Source: https://www.federalregister.gov/articles/2014/05/28/2014-12245/medicare-program-prior-authorization-process-for-certain-durable-medical-equipment-prosthetics
Timestamp: 2015-03-29 03:09:35
Document Index: 781741645

Matched Legal Cases: ['§ 405', '§ 414', 'art 405', 'art 414', '§ 414', '§ 414']

Federal Register | Medicare Program; Prior Authorization Process for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Items
-30531 (21 pages)
Document Number: 2014-12245
Shorter URL: https://federalregister.gov/a/2014-12245 Related Topics
Prior Authorization Process for Certain Durable Medical Equipment, Prosthetic, Orthotics, and Supplies (DMEPOS) Items (CMS-6050-P) 1 action from May 2014 May 2014
1. Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS)
2. DMEPOS Payment Rules—Advance Determination of Coverage
Table 1—2011 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
Table 2—2012 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
Table 3—2013 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
Table 4—Proposed Master List of DMEPOS Items Subject to Frequent Unnecessary Utilization for Prior Authorization
Table 5—Range of Estimates of Potentially Affected Claims
Table 6—Range of Potentially Affected Cases
Table 7—Time Burden Associated With Potentially Affected Cases
Table 8—Range Estimate of PRA Burden in Dollars
Table 9—Overall Economic Impact to Health Sector
Table 10—Private Sector Cost
Table 11—Medicare Cost
Table 12—CY Budgetary Impact (With Managed Care) Estimate in Millions
Table 13—Accounting Statement: Classification of Estimated Transfers, Benefits, and Costs
Maria Ciccanti, (410) 786-3107.
The term “durable medical equipment (DME)” is defined in section 1861(n) of the Social Security Act (the Act). It is also referenced in the definition of “medical and other health services” in section 1861(s)(6) of the Act. Furthermore, the term is defined in title 42 of the Code of Federal Regulations (42 CFR 414.202) as equipment furnished by a supplier or a home health agency (HHA) that—
Examples of durable medical equipment include hospital beds, oxygen tents, and wheelchairs. Prosthetic devices are included in the definition of “medical and other health services” in section 1861(s)(8) of the Act. Prosthetic devices are defined as devices (other than dental) which replace all or part of an internal body organ, including replacement of such devices. Examples of prosthetic devices include cochlear implants, electrical continence aids, electrical nerve stimulators, and tracheostomy speaking valves.
Payment made for the furnishing of an item that does not meet one or more of Medicare's coverage, coding, and payment rules is an improper payment. The Comprehensive Error Rate Testing (CERT) program measures improper payments in the Medicare Fee-For-Service (FFS) program. CERT is designed to comply with the Improper Payments Elimination and Recovery Act of 2010 (IPERA) (Pub. L. 111-204). For the 2012 reporting period, the CERT program determined that DMEPOS claims had an improper payment rate of 66 percent, accounting for approximately 20 percent of the overall Medicare FFS improper payment rate. This is significant since Medicare FFS DMEPOS expenditures represent approximately 3 percent of all Medicare FFS expenditures. The projected improper payment amount for DMEPOS during the 2012 reporting period was approximately $6.4 billion. It is important to note that the improper payment rate is not a “fraud rate,” but is a measurement of payments that did not meet Medicare requirements. The CERT program cannot label a claim fraudulent. The CERT program develops improper payment rates for those items for which at least 30 claims are included in their sample. Since the CERT program uses random samples to select claims across providers and suppliers, reviewers are often unable to see provider billing patterns that indicate potential fraud when making payment determinations.
Medicare pays for DMEPOS items only if the beneficiary's medical record contains sufficient documentation of the beneficiary's medical condition to support the need for the type and quantity of items ordered. In addition, all required documentation elements outlined in Medicare policies must be present for the claim to be paid. For the 2012 reporting period, approximately 94 percent of DMEPOS improper payments were due to insufficient documentation.
