[Federal Register Volume 60, Number 237 (Monday, December 11, 1995)]
[Rules and Regulations]
[Pages 63440-63444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30065]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Part 424
[BPD-838-FC]
RIN 0938-AH19
Medicare Program; Additional Supplier Standards
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule with comment.
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SUMMARY: This final rule with comment period conforms our regulations
to changes made to section 1834 of the Social Security Act (the Act) by
section 131 of the Social Security Act Amendments of 1994. Section
1834(j) of the Act requires that suppliers meet additional standards
related to compliance with State and Federal licensure requirements,
maintaining a physical facility on an appropriate site, and proof of
appropriate liability insurance. This final rule retains existing
regulatory standards and incorporates the three additional standards
specifically cited from the statute.
DATES: Effective Date: This rule is effective January 1, 1996.
Comments: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on
February 9, 1996.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: BPD-838-FC, P.O. Box 26676,
Baltimore, MD 21207.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code BPD-838-FC. Comments received timely will be available for
public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 309-G of
the Department's offices at 200 Independence Avenue, SW, Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
For comments that relate to information collection requirements,
mail a copy of comments to: Office of Information and Regulatory
Affairs, Office of Management and Budget, Room 10235, New Executive
Office Building, Washington, DC 20503, Attn: Allison Herron Eydt, HCFA
Desk Officer.
FOR FURTHER INFORMATION CONTACT: Larry Bonander, (410) 786-4479.
SUPPLEMENTARY INFORMATION:
I. Background
A. General
The Medicare Part B program is a voluntary program that pays all or
part of the costs for physicians' services, outpatient hospital
services, certain home health services, services furnished by rural
health clinics, ambulatory surgical centers, and comprehensive
outpatient rehabilitation facilities, and certain other medical and
hospital health services not covered by Medicare Part A.
Medicare services are furnished by two types of entities, that is,
providers and suppliers. The term ``provider'' as defined in our
regulations at 42 CFR 400.202, means a hospital, a rural primary care
hospital, a skilled nursing facility, a comprehensive outpatient
rehabilitation facility, a home health agency, or a hospice that has in
effect an agreement to participate in Medicare. A clinic, a
rehabilitation agency, or a public health agency that has a similar
agreement to furnish outpatient physical therapy or speech pathology
services, or a community mental health center with a similar agreement
to furnish partial hospitalization services, is also considered a
provider (see sections 1861(u) and 1866(e) of the Social Security Act
(the Act)).
In general, suppliers are individuals or entities that furnish
certain types of medical and other health services under part B. There
are different definitions of the term supplier and specific regulations
governing different types of suppliers. Durable medical equipment,
prosthetics, orthotics, and supplies (DMEPOS) encompasses the types of
items included in the definition of ``medical equipment and supplies''
found at section 1834(j)(5) of the Act. In
[[Page 63441]]
this rule, the term ``DMEPOS supplier'' refers to all individuals or
entities that furnish these items.
For purposes of DMEPOS supplier standards, the term ``supplier'' is
currently defined in Sec. 424.57(a) as an entity or individual,
including a physician or part A provider, which sells or rents part B
covered items to Medicare beneficiaries, and which meets certain
standards. We are retaining this definition for purposes of identifying
those entities that must meet Medicare DMEPOS supplier standards in
order to obtain a supplier number. Those individuals or entities that
do not furnish DMEPOS items but only furnish other types of health care
services, such as physicians' services or nurse practitioner services,
would not be subject to these standards. Moreover, a supplier number is
not necessary before Medicare payment can be made with respect to
medical equipment and supplies furnished incident to a physician's
service.
