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[Federal Register Volume 79, Number 226 (Monday, November 24, 2014)]
[Rules and Regulations]
[Pages 69772-69775]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-27737]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 424

[CMS-6006-F3]

Medicare Program; Surety Bond Requirement for Suppliers of 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS); Technical Amendment

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

ACTION: Final rule; technical amendment.

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SUMMARY: This technical amendment corrects codification, terminology, 
and technical errors in the requirements for suppliers of durable 
medical equipment, prosthetics, orthotics, and supplies (DMEPOS) at 42 
CFR 424.57.

DATES: This technical amendment is effective November 24, 2014.

FOR FURTHER INFORMATION CONTACT: Frank Whelan, (410) 786-1302.

SUPPLEMENTARY INFORMATION:

I. Background

    For purposes of the durable medical equipment, prosthetics, 
orthotics and supplies (DMEPOS) supplier standards, the term ``DMEPOS 
supplier'' is defined in Sec.  424.57(a) as an entity or individual, 
including a physician or Part A provider, that sells or rents Part B 
covered DMEPOS items to Medicare beneficiaries and that meet the DMEPOS 
supplier standards. 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.
    The term durable medical equipment is defined at section 1861(n) of 
the Act. Prosthetic devices are defined in section 1861(s)(8) 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.''

[[Page 69773]]

II. Summary of Technical Errors in the Regulations Text at Sec.  424.57

    In the January 2, 2009 Federal Register (74 FR 166), we published a 
final rule that implemented section 1834(a)(16) of the Act by requiring 
certain Medicare DMEPOS suppliers to furnish CMS with a surety bond. In 
codifying the regulatory changes included the January 2, 2009 final 
rule, the Office of the Federal Register (OFR) found an inaccurate 
amendatory instruction for the amendments to Sec.  424.57(d) and (e). 
OFR therefore, added the regulatory text via an editorial note in Code 
of Federal Regulations (CFR). Subsequently, we published a correcting 
amendment in the March 27, 2009 Federal Register (74 FR 13345) to 
correct the amendatory instruction errors made in the January 2, 2009 
final rule. The correcting amendment redesignated Sec.  424.57(d) and 
(e) as Sec.  424.57(e) and (g). However, the provisions of the 
correcting amendment were inadvertently omitted in OFR's revisions to 
the CFR; therefore, the editorial note was retained.
    In the August 27, 2010 Federal Register (75 FR 52629), we published 
a final rule that clarified, expanded, and added to the existing 
enrollment requirements that DMEPOS suppliers must meet to establish 
and maintain billing privileges in the Medicare program. In the August 
27, 2010 final rule, we included an amendment for Sec.  424.57(e). This 
amendment revised the ``failure to meet standards'' provision which was 
redesignated as paragraph (e) in the March 27, 2009 correcting 
amendment. The revisions to Sec.  424.57(e) specified the revocation 
and overpayment requirements associated with the failure of a supplier 
to meet the standards in Sec.  424.57(b) and (c). (For more detailed 
information, see the August 27, 2010 final rule (75 FR 52649).) 
However, the amendment to paragraph (e) was inadvertently omitted from 
OFR's revisions to Sec.  424.57 in the CFR.
    In the February 2, 2011 Federal Register (76 FR 5862), we published 
a final rule with comment period that, among other things, stated our 
policy for revalidation of billing privileges. This final rule included 
an amendment to the provision regarding revalidation of billing 
privileges which is currently printed in the CFR at Sec.  424.57(e). 
The revisions were incorporated for the correct provision. However, 
Sec.  424.57(e) should have been redesignated as Sec.  424.57(g) in 
accordance with the provision included in our March 27, 2009 correcting 
amendment.
    As a result of the codification and technical errors for Sec.  
424.57(d) and (e) specified previously, the regulations text of this 
technical amendment sets forth the following:
     The surety bond requirements specified in the January 2, 
2009 final rule as Sec.  424.57(d).
     The ``failure to meet standards'' requirement specified in 
the August 27, 2010 final rule as Sec.  424.57(e).
     The ``revalidation of billing privileges'' language 
specified in the February 2, 2011 final rule as Sec.  424.57(g).
    In our review of Sec.  424.57(d) and (e), we also determined that 
there were other terminology and technical errors that needed to be 
addressed. Therefore, we are including the following additional changes 
in the regulations text of this technical amendment:
     Removal of the term ``National Supplier Clearinghouse 
(NSC)'' from the definitions in Sec.  424.57(a). We are also replacing 
term ``NSC'' with ``CMS contractor'' in Sec.  424.57(d). Removing the 
name of the contractor and using the term ``CMS contractor'' more 
accurately reflects the possibility that different CMS contractors may 
handle these issues and eliminates the need to make regulatory text 
changes when we make contractual changes.
     Changing the terms ``supplier'' and ``DME supplier'' to 
``DMEPOS supplier.'' We note that throughout Sec.  424.57(d), the terms 
``supplier,'' ``DME supplier,'' and ``DMEPOS supplier'' are used 
interchangeably, though they have the same meaning for purposes of the 
applicability of Sec.  424.57(d). However, we are making the change to 
ensure consistent terminology and accuracy. We believe that this 
terminology change would clarify that Sec.  424.57(d) does not apply to 
all Medicare suppliers but does apply to all Medicare DMEPOS suppliers.
     Updating Office of Management and Budget (OMB) number for 
the Medicare enrollment application form referenced in Sec.  
424.57(d)(2)(i) from OMB number 0938-0685 to OMB control number 0938-
1056. The OMB control number is out of date and at our request given a 
separate new control number.
     Revising the cross-references in Sec.  424.515 
(introductory text and paragraph (d)(3).