Without sufficient documentation, Medicare is unable to determine if the item is medically necessary for the beneficiary or whether unnecessary utilization is occurring.
The OIG provides independent and objective oversight that promotes economy, efficiency, and effectiveness in the programs and operations of HHS. OIG's mission to protect the integrity of HHS programs is carried out through a network of audits, investigations, and inspections. The OIG audits and evaluates the performance of HHS programs and their participants. In some cases, OIG reports disclose aberrant billing utilization data or high incidences of improper payments for particular items or services. We have concluded that nationwide findings by OIG or by GAO of potentially high rates of fraud, unnecessary utilization, or aberrant or improper billings, combined with the payment thresholds established here, are good indicators that an item is “frequently subject to unnecessary utilization” as set out in section 1834(a)(15) of the Act.
The item is listed in the 2011 or later Comprehensive Error Rate Testing (CERT) program's Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix (hereafter referred to as CERT DME Appendix). This report describes the background of the Medicare FFS and CERT programs, the incidence and rates of improper payments and the common causes of these errors. Because the CERT program reviews a representative random sample of claims each year, we are using the most recent published report at the time of the writing of this proposed rule. We believe limiting this criterion to items listed in the 2011 or later CERT DME Appendix (and also meeting the payment threshold) accomplishes the intent of section 1834(a)(15) of the Act. Interested parties can access the CERT reports at http://cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/CERT/CERT-Reports.html.
An August 2009 report titled “Inappropriate Medicare Payment for Pressure Reducing Support Surfaces” found that 86 percent of claims for group 2 pressure reducing support surfaces did not meet Medicare coverage criteria for the first half of 2007. This amounted to an estimated $33 million in improper payments during that time.
Table 1—2011 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix Back to Top
Service billed to DME (HCPCS)
Number of claims in sample
Number of lines in sample
Dollars overpaid
Total dollars paid in sample
Projected dollars overpaid
Overpayment rate (percent)
$2,212,120,825
Oxygen concentrator (E1390)
1,133,180,723
929,031,554
Hosp bed semi-electr w/Matt (E0260)
135,908,667
Budesonide non-comp unit (J7626)
106,061,471
Tacrolimus oral per 1 MG (J7507)
104,040,006
Lancets per box (A4259)
99,822,219
Cont airway pressure device (E0601)
98,014,011
Portable gaseous 02 (E0431)
97,194,278
Diab shoe for density insert (A5500)
88,965,667
Multi den insert direct form (A5512)
71,586,004
66,560,532
RAD w/o backup non-inv Intfc (E0470)
64,412,596
CPAP full face mask (A7030)
64,248,424
Nasal application device (A7034)
62,469,031
High strength ltwt whlchr (K0004)
61,980,799
Disp fee inhal drugs/30 days (Q0513)
57,749,018
Multi den insert custom mold (A5513)
54,355,934
52,201,255
Mycophenolate mofetil oral (J7517)
49,929,224
943,311,918
6,553,144,155
Table 2—2012 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix Back to Top
$2,231,572
$1,536,420,429
1,168,366,128
906,250,472
PWC gp 2 std cap chair (K0823)
201,693,896
137,852,967
98,992,634
97,807,986
96,375,515
80,812,581
78,369,581
Neg press wound therapy pump (E2402)
72,189,807
70,291,185
70,244,578
68,920,996
63,658,439
58,594,189
57,481,278
56,257,539
55,809,106
55,671,152
1,380,908,350
3,933,943
6,048,632
6,412,968,806
Table 3—2013 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix Back to Top
$983,768,125
867,058,104
791,786,761
201,643,982
137,106,877
Tacrolimus oral per 1MG (J7507)
88,099,443
Cont airway pressure devce (E0601)
84,740,816
82,958,405
78,011,911
69,222,164
65,194,062
59,780,922
Budesonide non-compUnit (J7626)
59,537,844
53,974,803
53,344,568
52,628,676
51,690,372
LSO sag-coro rigid frame pre (L0631)
51,310,493
49,722,593
47,738,353
7,804,614
1,736,897,848
9,624,629
5,666,217,120
Table 4—Proposed Master List of DMEPOS Items Subject to Frequent Unnecessary Utilization for Prior Authorization Back to Top
Powered air flotation bed (low air loss therapy).
