (c)(7)(i) through 

(c)(7)(iii) as paragraphs (c)(7)(i)(B) 

through (c)(7)(i)(D). 

++ Redesignated paragraph (c)(7)(iv) 

as paragraph (c)(7)(ii). 

++ Added a new paragraph (c)(7)(iii) 

that specifies that an appropriate site 

may be the centralized location for all 

of the business records and ordering and 

referring documentation of a multisite 

supplier. 

• In § 424.57(c)(9), we made technical 

and clarifying changes. 

• In § 424.57(c)(10), we are not 

finalizing this proposed provision in 

this final regulation. 

• In § 424.57(c)(11), we added a 

definition of direct solicitation in 

§ 424.57(a). 

• In § 424.57(c)(12), we are not 

finalizing this proposed provision in 

this final rule. 

• In § 424.57(c)(27), we are adopting 

this provision as proposed. 

• In § 424.57(c)(28), we adopting the 

provision established in § 424.516(f). 

• In § 424.57(c)(29), we added an 

exception to our requirements on the 

prohibition of sharing a practice 

location in paragraph (c)(29)(ii). 

• In § 424.57(c)(30), we added 

exceptions for DMEPOS suppliers who 

are working with custom-made orthotics 

and prosthetics and physicians, 

nonphysician practitioners, and 

physical and occupational therapists. 

• In § 424.57(c)(31), we are not 

finalizing this proposed provision in 

this final rule. 

• In § 424.57(c)(32), we are not 

finalizing this proposed revision in this 

final rule. Accordingly, we have 

withdrawn the information collection 

requirement request associated with this 

provision. 

• In § 424.57(e) (which was proposed 

as § 424.57(d)), we are modifying our 

proposal with a change to the effective 

date of date of revocation. (See the 

Surety Bond final rule in the March 27, 

2009 Federal Register (74 FR 13345)). In 

order to be consistent with our 

regulations at § 424.535(g), we are 

extending the effective date of 

revocation from 15 to 30 days after 

notification of the revocation. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), agencies are required to 

provide a 30-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 PRA 

requires that we solicit comments on the 

following issues: 

• Whether the information collection 

is necessary and useful to carry out the 

proper functions of the agency; 

• The accuracy of the agency’s 

estimate of the information collection 

burden; 

• The quality, utility, and clarity of 

the information to be collected; and 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

The following is a discussion of the 

provisions, as stated in section III. of 

this final rule, that contain information 

collection requirements. 

The provision at § 424.57(c)(1) states 

that a supplier must operate its own 

business and furnish Medicare–covered 

items in compliance with all applicable 

Federal and State licensure and 

regulatory requirements. The purpose of 

this standard is to ensure that DMEPOS 

suppliers obtain and maintain the 

necessary State licenses required to 

furnish services provided to Medicare 

beneficiaries. While there is burden 

associated with complying with this 

standard, we believe it is exempt from 

the PRA as stated in 5 CFR 1320.3(b)(3). 

A collection of information conducted 

or sponsored by a Federal agency that is 

also conducted or sponsored by a unit 

of State, local, or tribal government is 

presumed to impose a Federal burden 

except to the extent that the agency 

shows that such State, local, or tribal 

requirement would be imposed even in 

the absence of a Federal requirement. In 

addition, we believe the burden 

associated with the maintenance of the 

required documentation is exempt from 

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the PRA as stated in 5 CFR 1320.3(b)(2), 

to the extent that the time, effort, and 

financial resources necessary to comply 

with collection of information that 

would be incurred by persons in the 

normal course of their activities. 

Maintaining State license 

documentation is part of usual and 

customary business practices. 

Proposed § 424.57(c)(10)(iii) stated 

that with respect to liability insurance, 

it was the responsibility of the DMEPOS 

supplier to, ‘‘promptly notify the NSC in 

writing of any policy changes or 

cancellations.’’ The burden associated 

with this proposed requirement was the 

time and effort associated with drafting 

and submitting notification to the NSC 

of any policy changes or cancellations. 

