[Federal Register Volume 64, Number 143 (Tuesday, July 27, 1999)]
[Proposed Rules]
[Pages 40534-40539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19115]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 414

[HCFA-1010-P]
RIN 0938-AJ00


Medicare Program; Replacement of Reasonable Charge Methodology by 
Fee Schedules

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

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SUMMARY: We are proposing to implement fee schedules to be used for 
payment of services, excluding ambulance services, still subject to the 
reasonable charge payment methodology. The authority for establishing 
these fee schedules is provided by section 4315 of the Balanced Budget 
Act of 1997 (Public Law 105-33), which adds to the Social Security Act 
a new section 1842(s). A fee schedule for ambulance services is 
mandated by a different statutory provision. Section 1842(s) of the 
Social Security Act specifies that statewide or other areawide fee 
schedules may be implemented for the following services: medical 
supplies; home dialysis supplies and equipment; therapeutic shoes; 
parenteral and enteral nutrients, equipment, and supplies; 
electromyogram devices; salivation devices; blood products; and 
transfusion medicine.

DATES: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on 
September 27, 1999.

ADDRESSES: Mail an original and 3 copies of written comments to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-1010-P, P.O. Box 26688, 
Baltimore, MD 21207-0488.

[[Page 40535]]

    If you prefer, you may deliver an original and 3 copies of your 
written comments to one of the following addresses: Room 443-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, D.C. 
20201, or Room C5-09-26, 7500 Security Boulevard, Baltimore, Maryland 
21244-1850.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-1010-P. 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 443-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).
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
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libraries throughout the country that receive the Federal Register.
    This Federal Register document is also available from the Federal 
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Government Printing Office. Free public access is available on a Wide 
Area Information Server (WAIS) through the Internet and via 
asynchronous dial-in. Internet users can access the database by using 
the World Wide Web; the Superintendent of Documents home page address 
is http://www.access.gpo.gov/nara/index.html, by using local WAIS 
client software, or by telnet to swais.access.gpo.gov, then log in as 
guest (no password required). Dial-in users should use communications 
software and modem to call (202) 512-1661; type swais, then log in as 
guest (no password required).

FOR FURTHER INFORMATION CONTACT: Joel Kaiser, (410) 786-4499.

SUPPLEMENTARY INFORMATION:

I. Background

A. Payment Under Reasonable Charges

    Payment for most services, including supplies and equipment, 
furnished under Part B of the Medicare program (Supplementary Medical 
Insurance) is made through contractors known as Medicare carriers. At 
one point, payment for most of these services was made on a reasonable 
charge basis by these carriers. The methodology for determining 
reasonable charges is set forth in section 1842(b) of the Social 
Security Act (the Act) and 42 CFR part 405, subpart E of our 
regulations. Reasonable charge determinations are generally based on 
customary and prevailing charges derived from historic charge data. The 
reasonable charge for service is generally set at the lowest of the 
following factors:
     The supplier's actual charge for the service.
     The supplier's customary charge for the service.
     The prevailing charge in the locality for similar 
services. (The prevailing charge may not exceed the 75th percentile of 
the customary charges of suppliers in the locality.)
     The inflation indexed charge (IIC). The IIC is defined in 
Sec. 405.509(a) as the lowest of the fee screens used to determine 
reasonable charges for services, including supplies, and equipment paid 
on a reasonable charge basis (excluding physicians' services) that is 
in effect on December 31 of the previous fee screen year, updated by 
the inflation adjustment factor. Fee screens are those factors 
identified above, including the IIC and lowest charge level if 
applicable, used to determine payment under the reasonable charge 
methodology. The inflation adjustment factor is based on the current 
change in the consumer price index for all urban consumers (CPI-U) for 
the 12-month period ending June 30.
    For parenteral and enteral nutrients, equipment, and supplies, an 
additional factor, the lowest charge level (LCL), is used to determine 
the reasonable charge. In accordance with Sec. 405.511(c), the LCL is 
set at the 25th percentile of the charges (incurred or submitted on 
claims processed by the carrier) for the above services, in the 
locality designated by the carrier for this purpose, during the 3-month 
period of July 1 through September 30 preceding the fee screen year 
(January 1 through December 31) for which the service was furnished.
    Sections 405.502(g) and 405.506 permit exceptions to the general 
rules for determining reasonable charges. Section 405.502(g) gives the 
carrier the authority to establish special payment limits for a 
category of service if it determines that the standard rules for 
calculating payments result in grossly deficient or grossly excessive 
payments. Section 405.506 provides that a charge which exceeds the 
customary charge, the prevailing charge, or the LCL ``may be found to 
be reasonable, but only where there are unusual circumstances, or 
medical complications requiring additional time, effort or expense 
which support an additional charge, and only if it is acceptable 
medical or medical service practice in the locality to make an extra 
charge in such cases.''