Hosp bed semi-electr w/matt.
Powered pres-redu air mattrs.
Nonpowered advanced pressure reducing overlay for mattress, standard mattress length and width.
Powered air overlay for mattress, standard mattress length and width.
Nonpowered advanced pressure reducing mattress.
Respiratory assist device, bi-level pressure capability, without backup rate feature, used with noninvasive interface, e.g., nasal or facial mask (intermittent assist device with continuous positive airway pressure device).
Continuous Airway Pressure (CPAP) Device.
Negative pressure wound therapy electrical pump, stationary or portable.
High strength, lightweight wheelchair.
Power wheelchair, group 1 standard, portable, sling/solid seat and back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 1 standard, portable, captains chair, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 1 standard, sling/solid seat and back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 1 standard, captains chair, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 standard, portable, sling/solid seat/back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 standard, portable, captains chair, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 standard, sling/solid seat/back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 standard, captains chair, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 heavy duty, sling/solid seat/back, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 2 heavy duty, captains chair, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 2 very heavy duty, sling/solid seat/back, patient weight capacity 451 to 600 pounds.
Power wheelchair, group 2 very heavy duty, captains chair, patient weight capacity 451 to 600 pounds.
Power wheelchair, group 2 extra heavy duty, sling/solid seat/back, patient weight capacity 601 pounds or more.
Power wheelchair, group 2 extra heavy duty, captains chair, patient weight 601 pounds or more.
Power wheelchair, group 2 standard, single power option, sling/solid seat/back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 standard, single power option, captains chair, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 heavy duty, single power option, sling/solid seat/back, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 2 heavy duty, single power option, captains chair, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 2 very heavy duty, single power option sling/solid seat/back, patient weight capacity 451 to 600 pounds.
Power wheelchair, group 2 extra heavy duty, single power option, sling/solid seat/back, patient weight capacity 601 pounds or more.
Power wheelchair, group 2 standard, multiple power option, sling/solid seat/back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 standard, multiple power option, captains chair, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 2 heavy duty, multiple power option, sling/solid seat/back, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 3 standard, sling/solid seat/back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 3 standard, captains chair, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 3 heavy duty, sling/solid seat/back, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 3 heavy duty, captains chair, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 3 very heavy duty, sling/solid seat/back, patient weight capacity 451 to 600 pounds.
Power wheelchair, group 3 very heavy duty, captains chair, patient weight capacity 451 to 600 pounds.
Power wheelchair, group 3 extra heavy duty, sling/solid seat/back, patient weight capacity 601 pounds or more.
Power wheelchair, group 3 extra heavy duty, captains chair, patient weight capacity 601 pounds or more.
Power wheelchair, group 3 standard, single power option, sling/solid seat/back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 3 standard, single power option, captains chair, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 3 heavy duty, single power option, sling/solid seat/back, patient weight 301 to 450 pounds.
Power wheelchair, group 3 heavy duty, single power option, captains chair, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 3 very heavy duty, single power option, sling/solid seat/back, patient weight capacity 451 to 600 pounds.
Power wheelchair, group 3 standard, multiple power option, sling/solid seat/back, patient weight capacity up to and including 300 pounds.
Power wheelchair, group 3 heavy duty, multiple power option, sling/solid seat/back, patient weight capacity 301 to 450 pounds.
Power wheelchair, group 3 very heavy duty, multiple power option, sling/solid seat/back, patient weight capacity 451 to 600 pounds.