However, we have decided not to 

finalize this requirement in this final 

rule and therefore will not be submitting 

an information collection request to 

OMB for its review and approval. 

Proposed § 424.57(c)(12) stated that a 

supplier, ‘‘[m]ust be responsible for the 

delivery of Medicare-covered items to 

beneficiaries and maintain proof of 

delivery.’’ In addition, the supplier 

must, ‘‘[d]ocument that it or another 

qualified party has at an appropriate 

time, provided beneficiaries with 

information and instructions on how to 

use the Medicare-covered items safely 

and effectively.’’ The burden associated 

with this section is the time and effort 

required to: Document the delivery of 

the Medicare-covered item; document 

the provision of information or 

instructions to the beneficiary by the 

supplier itself or another qualified 

party; maintain the documentation of 

delivery of the Medicare-covered items 

and the necessary information and 

instructions. While the burden 

associated with the aforementioned 

proposed requirements is subject to the 

PRA, we have decided not to finalize 

these requirements in this final rule and 

therefore will not be submitting an 

information collection request to OMB 

for its review and approval. 

Proposed § 424.57(c)(12)(ii) specified 

that a supplier must furnish information 

to beneficiaries at the time of delivery 

of items on how the beneficiary can 

contact the supplier by telephone. The 

burden associated with complying with 

the standard is the time and effort 

required for the supplier to provide its 

contact information to beneficiary at the 

time of delivery of the Medicare-covered 

item(s). While the burden associated 

with the aforementioned proposed 

requirement is subject to the PRA, CMS 

has decided not to finalize this 

requirement in this final rule and 

therefore will not be submitting an 

information collection request to OMB 

for its review and approval. 

The provision at § 424.57(c)(28) 

discusses a recordkeeping requirement. 

This provision states that suppliers are 

required to maintain ordering and 

referring documentation, including NPI, 

received from a physician or eligible 

professional for 7 years from the date of 

service. Based on public comment and 

the provisions established in prior 

rulemaking documents, we revised this 

provision for record retention 

requirement from 7 years after a claim 

is reimbursed to 7 years from the date 

of service. 

The burden associated with this 

requirement is the time and effort 

necessary for a supplier to file and 

maintain ordering and referring 

documentation from the previously 

stated list of providers. While this 

requirement is subject to the PRA, the 

associated burden is exempt under 5 

CFR 1320.3(b)(2), to the extent that the 

time, effort, and financial resources 

necessary to comply with collection of 

information that would be incurred by 

persons in the normal course of their 

activities. Maintaining ordering and 

referring documentation is a usual and 

customary business practice. 

Proposed § 424.57(c)(32), stated that 

each supplier must report changes in 

hours of operation to the NSC 15 

calendar days prior to the proposed 

change. The burden associated with this 

requirement is the time and effort 

associated with notifying the NSC of the 

change in hours of operation. We 

estimated that 1,000 suppliers will be 

subject to this requirement. The 

estimated time required to report the 

information to the NSC is 10 minutes. 

The estimated total annual burden 

associated with this requirement is 167 

hours. We received a public comment 

regarding the burden assessment for the 

information collection requirement 

contained in § 424.57(c)(32). 

Comment: One commenter stated that 

there is little gained by imposing such 

a rigid notification and requests that the 

requirement be modified to permit the 

supplies to notify the NSC of changes in 

operation within 30 calendar days after 

the proposed change and that we should 

revise the burden estimate associated 

with this provision. 

Response: We appreciate this 

comment and agree that this provision 

would increase the paperwork burden 

imposed on DMEPOS suppliers. 

Accordingly, we are not adopting this 

new supplier standard and have 

removed the paperwork burden 

associated with this provision. 