B. Payment Under Fee Schedules

    The law gradually replaced the reasonable charge payment 
methodology with fee schedule payment methodologies for most services 
furnished under Part B of the Medicare program. Fee schedules have been 
established for physicians' services, laboratory services, durable 
medical equipment (DME), prosthetics and orthotics, surgical dressings, 
and, beginning in the year 2000, ambulance services. Subject to 
coinsurance and deductible rules, Medicare payment for these services 
is equal to the lower of the actual charge for the service or the 
amount determined under the fee schedule methodology.
    Section 4315 of the Balanced Budget Act of 1997 (BBA) amends the 
Act at section 1842 by adding a new subsection(s). Section 1842(s) of 
the Act provides authority for implementing statewide or other areawide 
fee schedules to be used for payment of the following services that are 
currently paid on a reasonable charge basis:
     Medical supplies.
     Home dialysis supplies and equipment (as defined in 
section 1881(b)(8) of the Act).
     Therapeutic shoes.
     Parenteral and enteral nutrients, equipment, and supplies 
(PEN).
     Electromyogram devices.
     Salivation devices.
     Blood products.
     Transfusion medicine.
    Section 1842(s)(1) of the Act provides that the fee schedules for 
the services listed above are to be updated on an annual basis by the 
percentage increase in the CPI-U (United States city average) for the 
12-month period ending with June of the preceding year. The fee 
schedules for PEN, however, may not be updated before the year 2003. 
Finally, total payments for the initial year of the fee schedules must 
be approximately equal to the estimated total payments that would have 
been made under the

[[Page 40536]]

reasonable charge payment methodology.

II. Provisions of the Proposed Regulations

A. General

    We propose, under section 1842(s) of the Act, to implement fee 
schedules for those services listed above. Subject to coinsurance and 
deductible rules, Medicare payment for these services is to be equal to 
the lower of the actual charge for the service or the amount determined 
under the applicable fee schedule payment methodology presented below. 
The fee schedules we propose would apply to services furnished on or 
after January 1, 1999, and would be calculated using base reasonable 
charges updated by an inflation update factor.
    Section 4315(d) of the BBA requires that the total payments for the 
initial year of the fee schedules be approximately equal to the 
estimated total payments that would have been made under the reasonable 
charge payment methodology. For this reason, for services other than 
PEN, we are proposing that the fee schedule amounts be based on average 
reasonable charges from the period July 1, 1996 through June 30, 1997, 
the same data period used in calculating the 1998 reasonable charges. 
Furthermore, for the purposes of calculating the 1999 fee schedule 
amounts, we are proposing that the base fee schedule amounts be 
increased by the change in the CPI-U for the 12-month period ending 
with June of 1998, the inflation adjustment factor that would have 
otherwise been used in calculating the 1999 IICs. This would update the 
reasonable charge data to the 1999 level, the initial year of the fee 
schedules. For PEN, which accounts for approximately 90 percent of the 
Medicare expenditures for services addressed in this rule, we are 
proposing that the fee schedule amounts be based on the reasonable 
charges that would have been used in determining payment for PEN in 
1999.
    The proposed fee schedules would have a minimal, if any, impact on 
the efforts of HCFA and its contractors to revise their current systems 
to be millennium or Y2K compliant, as Y2K compliant fee schedule 
systems are already in place for other services. The proposed fee 
schedules would be incorporated into these current systems.