Power wheelchair, group 3 extra heavy duty, multiple power option, sling/solid seat/back, patient weight capacity 601 pounds or more.
Partial foot, molded socket, ankle height, with toe filler.
Partial foot, molded socket, tibial tubercle height, with toe filler.
Ankle, symes, molded socket, sach foot.
Ankle, symes, metal frame, molded leather socket, articulated ankle/foot.
Below knee, molded socket, shin, sach foot.
Below knee, plastic socket, joints and thigh lacer, sach foot.
Knee disarticulation (or through knee), molded socket, external knee joints, shin, sach foot.
Knee disarticulation (or through knee), molded socket, bent knee configuration, external knee joints, shin, sach foot.
Above knee, molded socket, single axis constant friction knee, shin, sach foot.
Above knee, short prosthesis, no knee joint (‘stubbies'), with foot blocks, no ankle joints, each.
Above knee, short prosthesis, no knee joint (‘stubbies'), with articulated ankle/foot, dynamically aligned, each.
Above knee, for proximal femoral focal deficiency, constant friction knee, shin, sach foot.
Hip disarticulation, canadian type; molded socket, hip joint, single axis constant friction knee, shin, sach foot.
Hip disarticulation, tilt table type; molded socket, locking hip joint, single axis constant friction knee, shin, sach foot.
Hemipelvectomy, canadian type; molded socket, hip joint, single axis constant friction knee, shin, sach foot.
Below knee, molded socket, shin, sach foot, endoskeletal system.
Knee disarticulation (or through knee), molded socket, single axis knee, pylon, sach foot, endoskeletal system.
Above knee, molded socket, open end, sach foot, endoskeletal system, single axis knee.
Hip disarticulation, canadian type, molded socket, endoskeletal system, hip joint, single axis knee, sach foot.
Hemipelvectomy, canadian type, molded socket, endoskeletal system, hip joint, single axis knee, sach foot.
Immediate post surgical or early fitting, application of initial rigid dressing, including fitting, alignment, suspension, and one cast change, below knee.
Immediate post surgical or early fitting, application of initial rigid dressing, including fitting, alignment and suspension and one cast change `ak' or knee disarticulation.
Initial, below knee ‘ptb' type socket, non-alignable system, pylon, no cover, sach foot, plaster socket, direct formed.
Initial, above knee—knee disarticulation, ischial level socket, non-alignable system, pylon, no cover, sach foot, plaster socket, direct formed.
Preparatory, below knee ‘ptb' type socket, non-alignable system, pylon, no cover, sach foot, plaster socket, molded to model.
Preparatory, below knee ‘ptb' type socket, non-alignable system, pylon, no cover, sach foot, thermoplastic or equal, direct formed.
Preparatory, below knee ‘ptb' type socket, non-alignable system, pylon, no cover, sach foot, thermoplastic or equal, molded to model.
Preparatory, below knee ‘ptb' type socket, non-alignable system, no cover, sach foot, prefabricated, adjustable open end socket.
Preparatory, below knee ‘ptb' type socket, non-alignable system, pylon, no cover, sach foot, laminated socket, molded to model.
Preparatory, above knee—knee disarticulation, ischial level socket, non-alignable system, pylon, no cover, sach foot, plaster socket, molded to model.
Preparatory, above knee—knee disarticulation, ischial level socket, non-alignable system, pylon, no cover, sach foot, thermoplastic or equal, direct formed.
Preparatory, above knee—knee disarticulation ischial level socket, non-alignable system, pylon, no cover, sach foot, thermoplastic or equal, molded to model.
Preparatory, above knee—knee disarticulation, ischial level socket, non-alignable system, pylon, no cover, sach foot, prefabricated adjustable open end socket.
Preparatory, above knee—knee disarticulation ischial level socket, non-alignable system, pylon no cover, sach foot, laminated socket, molded to model.
Preparatory, hip disarticulation-hemipelvectomy, pylon, no cover, sach foot, thermoplastic or equal, molded to patient model.