Consistent with supplier standard in 

§ 424.57(c)(2), we will continue to 

require that DMEPOS suppliers report 

changes in operation within 30 calendar 

days. 

We have submitted a copy of this final 

rule to OMB for its review and approval 

of the aforementioned information 

collection requirements. 

VI. Regulatory Impact Statement 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

review (September 30, 1993), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). This rule does not reach 

the economic threshold and thus is not 

considered a major rule. 

To ensure that Medicare is making 

correct payments to only legitimate 

DMEPOS suppliers, we implemented a 

comprehensive payment and enrollment 

strategy. This strategy includes 

developing and implementing the 

statutorily-mandated competitive 

bidding program, making revisions to 

the National Supplier Clearinghouse 

contract, implementing a DMEPOS 

demonstration project, and publishing a 

proposed rule that would require 

DMEPOS suppliers to obtain a surety 

bond. 

Accordingly, it is essential that we 

further develop and implement 

administrative and regulatory changes 

which prevent unscrupulous DMEPOS 

suppliers from enrolling or maintaining 

their enrollment in the Medicare 

program. To this end, we have 

implemented the following 

administrative changes and are seeking 

comments on mandated DMEPOS surety 

bonding requirements. 

As part of our administrative change, 

we revised the contract with the 

National Supplier Clearinghouse (NSC) 

in FY 2008 and are currently 

recompeting this contract through full 

and open competition. The revised 

contract requires that the NSC conduct 

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and increase the number of on-site visits 

to ensure that DMEPOS suppliers are in 

compliance with the provisions in 

§ 424.57. We are also expanding the 

funding for NSC operations to support 

the increased number of site visits. 

These expanded measures will help to 

ensure that only legitimate DMEPOS 

suppliers are enrolled or maintain 

enrollment in the Medicare program. In 

addition, we announced plans on June 

28, 2007, to implement a 2-year 

demonstration involving DMEPOS 

suppliers. The goal of this initiative is 

to strengthen our ability to detect and 

prevent fraudulent activity and has 

focused specifically on DMEPOS 

suppliers in South Florida and the Los 

Angeles metropolitan area. Based on the 

findings of this initiative, we will 

determine if the administrative 

processes and procedures used in this 

demonstration should be expanded to 

other parts of the country. 

On August 1, 2007, we published a 

proposed rule (72 FR 42001) which 

would implement section 4312(a) of the 

Balanced Budget Act of 1997 (BBA) by 

requiring all Medicare DMEPOS 

suppliers to furnish CMS with a surety 

bond. The public comment period for 

this proposed rule closed on October 1, 

2007. As noted previously, we finalized 

the surety bond provisions in a final 

rule entitled ‘‘Medicare Program; Surety 

Bond Requirement for Suppliers of 

Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

(DMEPOS)’’ on January 2, 2009. 

Accordingly, while the activities 

described previously will promote 

compliance with the existing supplier 

standards, these activities do not supply 

CMS and the NSC with the needed 

authority to deny or revoke billing 

privileges to those DMEPOS suppliers 

that pose a significant risk to the 

program. Therefore, we believe that the 

provisions of this final rule are essential 

in expanding upon and strengthening 

the supplier standards in order to 

ensure that only legitimate suppliers are 

enrolled or maintain enrollment in the 

Medicare program. 

The RFA requires agencies to analyze 

options for regulatory relief for small 

businesses. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and 

government agencies. Most hospitals 

and most other providers and suppliers 

are small entities, either by nonprofit 

status or by having revenues of $7.0 to 

$34.5 million in any 1 year. (For details, 

see the Small Business Administration’s 

Web site at http://sba.gov/idc/groups/ 

public/documents/sba_homepage/ 

serv_sstd_tablepdf.pdf (refer to the 

620000 series. There are four categories 

of provider revenues listed, $7.0, $10.0, 

$13.5, and $34.5 million or less). 

Individuals and States are not included 

in the definition of a small entity. 