For Medicare purposes, DMEPOS suppliers either accept or do not
accept assignment. If a DMEPOS supplier accepts assignment, it agrees
to accept the Medicare approved amount as payment in full for the
covered item. Generally, Medicare pays 80 percent of the approved
amount and the beneficiary is responsible for applicable coinsurance
and any unmet Medicare deductible amounts. DMEPOS suppliers that have
voluntarily agreed to enter into an agreement to accept assignment for
all items are referred to as ``participating suppliers''. Participating
DMEPOS suppliers are listed in directories available to Medicare
beneficiaries and receive part B payment directly from the Medicare
program. Nonparticipating DMEPOS suppliers may accept assignment on a
case-by-case basis, and for these claims, receive payment directly from
Medicare. If a beneficiary receives a service from a nonparticipating
DMEPOS supplier on a nonassigned basis, however, payment is made to the
beneficiary who in turn pays the DMEPOS supplier. This rule applies to
all DMEPOS suppliers for all items furnished to Medicare beneficiaries
regardless of whether they accept Medicare assignment or are Medicare
participating suppliers.
Durable Medical Equipment
Durable medical equipment (DME) is included in the definition of
``medical and other health services'' as indicated by section
1861(s)(6) of the Act. The term DME is defined at section 1861(n) of
the Act. This definition, in part, excludes from coverage as DME, items
furnished in skilled nursing facilities and hospitals. (Equipment
furnished in those facilities is paid for as part of their routine or
ancillary costs.) The term is also defined in Sec. 414.202 as meaning
``equipment, furnished by a supplier or a home health agency that--
(1) Can withstand repeated use;
(2) Is primarily and customarily used to serve a medical purpose;
(3) Generally is not useful to an individual in the absence of an
illness or injury; and
(4) Is appropriate for use in the home.'' Examples of DME include
such items as blood glucose monitors, hospital beds, nebulizers, oxygen
delivery systems, and wheelchairs.
Prosthetic Devices
Prosthetic devices are also included in the definition of ``medical
and other health services'' under section 1861(s)(8) of the Act. They
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.
Orthotics and Prosthetics
Section 1861(s)(9) of the Act provides for the coverage of ``leg,
arm, back, and neck braces, and artificial legs, arms, and eyes * * *
'' under the term ``medical and other health services''. As indicated
by section 1834(h)(4)(C) of the Act, these items are often referred to
as ``orthotics and prosthetics.''
Supplies
Section 1861(s)(5) includes ``surgical dressings, and splints,
casts, and other devices used for reduction of fractures and
dislocations;'' 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):
(1) 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.
(2) 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.
(3) 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.
(4) Oral drugs prescribed for use as an anticancer therapeutic
agent as noted at section 1861(s)(2)(Q) of the Act.
(5) Self-administered erythropoietin (as described in section
1861(s)(2)(O) of the Act).
B. DMEPOS Supplier Standards
On June 18, 1992, we published a final rule with comment period (57
FR 27290) that established in Sec. 424.57 certain business standards
for entities seeking to qualify as Medicare suppliers of DMEPOS items.
Currently, in order to obtain a Medicare billing number, a DMEPOS
supplier is required to meet, and to certify that it meets, the
following supplier standards:
1. Respond to orders received by filling those orders from its own
inventory or inventory from other companies with which it has
contracted to fill such orders; or fabricating or fitting items for
sale from supplies purchased under a contract.
2. Be responsible for delivery of Medicare covered items to
Medicare beneficiaries.
3. Honor all warranties express and implied under applicable State
law.
4. Answer any questions or complaints a beneficiary has about the
item or use of the item that was sold or rented to him or her, and
refer beneficiaries with Medicare questions to the appropriate carrier.
5. Maintain and repair items rented to beneficiaries directly or
through a service contract with another company.
6. Accept returns of substandard (less than full quality for the
particular item) or unsuitable items (inappropriate for the beneficiary
at the time it was fitted and/or sold) from beneficiaries.
7. Disclose consumer information to each beneficiary who rents or
purchases items. This information consists of the supplier standards to
which it must conform.
8. Comply with the disclosure provisions in Sec. 420.206
(Disclosure of persons having ownership, financial, or control
interest).