Preparatory, hip disarticulation-hemipelvectomy, pylon, no cover, sach foot, laminated socket, molded to patient model.
Addition to lower extremity, endoskeletal system, above knee, hydracadence system.
Addition to lower extremity, endoskeletal system, above knee—knee disarticulation, 4 bar linkage, with friction swing phase control.
Addition to lower extremity, endoskeletal system, above knee—knee disarticulation, 4 bar linkage, with hydraulic swing phase control.
Addition to lower extremity, exoskeletal system, above knee—knee disarticulation, 4 bar linkage, with pneumatic swing phase control.
Addition to lower extremity, endoskeletal system, above knee, universal multiplex system, friction swing phase control.
Addition to lower extremity, below knee, wood socket.
Addition to lower extremity, hip disarticulation, flexible inner socket, external frame.
Addition to lower extremity, ischial containment/narrow m-l socket.
Addition to lower extremity, above knee, flexible inner socket, external frame.
Addition to lower extremity, below knee/above knee, custom fabricated socket insert for congenital or atypical traumatic amputee, silicone gel, elastomeric or equal, for use with or without locking mechanism, initial only (for other than initial, use code l5673 or l5679).
Addition to lower extremity, below knee/above knee, custom fabricated socket insert for other than congenital or atypical traumatic amputee, silicone gel, elastomeric or equal, for use with or without locking mechanism, initial only (for other than initial, use code l5673 or l5679).
Replacement, socket, below knee, molded to patient model.
Replacement, socket, above knee/knee disarticulation, including attachment plate, molded to patient model.
Replacement, socket, hip disarticulation, including hip joint, molded to patient model.
Ankle, symes, molded to patient model, socket without solid ankle cushion heel (sach) foot, replacement only.
Custom shaped protective cover, above knee.
Custom shaped protective cover, knee disarticulation.
Custom shaped protective cover, hip disarticulation.
Addition, exoskeletal knee-shin system, polycentric, friction swing and stance phase control.
Addition, exoskeletal knee-shin system, single axis, pneumatic swing, friction stance phase control.
Addition, exoskeletal knee-shin system, single axis, fluid swing phase control.
Addition, exoskeletal knee-shin system, single axis, external joints fluid swing phase control.
Addition, exoskeletal knee-shin system, single axis, fluid swing and stance phase control.
Addition, exoskeletal knee-shin system, single axis, pneumatic/hydra pneumatic swing phase control.
Addition to lower limb prosthesis, vacuum pump, residual limb volume management and moisture evacuation system.
Addition to lower limb prosthesis, vacuum pump, residual limb volume management and moisture evacuation system, heavy duty.
Addition, exoskeletal system, hip disarticulation, ultra-light material (titanium, carbon fiber or equal).
Addition, endoskeletal knee-shin system, polycentric, hydraulic swing phase control, mechanical stance phase lock.
Addition, endoskeletal knee-shin system, polycentric, mechanical stance phase lock.
Addition, endoskeletal knee-shin system, polycentric, friction swing, and stance phase control.
Addition, endoskeletal knee-shin system, single axis, pneumatic swing, friction stance phase control.
Addition, endoskeletal knee-shin system, single axis, fluid swing phase control.
Addition, endoskeletal knee-shin system, single axis, hydraulic swing phase control, with miniature high activity frame.
Addition, endoskeletal knee-shin system, single axis, fluid swing and stance phase control.
Addition, endoskeletal knee-shin system, single axis, pneumatic/swing phase control.
Addition, endoskeletal knee/shin system, 4-bar linkage or multiaxial, pneumatic swing phase control.
Addition, endoskeletal, knee-shin system, stance flexion feature, adjustable.
Addition to endoskeletal knee-shin system, fluid stance extension, dampening feature, with or without adjustability.