We are not preparing an analysis for 

the RFA because we are certifying that 

this rule will not have a significant 

economic impact on a substantial 

number of small entities. We have 

determined that the RFA is reasonable 

given that the provisions contained in 

this final rule are primarily procedural 

and do not require DMEPOS suppliers 

to incur additional operating costs. We 

also believe that the regulatory impact 

of this final rule is negligible and not 

calculable. We understand that there 

may be some additional concerns about 

costs associated with a minimum square 

footage requirement; however, we 

maintain that this final rule would not 

have an adverse impact on a significant 

number of small entities because we 

believe that these suppliers are 

operating on standard business practices 

and therefore are already in compliance 

with these standards. Additionally, we 

established a limited time exception for 

those entities that do not meet the 

minimum square footage requirement 

and have entered into a long-term lease 

on or before the publication date of this 

final rule. Since we believe that a 

significant number of small entities 

currently meet each of the revised or 

new standard, we do not have 

information available to calculate the 

economic impact of any individual or 

combination of proposals would have 

on small entities. This final rule would 

merely clarify, expand, and update our 

current policy in the DMEPOS supplier 

standards currently covered in § 424.57. 

Therefore, we anticipate a minimal 

economic impact, if any, on small 

entities. 

As of March 2008, there were 113,154 

individual DMEPOS suppliers. 

However, due to the affiliation of some 

DMEPOS suppliers with chains, there 

were only approximately 65,984 unique 

billing numbers. We believe that 

approximately 20 percent of the 

DMEPOS suppliers are located in rural 

areas. 

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 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined 

that this final rule will not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. We understand that a large 

number of DMEPOS suppliers fall into 

this category, however these provisions 

are procedural in nature and we expect 

that legitimate DMEPOS suppliers are 

already meeting these provisions. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule that may result in 

expenditure in any 1 year by State, 

local, or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million. That threshold is 

currently approximately $130 million. 

This rule does not mandate 

expenditures by State, local, or tribal 

governments, in the aggregate, or by the 

private sector of $130 million and 

therefore no analysis is required. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of E.O. 13132 are not 

applicable. 

We anticipate that this rule would 

codify certain procedural policies 

contained in the Program Integrity 

Manual (PIM) that DMEPOS suppliers 

already are supposed to adhere to, and 

that legitimate DMEPOS suppliers 

should already be meeting. By 

establishing the standards in this rule, 

we are establishing our authority to 

deny or revoke the Medicare billing 

privileges of DMEPOS suppliers that 

have failed to comply with one or more 

of these supplier standards. 

We have considered alternatives to all 

of the provisions; however, only one of 

the provisions considered lends itself to 

other options. Initially, we considered 

establishing a 40 hour requirement for a 

DMEPOS supplier’s hours of operation 

since most business are open to the 

public for a minimum of 40 hours each 

week. 

To reduce the burden associated with 

this provision, but also to establish a 

minimum requirement for the hours of 

operation, we relaxed the initial 40-hour 

requirement to 30 hours per week 

because we believe that this is the 

minimum amount of time that a 

DMEPOS supplier is required to be open 

and legitimately operate as a business. 

We did not consider the alternative of 

not proceeding with the proposed 

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52648 Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules and Regulations 

provisions because we believe that they 

are necessary to ensure that only 

legitimate DMEPOS suppliers are 

enrolling and maintaining enrollment in 

the Medicare program. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professionals, 

Medicare, Reporting and recordkeeping 

requirements. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

■ 1. The authority citation for part 424 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

Subpart D—To Whom Payment Is 

Ordinarily Made 

■ 2. Section 424.57 is amended by— 

■ A. Adding in paragraph (a) the 

definition of ‘‘direct solicitation’’ in 

alphabetical order. 

■ B. In paragraph (a) revising the 

definition of ‘‘final adverse action’’. 

■ C. Revising the introductory text of 

paragraph (c). 