B. National Limits

    For medical supplies, electromyogram devices, salivation devices, 
blood products, and transfusion medicine furnished within the 
continental United States, we propose national limits on the statewide 
fee schedule amounts similar to those that were mandated by the 
Congress for DME and surgical dressings in section 1834 of the Act. The 
Congress mandated ceilings and floors, equal to 100 percent and 85 
percent, respectively, of the median of all statewide fee schedule 
amounts, to limit unreasonably high and low fees resulting from the 
local fee calculations for DME and surgical dressings. The Congress 
recognized the unique costs of doing business in areas outside the 
continental United States and therefore did not apply the national 
limits for DME and surgical dressings to these areas.
    The national limits for DME and surgical dressings have been 
effective at eliminating outlying fees that cannot be explained by the 
differences in the costs of doing business in one part of the country 
versus another. We are therefore proposing that this methodology be 
applied to the services identified above. Accordingly, the statewide 
fee schedule amounts for these services may not exceed 100 percent of 
the median of all statewide fee schedule amounts for areas within the 
continental United States and may not be less than 85 percent of the 
median of all statewide fee schedule amounts for areas within the 
continental United States. The statewide fee schedule amounts for areas 
outside the continental United States will not be subject to the 
national limits. National limits are not proposed for home dialysis 
supplies and equipment, therapeutic shoes, or PEN because the payment 
amounts for these services are already subject to national limits or 
are determined on a national basis in the case of PEN.

C. Medical Supplies

    Medical supplies are miscellaneous supplies or devices including, 
but not limited to, casts, splints, and paraffin that are not already 
included under an existing fee schedule. In addition, intraocular 
lenses (IOLs) inserted during or subsequent to cataract surgery in a 
physician's office are considered medical supplies for payment purposes 
under this rule. For calendar year 1999, we propose statewide fee 
schedule amounts equal to the weighted average of allowed charges for 
the services. For these calculations, we will use reasonable charge 
data with dates of service from July 1, 1996 through June 30, 1997, 
increased by the change in the CPI-U for the 12-month period ending 
with June of 1998. The fee schedule amounts are to be updated on an 
annual basis in accordance with section 1842(s)(1) of the Act. 
Beginning with the second year of the fee schedule, the statewide fee 
schedule amounts for IOLs inserted in a physician's office are not to 
exceed the Medicare allowed payment amount for IOLs furnished by 
ambulatory surgical centers (ASCs).

D. Home Dialysis Supplies And Equipment

    These are services as defined in Sec. 410.52. For calendar year 
1999, we propose statewide fee schedule amounts equal to the weighted 
average of allowed charges for the services. For these calculations, we 
will use reasonable charge data with dates of service from July 1, 1996 
through June 30, 1997, increased by the change in the CPI-U for the 12-
month period ending with June of 1998. However, amount of payment under 
this methodology may not exceed the limit specified for equipment and 
supplies in Sec. 414.330(c)(2). The fee schedule amounts are to be 
updated on an annual basis in accordance with section 1842(s)(1) of the 
Act.

E. Therapeutic Shoes

    These services are defined in section 1861(s)(12) of the Act as 
``extra-depth shoes with inserts or custom molded shoes with inserts 
for an individual with diabetes.'' In addition, section 1833(o)(2)(D) 
of the Act provides that an individual ``may substitute modification of 
such shoes instead of obtaining one (or more, as specified by the 
Secretary) pairs of inserts (other than the original pair of inserts 
with respect to such shoes).'' Section 1833(o)(2)(A) of the Act 
establishes national payment limits for these services. These are upper 
payment limits, or ceilings, applied to the reasonable charges 
calculated for these services. The initial year, 1988 limits were $300 
for one pair of custom molded shoes (including any inserts that are 
provided initially with the shoes), $100 for one pair of extra-depth 
shoes (not including inserts provided with such shoes), and $50 for any 
pairs of inserts. In accordance with section 1833(o)(2)(C) of the Act, 
these national payment limits are increased on an annual basis by the 
same annual percentage increase provided for DME, rounded to the 
nearest multiple of $1. We may establish limits lower than these limits 
if shoes and inserts of appropriate quality are readily available at or 
below the limits. We have determined that, to the extent that 
reasonable charges for shoes and inserts are lower than the limitations 
contained in section 1834(o)(2)(A) of the Act, shoes and inserts are 
readily available at that level. Therefore, we find it appropriate and 
consistent with the

[[Page 40537]]

direction of the BBA to apply fee schedule amounts lower than the 
limits.
    For calendar year 1999, we propose statewide fee schedule amounts 
equal to the weighted average of allowed charges for the services. For 
these calculations, we will use reasonable charge data with dates of 
service from July 1, 1996 through June 30, 1997, increased by the 
change in the CPI-U for the 12-month period ending with June of 1998. 
In addition, the statewide fee schedule amounts may not exceed the 
national payment limits established under section 1833(o)(2) of the 
Act. The fee schedule amounts are to be updated on an annual basis in 
accordance with section 1842(s)(1) of the Act.