Addition to lower extremity prosthesis, endoskeletal knee-shin system, microprocessor control feature, swing and stance phase, includes electronic sensor(s), any type.
Addition to lower extremity prosthesis, endoskeletal knee-shin system, microprocessor control feature, swing phase only, includes electronic sensor(s), any type.
Addition to lower extremity prosthesis, endoskeletal knee shin system, microprocessor control feature, stance phase only, includes electronic sensor(s), any type.
Addition, endoskeletal system, high activity knee control frame.
Addition, endoskeletal system, hip disarticulation, ultra-light material (titanium, carbon fiber or equal).
Addition, endoskeletal system, above knee, flexible protective outer surface covering system.
Addition, endoskeletal system, hip disarticulation, flexible protective outer surface covering system.
Addition to lower limb prosthesis, multiaxial ankle with swing phase active dorsiflexion feature.
Endoskeletal ankle foot system, microprocessor controlled feature, dorsiflexion and/or plantar flexion control, includes power source.
All lower extremity prosthesis, multi-axial ankle, dynamic response foot, one piece system.
All lower extremity prostheses, flex foot system.
All lower extremity prostheses, flex-walk system or equal.
All lower extremity prosthesis, shank foot system with vertical loading pylon.
Addition to lower limb prosthesis, vertical shock reducing pylon feature.
Addition to lower extremity prosthesis, user adjustable heel height.
In summary, because the Master List would be self-updating, we propose that we would annually publish notification of any additions or deletions to the Master List in the Federal Register and on the CMS Prior Authorization Web site. In addition, we propose to periodically publish notification of additions and deletions to the Required Prior Authorization List (including changes to the geographic regions in which prior authorization occurs) in the Federal Register and on the CMS Prior Authorization Web site. The announcement would appear in the Federal Register and there would be at least 60 days notice before prior authorization is required. This proposed rule does not announce the first items on the Required Prior Authorization List. We seek public comment on the: (1) Number of items selected for initial implementation; (2) number of future items selected for implementation; and (3) frequency in which we would select the items.
CMS or its contractors would review the prior authorization request to determine whether the item ordered for the beneficiary complies with applicable coverage, coding, and payment rules. After receipt of all applicable required Medicare documentation, CMS or its contractors would conduct a medical review and communicate a decision that provisionally affirms or non-affirms the request. A provisional affirmation is a preliminary finding that a future claim meets Medicare's coverage, coding, and payment rules. Claims receiving a provisional affirmation may still be denied based on technical requirements that can only be evaluated after the claim has been submitted for formal processing. For example, a finding that a claim is a duplicate claim can only be made after the claim has been submitted for formal processing. Claims receiving a provisional affirmation may also be denied based on information not available at the time of a prior authorization request (that is, proof of delivery). A prior authorization request that is non-affirmed under section 1834(a)(15) of the Act is not an initial determination on a claim for payment for items furnished, and therefore would not be appealable. We propose to make this distinction clear by adding a new paragraph (t) to § 405.926 stating that a contractor's prior determination of coverage is not an initial determination.
We propose to permit a requester to resubmit a prior authorization request if the initial request was non-affirmed. Prior authorization requests would be reviewed, and a decision of a provisional affirmative or non-affirmative would be communicated to the affected parties in the same manner as an initial request. We would consider a request for the same beneficiary for the same HCPCS code in a 6-month period of time to be a resubmission. A request outside of those parameters would be treated as a new initial request. We seek public comment on the number of resubmitted prior authorization requests allowed. This supports CMS's objective to satisfy our overall goal of enabling beneficiary access to care while protecting the Medicare Trust Fund. For the purpose of this proposed rule, we suggest that Medicare or its contractor make a reasonable effort to render an affirmative or non-affirmative decision within 10 days of receiving the initial request, 2 days for an expedited request or 20 days for a resubmission. We also seek public comment on suggested timeframes for provisionally affirmative or non-affirmative decisions on resubmitted prior authorization requests. Additional information about timeframes for all decisions would be described in CMS guidance to its contractors. The following illustrates possible prior authorization scenarios:
After promulgation of the prior authorization requirement through a possible final rule, CMS or its contractor would presume that the supplier knew that Medicare would automatically deny the claim for which the supplier failed to request a prior authorization, per section 1834(a)(15) of the Act. However, CMS or its contractor would generally presume that the Medicare beneficiary does not know, and cannot reasonably be expected to know, that Medicare will deny, or has denied, payment in advance under section 1834(a)(15) of the Act.
