[Federal Register Volume 75, Number 166 (Friday, August 27, 2010)]
[Rules and Regulations]
[Pages 52629-52649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21354]



[[Page 52629]]

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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.

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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 Sec.  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 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 that meet the DMEPOS 
supplier standards. This final rule applies to all DMEPOS suppliers and 
amends the DMEPOS supplier standards set forth at Sec.  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 
Sec.  414.202 as equipment furnished by a supplier or a HHA that--
    <bullet> Can withstand repeated use;
    <bullet> Is primarily and customarily used to serve a medical 
purpose;
    <bullet> Generally is not useful to an individual in the absence of 
an illness or injury; and
    <bullet> 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):
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> Oral drugs prescribed for use as an anticancer therapeutic 
agent as specified in section 1861(s)(2)(Q) of the Act.
    <bullet> Self-administered erythropoietin as described in section 
1861(s)(2)(O) of the Act.

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    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:
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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).
    <bullet> 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.
    <bullet> Section 302(a)(1) of MMA amended the Act to require the 
Secretary to develop quality standards for DMEPOS suppliers.
    <bullet> 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 Sec.  424.57.
    In Sec.  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 Sec.  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

[[Page 52631]]

positioned so that it is visible to the public, including customers 
using wheelchairs.
    In Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 
Medicare-covered 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 Sec.  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 Sec.  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 Sec.  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 Sec.  424.57. Since we are aware that physicians 
and other licensed nonphysician practitioners

[[Page 52632]]

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 Sec.  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 custom-made 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 Sec.  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 Sec.  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 Sec.  
405.350 et seq. We believe that Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 full-time employees.
    Response: We agree and have revised Sec.  424.57(c)(1)(ii) to 
clarify that the licensed professionals must be part-time or full-time 
employees.
    Comment: A commenter stated that Sec.  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.

[[Page 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 Sec.  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 third-party 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 co-
employment arrangement with a Professional Employment Organization to 
be compliant or noncompliant with this proposed rule.
    Response: We would consider a co-employment 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 Sec.  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

[[Page 52634]]

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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  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 full-time 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

[[Page 52635]]

applicable State licensing requirements for the services that it 
furnishes.
2. Physical Facility--Appropriate Site
    In Sec.  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 Sec.  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 Sec.  
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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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,

[[Page 52636]]

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 Sec.  424.57(c)(21) through Sec.  424.57(c)(25) 
and quality standards are independent of the supplier standards in 
Sec.  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 Sec.  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 Sec.  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

[[Page 52637]]

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 Sec.  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 in-person 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 Sec.  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 Sec.  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 Sec.  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

[[Page 52638]]

standards which only can be verified by visual inspection.
4. Business Telephone Operations
    In Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  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 
Sec.  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 Sec.  
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

[[Page 52639]]

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 Sec.  
424.57(c)(11) states that DMEPOS suppliers must agree not to directly 
solicit patients, except as permitted under the current provisions in 
Sec.  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 Sec.  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 Sec.  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 Sec.  424.57(a). These types of direct solicitations 
are one on

[[Page 52640]]

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 Sec.  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 Sec.  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 Sec.  424.57(c)(27) does not preclude suppliers from 
subcontracting the pick-up 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 oxygen-related 
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 oxygen-related 
products.
    Comment: A commenter stated that there is confusion regarding who 
needs to be licensed for specific services and believes the provisions 
in Sec.  424.57(c)(27) needs greater specificity and detail.
    Response: We appreciate this comment and have revised Sec.  
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 Sec.  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 Sec.  424.57(c)(27) into the revised supplier standard in 
Sec.  424.57(c)(1).
    Response: We disagree with this commenter and have adopted a new 
supplier standard in Sec.  424.57(c)(27).
2. Ordering and Referring Documentation
    In Sec.  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 Sec.  424.516(f). Moreover, we believe that this retention 
policy is consistent with the policy established at Sec.  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 Sec.  424.57(c)(28), we establish that suppliers are 
required to maintain ordering and referring documentation consistent 
with the provisions found in Sec.  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