III. Waiver of Proposed Rulemaking and Delay in Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide a period for public comment before the 
provisions of a rule take effect in accordance with section 553(b) of 
the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). However, we 
can waive this notice and comment procedure if the Secretary finds, for 
good cause, that the notice and comment process is impracticable, 
unnecessary, or contrary to the public interest, and incorporates a 
statement of the finding and the reasons therefore in the notice.
    Section 553(d) of the APA ordinarily requires a 30-day delay in 
effective date of final rules after the date of their publication in 
the Federal Register. This 30-day delay in effective date can be 
waived, however, if an agency finds for good cause that the delay is 
impracticable, unnecessary, or contrary to the public interest, and the 
agency incorporates a statement of the findings and its reasons in the 
rule issued.
    This action merely corrects codification, terminology, and 
technical errors in 42 CFR 424.57. We are correcting regulatory 
paragraph designations, an omission, and a technical correction to 
previously published regulatory text as well as making terminology and 
cross-references changes. These revisions in no way change the policies 
or substantive regulatory text finalized in the January 2, 2009, August 
27, 2010, and February 2, 2011 final rules. Since this technical 
amendment corrects codification and other technical errors and 
incorporates regulatory text that was inadvertently omitted, we find 
that both public comment and a delay in effective date of this 
technical amendment is unnecessary. Therefore, we find there is good 
cause to waive notice and comment procedures and the 30-day delay in 
effective date for this action.

List of Subjects in 42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR part 424 as set forth below:

PART 424--CONDITIONS FOR MEDICARE PAYMENT

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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).

0
2. Amend Sec.  424.57 by--
0
A. In paragraph (a) by removing the definition of ``National Supplier 
Clearinghouse'' (NSC).
0
B. Revising paragraphs (d) and (e).
0
C. Adding paragraph (g).
    The revisions and addition read as follows:

[[Page 69774]]