■ D. Revising paragraphs (c)(1), (c)(7) 

through (c)(9), (c)(11), and (e). 

■ E. Adding new paragraphs (c)(27) 

through (c)(30). 

The additions and revisions read as 

follows: 

§ 424.57 Special payment rules for items 

furnished by DMEPOS suppliers and 

issuance of DMEPOS supplier billing 

privileges. 

(a) * * * 

Direct solicitation means direct 

contact, which includes, but is not 

limited to, telephone, computer, e-mail, 

instant messaging or in-person contact, 

by a DMEPOS supplier or its agents to 

a Medicare beneficiary without his or 

her consent for the purpose of marketing 

the DMEPOS supplier’s health care 

products or services or both. 

* * * * * 

Final adverse action means one or 

more of the following actions: 

(i) A Medicare-imposed revocation of 

any Medicare billing privileges. 

(ii) Suspension or revocation of a 

license to provide health care by any 

State licensing authority. 

(iii) Revocation for failure to meet 

DMEPOS quality standards. 

(iv) A conviction of a Federal or State 

felony offense (as defined in 

§ 424.535(a)(3)(i) within the last 10 

years preceding enrollment, 

revalidation, or re-enrollment. 

(v) An exclusion or debarment from 

participation in a Federal or State health 

care program. 

* * * * * 

(c) Application certification 

standards. The supplier must meet and 

must certify in its application for billing 

privileges that it meets and will 

continue to meet the following 

standards: 

(1) Operates its business and 

furnishes Medicare-covered items in 

compliance with the following 

applicable laws: 

(i) Federal regulatory requirements 

that specify requirements for the 

provision of DMEPOS and ensure 

accessibility for the disabled. 

(ii) State licensure and regulatory 

requirements. If a State requires 

licensure to furnish certain items or 

services, a DMEPOS supplier— 

(A) Must be licensed to provide the 

item or service; 

(B) Must employ the licensed 

professional on a full-time or part-time 

basis, except for DMEPOS suppliers 

who are— 

(1) Awarded competitive bid contracts 

using subcontractors to meet this 

standard; or 

(2) Allowed by the State to contract 

licensed services as described in 

paragraph (c)(1)(ii)(C) of this section. 

(C) Must not contract with an 

individual or other entity to provide the 

licensed services, unless allowed by the 

State where the licensed services are 

being performed; and 

(iii) Local zoning requirements. 

* * * * * 

(7) Maintains a physical facility on an 

appropriate site. An appropriate site 

must meet all of the following: 

(i) Must meet the following criteria: 

(A) Except for State-licensed orthotic 

and prosthetic personnel providing 

custom fabricated orthotics or 

prosthetics in private practice, 

maintains a practice location that is at 

least 200 square feet beginning— 

(1) September 27, 2010 for a 

prospective DMEPOS supplier; 

(2) The first day after termination of 

an expiring lease for an existing 

DMEPOS supplier with a lease that 

expires on or after September 27, 2010 

and before September 27, 2013; or 

(3) September 27, 2013, for an existing 

DMEPOS supplier with a lease that 

expires on or after September 27, 2013. 

(B) Is in a location that is accessible 

to the public, Medicare beneficiaries, 

CMS, NSC, and its agents. (The location 

must not be in a gated community or 

other area where access is restricted.) 

(C) Is accessible and staffed during 

posted hours of operation. 

(D) Maintains a permanent visible 

sign in plain view and posts hours of 

operation. If the supplier’s place of 

business is located within a building 

complex, the sign must be visible at the 

main entrance of the building or the 

hours can be posted at the entrance of 

the supplier. 

(E) Except for business records that 

are stored in centralized location as 

described in paragraph (c)(7)(ii) of this 

section, is in a location that contains 

space for storing business records 

(including the supplier’s delivery, 

maintenance, and beneficiary 

communication records). 