Detailed requirements for valid ABN issuance can be found in the Medicare Claims Processing Manual (Internet Only Manual (IOM) 100-04): http://www.cms.gov/Regulations and Guidance/Guidance/Manuals/Downloads/clm104c30.pdf. This section will be updated to provide standard language that suppliers must include on ABNs issued for items requiring prior authorization. If an ABN is not given to the beneficiary in the manner described in CMS' claims processing manual, financial liability for the denied claim will not be shifted to the beneficiary.
In § 414.234(c), we would require, as a condition of payment for certain DMEPOS items frequently subject to unnecessary utilization, that a prior authorization request be submitted prior to the submission of a claim.
To estimate the impact of this proposed rule within a range of programmatic activity, we isolated those items on the Master List that had an associated improper payment rate. We then excluded power mobility devices from the list since they are currently subject to prior authorization under a CMS demonstration and thus not eligible to be selected from the Master List until the demonstration is completed. We ranked the remaining 25 items by average improper payment dollars per line. Using 2013 CERT data, we developed low, primary, and high estimates of potentially affected claims for each year for the first 10 years of the program, if implemented as proposed.
Table 5—Range of Estimates of Potentially Affected Claims Back to Top
Number of potentially affected claims
Table 6—Range of Potentially Affected Cases Back to Top
[Potential claims and resubmissions of associated prior authorization requests]
Table 7—Time Burden Associated With Potentially Affected Cases Back to Top
60,468.75
144,843.75
285,468.75
We then multiply the time burden estimate to an average loaded hourly rate of $35.36 (actual hourly rate of $17.86 + fringe benefits)
to equate the burden in dollars. The high time-burden for the first year is 11,250 hours and multiplied by the hourly rate of $35.36, we arrive at a high cost estimate of $397,800. Using the same approach, the total estimated high cost per year for years 2 and 3 is $3,978,000. The average of the high estimate annual cost for years 1 through 3 is $2.8 million Table 8 lists the range estimate of PRA burden in dollars. This impact is allocated across providers and suppliers nationwide.
Table 8—Range Estimate of PRA Burden in Dollars Back to Top
PRA burden (in dollars)
5,121,675
We also estimate the cost of mailing medical records to be $5 per request for prior authorization. However, many of the records are received via fax machines which have lower associated costs than traditional mail. Additionally, we offer electronic submission of medical documentation (esMD) to providers and suppliers who wish to use a less expensive alternative for sending in medical documents. Additional information on esMD can be found at www.cms.gov/esMD.
We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2012), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96 354), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). Since the effect of this rule may possibly redistribute more than $100 million in years 8 through 10, it may have an economically significant impact if the high estimates are realized. Per Executive Order 12866, we have prepared a regulatory impact analysis that, to the best of our ability, presents the costs and benefits of this proposed rule. The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of less than $7.0 million to $35.5 million in any 1 year. For details see the Small Business Administration's (SBA) Web site at: www.sba.gov/content/table-small-business-size-standards (refer to the 62 sector). Individuals and states are not included in the definition of a small entity.