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

* * * * *
    (d) Surety bonds requirements--(1) Effective date of surety bond 
requirements--(i) DMEPOS suppliers seeking enrollment or with a change 
in ownership. Except as provided in paragraph (d)(15) of this section, 
beginning May 4, 2009, DMEPOS suppliers seeking to enroll or to change 
the ownership of a supplier of DMEPOS must meet the requirements of 
paragraph (d) of this section for each assigned NPI for which the 
DMEPOS supplier is seeking to obtain Medicare billing privileges.
    (ii) Existing DMEPOS suppliers. Except as provided in paragraph 
(d)(15) of this section, beginning October 2, 2009, each Medicare-
enrolled DMEPOS supplier must meet the requirements of paragraph (d) of 
this section for each assigned NPI to which Medicare has granted 
billing privileges.
    (2) Minimum requirements for a DMEPOS supplier. (i) A DMEPOS 
supplier enrolling in the Medicare program, making a change in 
ownership, or responding to a revalidation or reenrollment request must 
submit to the CMS contractor a surety bond from an authorized surety of 
$50,000 and, if required by the CMS contractor, an elevated bond amount 
as described in paragraph (d)(3) of this section with its paper or 
electronic Medicare enrollment application (CMS-855S, OMB number 0938-
1056). The term of the initial surety bond must be effective on the 
date that the application is submitted to the CMS contractor.
    (ii) A supplier that seeks to become an enrolled DMEPOS supplier 
through a purchase or transfer of assets or ownership interest must 
submit to the CMS contractor surety bond from an authorized surety of 
$50,000 and, if required by the CMS contractor, an elevated bond amount 
as described in paragraph (d)(3) of this section that is effective from 
the date of the purchase or transfer in order to exercise billing 
privileges as of that date. If the bond is effective at a later date, 
the effective date of the new DMEPOS supplier billing privileges is the 
effective date of the surety bond as validated by the CMS contractor.
    (iii) A DMEPOS supplier enrolling a new practice location must 
submit to the CMS contractor a new surety bond from an authorized 
surety or an amendment or rider to the existing bond, showing that the 
new practice location is covered by an additional base surety bond of 
$50,000 or, as necessary, an elevated surety bond amount as described 
in paragraph (d)(3) of this section.
    (3) Elevated surety bond amounts. (i) If required, a DMEPOS 
supplier must obtain and maintain a base surety bond in the amount of 
$50,000 as specified in paragraph (d)(2) of this section and an 
elevated surety bond in the amount prescribed by the CMS contractor as 
described in paragraph (d)(3)(ii) of this section.
    (ii) The CMS contractor prescribes an elevated surety bond amount 
of $50,000 per occurrence of an adverse legal action within the 10 
years preceding enrollment, revalidation, or reenrollment, as defined 
in paragraph (a) of this section.
    (4) Type and terms of the surety bond--(i) Type of bond. A DMEPOS 
supplier must submit a bond that is continuous.
    (ii) Minimum requirements of liability coverage. (A) The terms of 
the bond submitted by a DMEPOS supplier for the purpose of complying 
with this section must meet the minimum requirements of liability 
coverage ($50,000) and surety and DMEPOS supplier responsibility as set 
forth in this section.
    (B) CMS requires a DMEPOS supplier to submit a bond that on its 
face reflects the requirements of this section. CMS revokes or denies a 
DMEPOS supplier's billing privileges based upon the submission of a 
bond that does not reflect the requirements of paragraph (d) of this 
section.
    (5) Specific surety bond requirements. (i) The bond must guarantee 
that the surety will, within 30 days of receiving written notice from 
CMS containing sufficient evidence to establish the surety's liability 
under the bond of unpaid claims, CMPs, or assessments, pay CMS a total 
of up to the full penal amount of the bond in the following amounts:
    (A) The amount of any unpaid claim, plus accrued interest, for 
which the DMEPOS supplier is responsible.
    (B) The amount of any unpaid claims, CMPs, or assessments imposed 
by CMS or OIG on the DMEPOS supplier, plus accrued interest.
    (ii) The bond must provide the following: The surety is liable for 
unpaid claims, CMPs, or assessments that occur during the term of the 
bond.
    (iii) If the DMEPOS supplier fails to furnish a bond meeting the 
requirements of paragraph (d) of this section, fails to submit a rider 
when required, or if the DMEPOS supplier's billing privileges are 
revoked, the last bond or rider submitted by the DMEPOS supplier 
remains in effect until the last day of the surety bond coverage period 
and the surety remains liable for unpaid claims, CMPs, or assessments 
that--
    (A) CMS or the OIG imposes or asserts against the DMEPOS supplier 
based on overpayments or other events that took place during the term 
of the bond or rider; and
    (B) Were imposed or assessed by CMS or the OIG during the 2 years 
following the date that the DMEPOS supplier failed to submit a bond or 
required rider, or the date the DMEPOS supplier's billing privileges 
were terminated, whichever is later.
    (6) Cancellation of a bond and lapse of surety bond coverage. (i) A 
DMEPOS supplier may cancel its surety bond and must provide written 
notice at least 30 days before the effective date of the cancellation 
to the CMS contractor and the surety.
    (ii) Cancellation of a surety bond is grounds for revocation of the 
DMEPOS supplier's Medicare billing privileges unless the DMEPOS 
supplier provides a new bond before the effective date of the 
cancellation. The liability of the surety continues through the 
termination effective date.
    (iii) If CMS receives notification of a lapse in bond coverage from 
the surety, the DMEPOS supplier's billing privileges are revoked. 
During this lapse, Medicare does not pay for items or services 
furnished during the gap in coverage, and the DMEPOS supplier is held 
liable for the items or services (that is, the DMEPOS supplier would 
not be permitted to charge the beneficiary for the items or services).
    (iv) The surety must immediately notify the CMS contractor if there 
is a lapse in the surety's coverage of the DMEPOS supplier's coverage.
    (7) Actions under the surety bond. The bond must provide that 
actions under the bond may be brought by CMS or by CMS contractors.
    (8) Required surety information on the surety bond. The bond must 
provide the surety's name, street address or post office box number, 
city, state, and zip code.
    (9) Change of surety. A DMEPOS supplier that obtains a replacement 
surety bond from a different surety to cover the remaining term of a 
previously obtained bond must submit the new surety bond to the CMS 
contractor at least 30 days prior to the expiration of the previous 
surety bond. There must be no gap in the coverage of the surety bond 
periods. If a gap in coverage exists, the CMS contractor revokes the 
DMEPOS supplier's billing privileges and does not pay for any items or 
services furnished by the DMEPOS supplier during the period for which 
no