F. Parenteral and Enteral Nutrients (PEN)

    These services are covered by Medicare as prosthetic devices, which 
are defined in section 1861(s)(8) of the Act. However, PEN is excluded 
from the prosthetic and orthotic fee schedule payment methodology by 
section 1834(h)(4)(B) of the Act. In accordance with section 4551(b) of 
the BBA, the reasonable charges for PEN for the years 1998 through 2002 
may not exceed the reasonable charges determined for 1995. The 
prevailing charges for PEN are currently determined on a nationwide 
basis (that is, the 75th percentile of the customary charges of 
suppliers in the entire nation).
    As explained above, section 4551(b) of the BBA limits the 
reasonable charges calculated for 1998 through 2002 for PEN to the 
reasonable charges calculated in 1995. Therefore, payment under the 
reasonable charge methodology would be based on the lesser of the 
charges calculated for the given fee screen year (for example, 1999) or 
the charges calculated for 1995. For calendar year 1999, we propose 
nationwide fee schedule amounts equal to the lesser of the charges 
determined to be reasonable for the services during 1995 or the charges 
determined to be reasonable for the services during 1998 (using charge 
data with dates of service from July 1, 1996 through June 30, 1997), 
increased by the inflation adjustment factor that would have otherwise 
been used in calculating the 1999 IICs, in effect, the 1999 reasonable 
charges. Beginning the fee screen year 2003, the fee schedule amounts 
are to be updated on an annual basis in accordance with section 
1842(s)(1) of the Act.

G. Electromyogram Devices And Salivation Devices

    The decision regarding Medicare coverage of these services is made 
at the carrier's discretion. In any carrier area in which these 
services are covered, for calendar year 1999, we propose statewide fee 
schedule amounts equal to the weighted average of allowed charges for 
the services. For these calculations, we will use reasonable charge 
data with dates of service from July 1, 1996 through June 30, 1997, 
increased by the change in the CPI-U for the 12-month period ending 
with June of 1998. The fee schedule amounts are to be updated on an 
annual basis in accordance with section 1842(s)(1) of the Act.

H. Blood Products

    For calendar year 1999, we propose statewide fee schedule amounts 
equal to the weighted average of allowed charges for the blood products 
services. These services are not included under the definition of drugs 
and biologicals in section 1861(t)(1) of the Act. For these 
calculations, we will use reasonable charge data with dates of service 
from July 1, 1996 through June 30, 1997, increased by the change in the 
CPI-U for the 12-month period ending with June of 1998. The fee 
schedule amounts are to be updated on an annual basis in accordance 
with section 1842(s)(1) of the Act.

I. Transfusion Medicine

    For calendar year 1999, we propose statewide fee schedule amounts 
equal to the weighted average allowed charges for transfusion medicine 
services. For these calculations, we will use reasonable charge data 
with dates of service from July 1, 1996 through June 30, 1997, 
increased by the change in the CPI-U for the 12-month period ending 
with June of 1998. The fee schedule amounts are to be updated on an 
annual basis in accordance with section 1842(s)(1) of the Act.

III. 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.

IV. Regulatory Impact Statement

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Public 
Law 96-354). 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). The RFA requires agencies 
to analyze options for regulatory relief of small businesses. For 
purposes of the RFA, small entities include small businesses, non-
profit organizations and government agencies. Most hospitals and most 
other providers and suppliers are small entities, either by non-profit 
status or by having revenues of $5 million or less annually. For 
purposes of the RFA, all suppliers of Medicare Part B services 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. This 
analysis must conform to the provisions of section 603 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 expect suppliers of the Part B services listed in this preamble 
to be affected by this proposed rule. For 1999, the initial year of the 
fee schedules, we estimate that there will be a decrease of less than 1 
percent in total expenditures for the services addressed in this 
proposed rule. Therefore, we expect that the overall impact of this 
proposed rule will be negligible.
    With regard to IOLs, beginning with the second year of the fee 
schedules, we are proposing that the fee schedule amounts not exceed 
the Medicare allowed payment amount for IOLs furnished by ASCs. 
Therefore, it is likely that the IOL fee schedule amounts will decrease 
after the first year of the fee schedules. We do not believe, however, 
that limiting payment for IOLs furnished in a physician's office to the 
amount paid for IOLs furnished in an ASC will result in a lack of 
availability of IOLs to Medicare beneficiaries. The IOLs furnished by 
ASCs are the same devices that are furnished in a physician's office. 
The Medicare payment amount for IOLs furnished by ASCs is established 
through separate regulations and is based on the average price paid by 
ASCs for these devices. This amount should represent adequate payment 
to physicians for the cost of the IOL device that they insert in their 
office.