(F) Is in a location that contains space 

for retaining the necessary ordering and 

referring documentation specified in 

§ 424.516(f). 

(ii) May be the centralized location for 

all of the business records and the 

ordering and referring documentation of 

a multisite supplier. 

(iii) May be a ‘‘closed door’’ business, 

such as a pharmacy or supplier 

providing services only to beneficiaries 

residing in a nursing home, that 

complies with all applicable Federal, 

State, and local laws and regulations. 

‘‘Closed door’’ businesses must comply 

with all the requirements in this 

paragraph. 

(8) Permits CMS, the NSC, or agents 

of CMS or the NSC to conduct on-site 

inspections to ascertain supplier 

compliance with the requirements of 

this section. 

(9) Maintains a primary business 

telephone that is operating at the 

appropriate site listed under the name 

of the business locally or toll-free for 

beneficiaries. 

(i) Cellular phones, beepers, or pagers 

must not be used as the primary 

business telephone. 

(ii) Calls must not be exclusively 

forwarded from the primary business 

telephone listed under the name of the 

business to a cellular phone, beeper, or 

pager. 

(iii) Answering machines, answering 

services, facsimile machines or 

combination of these options must not 

be used exclusively as the primary 

business telephone during posted 

operating hours. 

* * * * * 

(11) Agree not to make a direct 

solicitation (as defined in § 424.57(a)) of 

a Medicare beneficiary unless one or 

more of the following applies: 

(i) The individual has given written 

permission to the supplier or the 

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ordering physician or non-physician 

practitioner to contact them concerning 

the furnishing of a Medicare-covered 

item that is to be rented or purchased. 

(ii) The supplier has furnished a 

Medicare-covered item to the individual 

and the supplier is contacting the 

individual to coordinate the delivery of 

the item. 

(iii) If the contact concerns the 

furnishing of a Medicare-covered item 

other than a covered item already 

furnished to the individual, the supplier 

has furnished at least one covered item 

to the individual during the 15-month 

period preceding the date on which the 

supplier makes such contact. 

* * * * * 

(27) Must obtain oxygen from a Statelicensed oxygen supplier (applicable 

only to those suppliers in States that 

require oxygen licensure.) 

(28) Is required to maintain ordering 

and referring documentation consistent 

with the provisions found in 

§ 424.516(f) 

(29)(i) Except as specified in 

paragraph (c)(29)(ii) of this section, is 

prohibited from sharing a practice 

location with any other Medicare 

supplier or provider. 

(ii) The prohibition specified in 

paragraph (c)(29)(i) of this section is not 

applicable at a practice location that 

meets one of the following: 

(A) Where a physician whose services 

are defined in section 1848(j)(3) of the 

Act or a nonphysician practitioner, as 

described in section 1842(b)(18)(C) of 

the Act, furnishes items to his or her 

own patient as part of his or her 

professional service. 

(B) Where a physical or occupational 

therapist whose services are defined in 

sections 1861(p) and 1861(g) of the Act, 

furnishes items to his or her own patient 

as part of his or her professional service. 

(C) Where a DMEPOS supplier is colocated with and owned by an enrolled 

Medicare provider (as described in 

§ 489.2(b) of this chapter). The DMEPOS 

supplier— 

(1) Must operate as a separate unit; 

and 

(2) Meet all other DMEPOS supplier 

standards. 

(30)(i) Except as specified in 

paragraph (c)(30)(ii) of this section, is 

open to the public a minimum of 30 

hours per week. 

(ii) The provision of paragraph 

(c)(30)(i) of this section is not applicable 

at a practice location where a— 

(A) Physician whose services are 

defined in section 1848(j)(3) of the Act 

furnishes items to his or her own 

patient(s) as part of his or her 

professional service; 

(B) Licensed non-physician 

practitioners whose services are defined 

in sections 1861(p) and 1861(g) of the 

Act furnishes items to his or her own 

patient(s) as part of his or her 

professional service; or 

(C) DMEPOS supplier is working with 

custom made orthotics and prosthetics. 