[[Page 69775]]

bond coverage was available. If a DMEPOS supplier changes its surety 
during the term of the bond, the new surety is responsible for any 
overpayments, CMPs, or assessments incurred by the DMEPOS supplier 
beginning with the effective date of the new surety bond. The previous 
surety is responsible for any overpayments, CMPs, or assessments that 
occurred up to the date of the change of surety.
    (10) Parties to the surety bond. The surety bond must name the 
DMEPOS supplier as Principal, CMS as Obligee, and the surety (and its 
heirs, executors, administrators, successors and assignees, jointly and 
severally) as surety.
    (11) Effect of DMEPOS supplier's failure to obtain, maintain, and 
timely file a surety bond.
    (i) CMS revokes the DMEPOS supplier's billing privileges if an 
enrolled DMEPOS supplier fails to obtain, file timely, or maintain a 
surety bond as specified in this subpart and CMS instructions. 
Notwithstanding paragraph (e) of this section, the revocation is 
effective the date the bond lapsed and any payments for items furnished 
on or after that date must be repaid to CMS by the DMEPOS supplier.
    (ii) CMS denies billing privileges to a DMEPOS supplier if the 
supplier seeking to become an enrolled DMEPOS supplier fails to obtain 
and file timely a surety bond as specified with this subpart and CMS 
instructions.
    (12) Evidence of DMEPOS supplier's compliance. CMS may at any time 
require a DMEPOS supplier to show compliance with the requirements of 
paragraph (d) of this section.
    (13) Effect of subsequent DMEPOS supplier payment. If a surety has 
paid an amount to CMS on the basis of liability incurred under a bond 
and CMS subsequently collects from the DMEPOS supplier, in whole or in 
part, on the unpaid claim, CMPs, or assessment that was the basis for 
the surety's liability, CMS reimburses the surety the amount that it 
collected from the DMEPOS supplier, up to the amount paid by the surety 
to CMS, provided the surety has no other liability to CMS under the 
bond.
    (14) Effect of review reversing determination. If a surety has paid 
CMS on the basis of liability incurred under a surety bond and to the 
extent the DMEPOS supplier that obtained the bond is subsequently 
successful in appealing the determination that was the basis of the 
unpaid claim, CMP, or assessment that caused the DMEPOS supplier to pay 
CMS under the bond, CMS refunds the DMEPOS supplier the amount the 
DMEPOS supplier paid to CMS to the extent that the amount relates to 
the matter that was successfully appealed, provided all review, 
including judicial review, has been completed on the matter.
    (15) Exception to the surety bond requirement--(i) Qualifying 
entities and requirements. (A) Government-operated DMEPOS suppliers are 
provided an exception to the surety bond requirement if the DMEPOS 
supplier has provided CMS with a comparable surety bond under State 
law.
    (B) State-licensed orthotic and prosthetic personnel in private 
practice making custom made orthotics and prosthetics are provided an 
exception to the surety bond requirement if--
    (1) The business is solely-owned and operated by the orthotic and 
prosthetic personnel, and
    (2) The business is only billing for orthotic, prosthetics, and 
supplies.
    (C) Physicians and nonphysician practitioners as defined in section 
1842(b)(18) of the Act are provided an exception to the surety bond 
requirement when items are furnished only to the physician or 
nonphysician practitioner's own patients as part of his or her 
physician service.
    (D) Physical and occupational therapists in private practice are 
provided an exception to the surety bond requirement if--
    (1) The business is solely-owned and operated by the physical or 
occupational therapist;
    (2) The items are furnished only to the physical or occupational 
therapist's own patients as part of his or her professional service; 
and
    (3) The business is only billing for orthotics, prosthetics, and 
supplies.
    (ii) Loss of a DMEPOS supplier exception. A DMEPOS supplier that no 
longer qualifies for an exception as described in paragraph (d)(15)(i) 
of this section must submit a surety bond to the CMS contractor in 
accordance with requirements of paragraph (d) of this section within 60 
days after it knows or has reason to know that it no longer meets the 
criteria for an exception.
    (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 Sec.  405.874 of this 
subchapter.
    (2) Overpayments associated with final adverse actions. CMS or a 
CMS contractor may reopen (in accordance with Sec.  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.
* * * * *
    (g) Revalidation of billing privileges. A supplier must revalidate 
its application for billing privileges every 3 years after the billing 
privileges are first granted. (Each supplier must complete a new 
application for billing privileges 3 years after its last 
revalidation.)

Sec.  424.515  [Amended]

0
3. In Sec.  424.515, the introductory text and in paragraph (d)(3), the 
cross-reference ``Sec.  424.57(e)'' is removed and the cross-reference 
``Sec.  424.57(g)'' is added in its place.

    Dated: November 14, 2014.
C'Reda Weeden,
Executive Secretary to the Department, Department of Health and Human 
Services.
[FR Doc. 2014-27737 Filed 11-21-14; 8:45 am]
BILLING CODE 4120-01-P
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