[[Page 40538]]

    We expect that total expenditures in the outlying fee schedule 
years of 2000 and beyond will continue to approximate total 
expenditures that would have otherwise been made under the reasonable 
charge methodology in part because the fee schedules are updated using 
the same factor used in updating the IICs under the reasonable charge 
methodology.
    For these reasons, we are not preparing an analysis for either the 
RFA or section 1102(b) of the Act because we have determined, and we 
certify, that this proposed rule would 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 
regulation was reviewed by the Office of Management and Budget.
    42 CFR part 414 would be amended as set forth below:

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

    1. The authority citation for part 414 continues to read as 
follows:

    Authority: Secs. 1102, 1871, and 1881(b)(1) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(1)).

Subpart A--General Provisions

    2. A new Sec. 414.70 is added to read as follows:


Sec. 414.70  Fee schedules for certain items and services previously 
paid on a reasonable charge basis.

    (a) General rule. For services defined in Sec. 400.202 of this 
chapter furnished on or after January 1, 1999, Medicare pays for the 
services as described in paragraph (b) of this section on the basis of 
80 percent of the lesser of--
    (1) The actual charge for the service; or
    (2) The fee schedule amount for the service, as determined in 
accordance with paragraphs (e) through (k) of this section.
    (b) Payment classification. (1) HCFA or the carrier determines fee 
schedules for the following categories of services:
    (i) Medical supplies, as specified in paragraph (e) of this 
section.
    (ii) Home dialysis supplies and equipment, as specified in 
paragraph (f) of this section.
    (iii) Therapeutic shoes, as specified in paragraph (g) of this 
section.
    (iv) Parenteral and enteral nutrients, equipment, and supplies 
(PEN), as specified in paragraph (h) of this section.
    (v) Electromyogram devices and salivation devices, as specified in 
paragraph (i) of this section.
    (vi) Blood products, as specified in paragraph (j) of this section.
    (vii) Transfusion medicine, as specified in paragraph (k) of this 
section.
    (2) HCFA designates the specific services in each category through 
program instructions.
    (c) Definition. Local payment amount means the weighted average 
reasonable charge for the service furnished in a State, the District of 
Columbia, or a United States territory during the period July 1, 1996 
through June 30, 1997, as determined by the carrier, increased by the 
change in the consumer price index for all urban consumers (CPI-U) for 
the 12-month period ending with June 1998.
    (d) Updating the fee schedule amounts. Except for the fee schedule 
amounts for services described in paragraph (h) of this section, for 
each year subsequent to 1999, the fee schedule amounts of the preceding 
year are updated by the percentage increase in the CPI-U for the 12-
month period ending with June of the preceding year. For services 
described in paragraph (h) of this section, for each year subsequent to 
2002, the fee schedule amounts of the preceding year are updated by the 
percentage increase in the CPI-U for the 12-month period ending with 
June of the preceding year.
    (e) Medical supplies. (1) This category includes, but is not 
limited to, cast supplies, splints, paraffin, and intraocular lenses 
(IOLs) inserted during or subsequent to cataract surgery in a 
physician's office.
    (2) Payment for medical supplies is made in a lump sum amount for 
purchase of the item based on the applicable fee schedule amount.
    (3) The fee schedule amount for an item furnished in 1999 is one of 
the following:
    (i) Within the continental United States, 100 percent of the local 
payment amount if the local payment amount is neither greater than the 
median nor less than 85 percent of the median of all local payment 
amounts for areas within the continental United States.
    (ii) Within the continental United States, 100 percent of the 
median of all local payment amounts for areas within the continental 
United States if the local payment amount exceeds the median of all 
local payment amounts for areas within the continental United States.
    (iii) Within the continental United States, 85 percent of the 
median of all local payment amounts for areas within the continental 
United States if the local payment amount is less than 85 percent of 
the median of all local payment amounts for areas within the 
continental United States.
    (iv) 100 percent of the local payment amount for areas outside the 
continental United States.
    (4) For each year subsequent to 1999, the fee schedule payment 
amounts for IOLs inserted in a physician's office may not exceed the 
Medicare allowed payment amount for IOLs furnished by ambulatory 
surgical centers.
    (f) Home dialysis supplies and equipment. (1) This category 
includes items and services as defined in Sec. 410.52 of this chapter.
    (2) Payment for home dialysis supplies and equipment is made in a 
lump sum based on the applicable fee schedule amount, but may not 
exceed the limit for equipment and supplies in Sec. 414.330(c)(2).
    (3) The fee schedule amount for a service furnished in 1999 is 
equal to the local payment amount.
    (g) Therapeutic shoes. (1) This category includes extra-depth shoes 
with inserts or custom molded shoes with inserts for an individual with 
diabetes, modifications of the shoes, and replacement inserts for the 
shoes.
    (2) Payment for therapeutic shoes is made in a lump sum based on 
the applicable fee schedule amount.
    (3) The fee schedule amount for payment for a service furnished in 
1999 is the lesser of--
    (i) The local payment amount; or
    (ii) The national payment limit specified in section 1833(o)(2) of 
the Act.
    (h) Parenteral and enteral nutrients, equipment, and supplies 
(PEN). (1) Payment for PEN is made in a lump sum based on the 
applicable fee schedule amount.
    (2) The fee schedule amount for payment for a service furnished in 
1999 is the lesser of--
    (i) The charge determined to be reasonable for the service during 
1995; or
    (ii) The charge determined to be reasonable for the service during 
1998, increased by the inflation adjustment factor used in calculating 
the 1999 IIC.
    (i) Electromyogram and salivation devices.
    (1) Payment for an electromyogram device or a salivation device is 
made in a lump sum for purchase of the device or on a monthly rental 
basis based on the applicable fee schedule amount.
    (2) The fee schedule amount for payment for an electromyogram 
device or a salivation device furnished in 1999 is one of the 
following:
    (i) Within the continental United States, 100 percent of the local 
payment