Based on the estimate, the overall economic impact of this proposed rule is approximately $1.3 million in the first year. The 5-year impact is approximately $57 million and the 10-year impact is approximately $212 million, mostly driven by the increased number of items subjected to prior authorization after the first year. Additional administrative paperwork costs to private sector providers and an increase in Medicare spending to conduct reviews combine to create the financial impact. However, this impact is offset by some savings. We believe there are likely to be other benefits and cost savings that result from the DMEPOS prior authorization requirement. However, many of those benefits are difficult to quantify. For instance, we expect to see savings in the form of reduced unnecessary utilization, fraud, waste, and abuse, including a reduction in improper Medicare fee-for-service payments (note that not all improper payments are fraudulent). We are soliciting comment on the potential increased costs and benefits associated with this provision.
Table 9—Overall Economic Impact to Health Sector Back to Top
Private Sector Cost
Low Claim Estimation
Primary Claim Estimation
55,393,650
28,243,800
107,803,800
42,046,875
156,656,250
High Claim Estimation
79,875,000
304,875,000
Total Economic Impact to Health Sector
56,914,650
212,049,900
108,118,800
412,678,800
Table 10—Private Sector Cost Back to Top
Medicare would incur additional costs associated with processing the prior authorization requests. Applying the same logic previously described, we develop a range of potential costs that are dependent on the extent of implementation. We use the range of potentially affected cases (claims and resubmissions) in Table 6 and multiply it by $50, the estimated cost to review each request. Table 11 lists the cost range estimates. Table 11—Medicare Cost Back to Top
6,046,875
28,546,875
Our Office of the Actuary has provided the following budgetary cash impact possibilities based on the President's 2015 Budget baseline with an assumed October 1, 2014 effective date. The impacts are specific to the three scenarios in our potentially affected claim range: The low, primary, and high estimation of potentially affected claims (see Table 5). Table 12—CY Budgetary Impact (With Managed Care) Estimate in Millions Back to Top
2015-2019 (5-year impact)
2015-2024 (10-year impact)
Scenario 1: Assume Low Number of Claims
Number of Part B Claims
Part B Costs & Benefits:
Benefits (in millions)
Premium Offset * (in millions)
Total Part B (in millions)
Scenario 2: Assume Primary Number of Claims
Premium Offset ($ in millions)
Total Part B ($ in millions)
Scenario 3: Assume High Number of Claims
As required by OMB Circular A4 (available at http://www.whitehouse.gov/omb/circulars_default/), in Table 13 (Accounting Statement), we have prepared an accounting statement showing the estimated expenditures associated with this proposed rule. This estimate includes the estimated FY 2013 expenditures.
Table 13—Accounting Statement: Classification of Estimated Transfers, Benefits, and Costs Back to Top
** These costs are associated with the processing the prior authorization requests for Medicare.
*** Savings to the Medicare program due to the reduced unnecessary utilization, fraud, waste, and abuse.
Annualized Monetized *
($million/year)
Annualized Monetized **
Federal government to Medicare providers.
1.The authority citation for part 405 continues to read as follows: Authority:
2.Section 405.926 is amended as follows: a. In the introductory text, removing the phrase “but are not limited to—” and adding in its place the phrase “but are not limited to the following:”
b. In paragraphs (a)(2) and (b) through (q), removing “;” and adding in its place “.”.
c. In paragraph (r), removing “; and” adding in its place “.”.
d. Adding a new paragraph (t).
3.The authority citation for part 414 continues to read as follows: Authority:
4.Subpart D is amended by adding a new § 414.234 to read as follows: § 414.234 Prior authorization for items frequently subject to unnecessary utilization.
(4) Expedited reviews. (i) A prior authorization request for an expedited review must include documentation that shows that processing a prior authorization request using a standard timeline for review could seriously jeopardize the life or health of the beneficiary or the beneficiary's ability to regain maximum function.
1. Medicare Fee-for-Service 2012 Improper Payments Report. Retrieved February 2014 from http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/CERT/Downloads/Medicare-Fee-for-Service-2012-Improper-Payments-Report.pdf.
2. Based on Bureau of Labor Statistics information (29-2070 Medical Record and Health Information Technician 2012).