C. Obtaining a DMEPOS Supplier Number for Identification and Billing
Purposes
Since November 1, 1993, every DMEPOS supplier that submits claims
to a Durable Medical Equipment Regional Carrier (DMERC) is required to
complete and return the Medicare
[[Page 63442]]
Supplier Number Application (HCFA-192 Form) to the National Supplier
Clearinghouse (NSC). The NSC distributes applications, verifies the
data, issues numbers to approved suppliers, and maintains a national
supplier file. The DMEPOS supplier must obtain a supplier number from
the NSC before the DMERC will accept a claim. If the DMEPOS supplier
attempts to file a claim before obtaining a supplier number the DMERC
will reject the claim.
Under this final rule, in order to obtain a Medicare supplier
number, a DMEPOS supplier will be required to meet, and to certify that
it meets, the supplier standards found in the new Sec. 424.57 as
discussed in section II. of this rule. The DMEPOS supplier standards
found in the new Sec. 424.57 include the supplier standards that are in
the existing Sec. 424.57, and also the standards cited in section
1834(j)(1)(B)(ii) (I) through (III) of the Act.
The DMEPOS supplier's certification that supplier standards are met
must be completed before a supplier number will be issued by the NSC.
The DMEPOS supplier is accountable to complete the application
accurately. Any deliberate misrepresentation or concealment of material
information may subject the DMEPOS supplier to liability under civil
and criminal laws. Every three years the DMEPOS supplier is required to
recertify that it continues to meet the DMEPOS supplier standards.
II. Provisions of the Final Regulation
Section 131 of the Social Security Act Amendments of 1994 (SSA '94,
Pub. L. 103-432, enacted on October 31, 1994), added a new subsection
(j) to section 1834 of the Act. Section 1834(j)(1)(B)(i) of the Act
requires that for medical equipment and supplies furnished on or after
October 31, 1994, and before January 1, 1996, the supplier must meet
the current standards established in Sec. 424.57. Section
1834(j)(1)(B)(ii) of the Act requires that for medical equipment and
supplies furnished on or after January 1, 1996, the supplier must meet
revised standards issued by the Secretary, after consultation with
representatives of suppliers of medical equipment and supplies,
carriers, and consumers.
As a result of SSA '94, we are establishing additional DMEPOS
supplier standards by revising paragraph (c) of Sec. 424.57 of the
regulations. The revised standards include all of the standards that
are in the existing Sec. 424.57 and those standards specifically
required by section 1834(j)(1)(B)(ii) (I) through (III) of the Act.
Beginning January 1, 1996, a supplier will be required to meet, and
to certify that it meets, the existing standards discussed in section
C. of this rule, and also the following additional standards. The
supplier must--
(1) Comply with all applicable State and Federal licensure and
regulatory requirements;
(2) Maintain a physical facility on an appropriate site; and
(3) Have proof of appropriate liability insurance.
We are issuing this final rule to incorporate those standards that
Congress has explicitly identified and indicated should be used
beginning January 1, 1996. In addition, our existing regulatory
standards have already been subject to the notice and comment process,
and both the public and the industry are familiar with those standards.
Congress did not indicate any intention to relax those standards.
Rather, we believe Congress' intent is to strengthen these standards to
protect Medicare beneficiaries. This final rule will provide a base
level of protection that will enable us to continue to process
applications of individuals and entities who seek to become suppliers,
and will provide a basis to revoke the numbers of suppliers who do not
fulfill those standards according to our regulations at Sec. 405.874.
The statute also gives the Secretary the authority to establish
additional standards besides those included in the existing Sec. 424.57
and those standards specifically cited in section 1834(j)(1)(B)(ii) (I)
through (III). As directed by the statute, we have contacted or
consulted with representatives of suppliers, carriers, and consumers
concerning the need for additional supplier standards. These meetings
were productive and we have received numerous comments that suggest
that additional standards may be necessary in certain areas. We are
currently considering these comments as we develop a proposed rule that
would set forth additional substantive supplier standards. At this
time, however, we are retaining our existing standards and only adding
those standards specifically cited from section 1834(j) of the Act.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, agencies are required to
provide a 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency;
The accuracy of the agency's estimate of the information
collection burden;
The quality, utility, and clarity of the information to be
collected; and
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques. Therefore, we are soliciting public comment on each of
these issues for the information collection requirements discussed
below.