* * * * * 

(e) Failure to meet standards—(1) 

Revocation. CMS revokes a supplier’s 

billing privileges if it is found not to 

meet the standards in paragraphs (b) 

and (c) of this section. Except as 

otherwise provided in this section, the 

revocation is effective 30 days after the 

entity is sent notice of the revocation, as 

specified in § 405.874 of this 

subchapter. 

(2) Overpayments associated with 

final adverse actions. CMS or a CMS 

contractor may reopen (in accordance 

with § 405.980 of this chapter) all 

Medicare claims paid on or after the 

date of a final adverse action (as defined 

in paragraph (a) of this section) in order 

to establish an overpayment 

determination. 

* * * * * 

Authority: (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program). 

Dated: August 19, 2010. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: August 24, 2010. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2010–21354 Filed 8–26–10; 8:45 am] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 73 

[DA 10–1521; MB Docket No. 10–22, RM– 

11591]. 

Radio Broadcasting Services; 

DeBeque, Colorado 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule. 

SUMMARY: The Audio Division grants a 

Petition for Rule Making issued at the 

request of Cochise Media Licenses, LLC, 

requesting the substitution of Channel 

247C3 for vacant Channel 275C3 at 

DeBeque to accommodate the hybrid 

application, proposing the reallotment 

of Channel 274C3, Crawford, Colorado, 

to Channel 275C3 at Battlement Mesa, 

Colorado, as its first local service. A 

staff engineering analysis indicates that 

Channel 247C3 can be allotted to 

DeBeque consistent with the minimum 

distance separation requirements of the 

Rules with a site restriction 13.8 

kilometers (8.5 miles) northeast of the 

community. The reference coordinates 

are 39–24–45 NL and 108–05–26 WL. 

DATES: Effective September 30, 2010. 

ADDRESSES: Secretary, Federal 

Communications Commission, 445 

Twelfth Street, SW., Washington, DC. 

20554. 

FOR FURTHER INFORMATION CONTACT: 

Rolanda F. Smith, Media Bureau, (202) 

418–2180. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Report 

and Order, MB Docket No. 10–22, 

adopted August 12, 2010, and released 

August 16, 2010. The Notice of 

Proposed Rule Making proposed the 

substitution of Channel 247C3 for 

vacant Channel 275C3 at DeBeque, 

Colorado. See 75 FR 4036, published 

January 26, 2010. The full text of this 

Commission decision is available for 

inspection and copying during normal 

business hours in the Commission’s 

Reference Information Center, 445 

Twelfth Street, SW., Washington, DC 

20554. The complete text of this 

decision may also be purchased from 

the Commission’s duplicating 

contractor, Best Copy and Printing, Inc., 

445 12th Street, SW., Room CY–B402, 

Washington, DC, 20554, telephone 1– 

800–378–3160 or http:// 

www.BCPIWEB.com. This document 

does not contain proposed information 

collection requirements subject to the 

Paperwork Reduction Act of 1995, 

Public Law 104–13. In addition, 

therefore, it does not contain any 

proposed information collection burden 

‘‘for small business concerns with fewer 

than 25 employees,’’ pursuant to the 

Small Business Paperwork Relief Act of 

2002, Public Law 107–198, see 44 U.S.C. 

3506(c)(4). The Commission will send a 

copy of this Report and Order in a 

report to be sent to Congress and the 

Government Accountability Office 

pursuant to the Congressional Review 

Act, see 5 U.S.C. 801(a)(1)(A). 

List of Subjects in 47 CFR Part 73 

Radio, Radio broadcasting. 

■ As stated in the preamble, the Federal 

Communications Commission amends 

47 CFR part 73 as follows: 

PART 73—RADIO BROADCAST 

SERVICES 

■ 1. The authority citation for part 73 

continues to read as follows: 

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