[[Page 52641]]

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 Sec.  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 
Sec.  424.57(c)(28) is consistent with the section 6406(a) of ACA 
requirement.
3. Prohibition on Sharing of a Practice Location
    In Sec.  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 
Sec.  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 Sec.  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

[[Page 52642]]

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 Sec.  
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 State-licensed 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 Sec.  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 Sec.  424.57(c)(29). In Sec.  
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 Sec.  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 Sec.  
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 Sec.  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.

[[Page 52643]]

    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 Sec.  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 custom-made 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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  
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

[[Page 52644]]

certain circumstances to the supplier standard of the 30 hours minimum 
requirement.
    Comment: One commenter suggested the language describing the 
proposed change at Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  405.350 et seq. The underlying basis to report ``adverse legal 
actions'' to the NSC are found in Sec.  424.530 and Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  405.900 through Sec.  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

[[Page 52645]]

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 Sec.  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 Sec.  
424.57(c)(26) was reserved for the proposed DME surety bond standard.
    Response: We note that Sec.  424.57(c)(26) was reserved for the 
proposed DME surety bond standard. We also note that the proposed 
provision at Sec.  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:
    <bullet> In Sec.  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 Sec.  
424.58'' to the end of the paragraph; and (3) revising paragraph (iv) 
by removing the word ``or'' from the end of the paragraph.
    <bullet> In Sec.  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.
    <bullet> In Sec.  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.
    <bullet> In Sec.  424.57(c)(9), we made technical and clarifying 
changes.
    <bullet> In Sec.  424.57(c)(10), we are not finalizing this 
proposed provision in this final regulation.
    <bullet> In Sec.  424.57(c)(11), we added a definition of direct 
solicitation in Sec.  424.57(a).
    <bullet> In Sec.  424.57(c)(12), we are not finalizing this 
proposed provision in this final rule.
    <bullet> In Sec.  424.57(c)(27), we are adopting this provision as 
proposed.
    <bullet> In Sec.  424.57(c)(28), we adopting the provision 
established in Sec.  424.516(f).
    <bullet> In Sec.  424.57(c)(29), we added an exception to our 
requirements on the prohibition of sharing a practice location in 
paragraph (c)(29)(ii).
    <bullet> In Sec.  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.
    <bullet> In Sec.  424.57(c)(31), we are not finalizing this 
proposed provision in this final rule.
    <bullet> In Sec.  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.
    <bullet> In Sec.  424.57(e) (which was proposed as Sec.  
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 Sec.  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:
    <bullet> Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
    <bullet> The accuracy of the agency's estimate of the information 
collection burden;
    <bullet> The quality, utility, and clarity of the information to be 
collected; and
    <bullet> 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 Sec.  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

[[Page 52646]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 52647]]

and increase the number of on-site visits to ensure that DMEPOS 
suppliers are in compliance with the provisions in Sec.  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 Sec.  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

[[Page 52648]]

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.


0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 424--CONDITIONS FOR MEDICARE PAYMENT

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

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

Subpart D--To Whom Payment Is Ordinarily Made

0
2. Section 424.57 is amended by--
0
A. Adding in paragraph (a) the definition of ``direct solicitation'' in 
alphabetical order.
0
B. In paragraph (a) revising the definition of ``final adverse 
action''.
0
C. Revising the introductory text of paragraph (c).
0
D. Revising paragraphs (c)(1), (c)(7) through (c)(9), (c)(11), and (e).
0
E. Adding new paragraphs (c)(27) through (c)(30).
    The additions and revisions read as follows:


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

    (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 Sec.  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 Sec.  
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 Sec.  
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

[[Page 52649]]

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 State-licensed 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 Sec.  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 co-located with and owned by an 
enrolled Medicare provider (as described in Sec.  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 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.
* * * * *

    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