The following sections of this document contain information
collection requirements as described below:
The information collection requirements in Sec. 424.57 (``Special
payment rules for items furnished by DMEPOS suppliers and issuance of
DMEPOS supplier billing numbers''), in paragraph (c)(7), arise as a
result of requiring all DMEPOS suppliers to give a copy of the DMEPOS
supplier standards to each Medicare beneficiary with whom they do
business. The National Supplier Clearinghouse will supply a copy to
each enrolled supplier which may be photocopied. We estimate the public
reporting burden for this collection of information to average
approximately 20 minutes per year, including photocopying and handing
out the standards, which totals approximately 46,200 hours.
The information collection requirements in Sec. 424.57(c)(8) cross
refers to Sec. 420.206 (``Disclosure of persons having ownership,
financial, or control interest'') concern the information necessary for
disclosure of ownership and control and the identities of managing
employees. The respondents who will provide the information will be the
DMEPOS suppliers. Public reporting burden for this collection of
information is estimated to be 140,000 hours. We estimate that 140,000
suppliers will complete the information which is estimated at one hour
per supplier.
We have submitted a copy of this final rule with comment period to
OMB for its review of the information collection requirements in
Sec. 424.57(c) (7) and (8). These requirements are not effective until
they have been approved by OMB. A notice will be published in the
[[Page 63443]]
Federal Register when approval is obtained.
Organizations and individuals desiring to submit comments on the
information collection and recordkeeping requirements should send them
to the Health Care Financing Administration, Office of Financial and
Human Resources, Management Planning and Analysis Staff, 7500 Security
Boulevard, Baltimore, Maryland, 21244-1850 and to the Office of
Management and Budget official whose name appears in the ADDRESSES
section of this preamble.
IV. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the ``DATES''
section of this preamble, and, if we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
V. Waiver of Prior Notice With Comment Period and of Delayed Effective
Date
We ordinarily publish a notice of proposed rulemaking for a rule to
provide a period of public comment prior to the effective date of the
rule. This procedure can be waived, however, when an agency finds good
cause that a notice and comment procedure is impracticable,
unnecessary, or contrary to the public interest. Further, we generally
provide for final rules to be effective no sooner than 30 days after
the date of publication unless we find good cause to waive the delay.
In the case of this rule, we find good cause to implement this rule
as a final rule because the delay involved in the prior notice and
comment procedures for these DMEPOS supplier standards would be
contrary to the public interest. In SSA '94, Congress enacted numerous
substantive provisions designed to protect Medicare beneficiaries from
abusive practices by DMEPOS suppliers. These provisions establish
limitations on the information DMEPOS suppliers may include on a
certificate of medical necessity (section 1834(j)(2)), establish
restrictions on the methods DMEPOS suppliers may use to contact certain
Medicare beneficiaries (section 1834(a)(17)), and limit the Medicare
beneficiary's liability if the DMEPOS supplier does not comply with
these statutory requirements (section 1834(j)(4)). Congress has also
established significant penalties, including civil money penalties, if
DMEPOS suppliers violate particular statutory provisions (section
1834(a)(18)(B)). Most importantly, for purposes of this regulation,
Congress has indicated that beginning January 1, 1996, individuals or
entities must meet at least three additional standards in order to
obtain a Medicare supplier number.
When considered as a whole, these legislative changes demonstrate
that Congress has serious concerns about the business practices
employed by certain DMEPOS suppliers, and that Medicare beneficiaries
require additional protection from these practices. It would,
therefore, be contrary to the public interest to delay establishing the
specific additional criteria that Congress has identified by adhering
to the normal notice and comment procedures. In addition, as noted
previously, the Secretary has already established certain regulatory
standards for DMEPOS suppliers that were developed in accordance with
the notice and comment procedures. These standards are familiar to the
public and the regulated DMEPOS supplier community and provide a base
level of protection for Medicare beneficiaries. Congress has not
indicated any intention to reduce or eliminate these existing
standards. It is necessary to maintain these existing regulatory
standards in order to protect the public interest and to further our
efforts to prevent fraud and abuse in the Medicare program through
Operation Restore Trust.
As directed by statute, we have met with representatives of DMEPOS
suppliers, the carriers, and consumers to consider whether additional
standards are necessary. Although these meetings were productive, it
was not possible to complete the full notice and comment procedure in
order to have final rules in place before January 1, 1996. We are
currently preparing a notice of proposed rulemaking reflecting our
consultations with these entities and individuals and will publish that
document in the near future. These final rules will be effective until
altered by those regulations.
We believe that it would be contrary to public interest to delay
implementation of the revised standards pending the process of
publishing both a proposed rule and a final rule. The three new
standards are required to be included in any new standards promulgated
by the Secretary, and are not discretionary. Moreover, the existing
DMEPOS standards had been promulgated in accordance with the notice and
comment provisions of the Administrative Procedure Act. Therefore, we
find good cause to waive proposed rulemaking for the revised
requirements set forth in Sec. 424.57 and to issue these regulations in
final. However, we are providing a 60-day period for public comment, as
indicated at the beginning of this rule, on the changes to Sec. 424.57.
For the above reasons, we also find good cause to waive the delay in
effective date of this rule.
VI. Regulatory Impact Analysis
Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612), we prepare a regulatory flexibility analysis unless we
certify that a rule will not have a significant economic impact on a
substantial number of small entities. For purposes of the RFA, all
providers, physicians, and other suppliers are considered to be small
entities. Individuals and States are not included in the definition of
a small entity.
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. Such
an 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 50 beds.
We are not preparing analyses for either the RFA or section 1102(b)
of the Act because we have determined, and we certify, that this rule
will not have a significant economic impact on a substantial number of
small entities or a significant impact on the operations of a
substantial number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
final rule was not reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 424
Emergency medical services, Health facilities, Health professions,
Medicare.
42 CFR Part 424 is amended as set forth below:
PART 424--CONDITIONS FOR MEDICARE PAYMENT
1. The authority citation for part 424 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302, and 1395hh).
2. Paragraph (c) of Sec. 424.57 is revised to read as follows:
[[Page 63444]]
Sec. 424.57 Special payment rules for items furnished by DMEPOS
suppliers and issuance of DMEPOS supplier billing numbers.
* * * * *
(c) Medicare does not issue a billing number to a supplier that
submits claims for items listed in Sec. 421.210(b) of this subchapter
until that supplier meets, and certifies that it meets, the following
standards. The supplier--
(1) In response to orders which it receives, fills those orders
from its own inventory or inventory in other companies with which it
has contracted to fill such orders or fabricates or fits items for sale
from supplies it buys under a contract;
(2) Is responsible for delivery of Medicare covered items to
Medicare beneficiaries;
(3) Honors all warranties express and implied under applicable
State law;
(4) Answers any questions or complaints a beneficiary has about the
item or use of the item that was sold or rented to him or her, and
refers beneficiaries with Medicare questions to the appropriate
carrier;
(5) Maintains and repairs directly or through a service contract
with another company, items it has rented to beneficiaries;
(6) Accepts returns of substandard (less than full quality for the
particular item) or unsuitable items (inappropriate for the beneficiary
at the time it was fitted and/or sold) from beneficiaries;
(7) Discloses consumer information to each beneficiary with whom it
does business which consists of the supplier standards to which it must
conform;
(8) Complies with the disclosure provisions in Sec. 420.206.
(9) Complies with all applicable State and Federal licensure and
regulatory requirements;
(10) Maintains a physical facility on an appropriate site; and
(11) Has proof of appropriate liability insurance.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: November 22, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 95-30065 Filed 12-8-95; 8:45 am]
BILLING CODE 4120-01-P