[[Page 40539]]

amount if the local payment amount is neither greater than the median 
nor less than 85 percent of the median of all local payment amounts for 
areas within the continental United States.
    (ii) 100 percent of the median of all local payment amounts for 
areas within the continental United States if the local payment amount 
within the continental United States exceeds the median of all local 
payment amounts for areas within the continental United States.
    (iii) 85 percent of the median of all local payment amounts for 
areas within the continental United States if the local payment amount 
within the continental United States is less than 85 percent of the 
median of all local payment amounts for areas within the continental 
United States.
    (iv) 100 percent of the local payment amount for areas outside the 
continental United States.
    (j) Blood products. (1) Payment for blood products is made in a 
lump sum based on the applicable fee schedule amount.
    (2) The fee schedule amount for payment for a blood product 
furnished in 1999 is one of the following:
    (i) Within the continental United States, 100 percent of the local 
payment amount if the local payment amount is neither greater than the 
median nor less than 85 percent of the median of all local payment 
amounts for areas within the continental United States.
    (ii) 100 percent of the median of all local payment amounts for 
areas within the continental United States if the local payment amount 
within the continental United States exceeds the median of all local 
payment amounts for areas within the continental United States.
    (iii) 85 percent of the median of all local payment amounts for 
areas within the continental United States if the local payment amount 
within the continental United States is less than 85 percent of the 
median of all local payment amounts for areas within the continental 
United States.
    (iv) 100 percent of the local payment amount for areas outside the 
continental United States.
    (k) Transfusion medicine. (1) Payment for transfusion medicine is 
made in a lump sum based on the applicable fee schedule amount.
    (2) The fee schedule amount for payment for transfusion medicine 
furnished in 1999 is one of the following:
    (i) Within the continental United States, 100 percent of the local 
payment amount if the local payment amount is neither greater than the 
median nor less than 85 percent of the median of all local payment 
amounts for areas within the continental United States.
    (ii) 100 percent of the median of all local payment amounts for 
areas within the continental United States if the local payment amount 
within the continental United States exceeds the median of all local 
payment amounts for areas within the continental United States.
    (iii) 85 percent of the median of all local payment amounts for 
areas within the continental United States if the local payment amount 
within the continental United States is less than 85 percent of the 
median of all local payment amounts for areas within the continental 
United States.
    (iv) 100 percent of the local payment amount for areas outside the 
continental United States.

Subpart E--Determination of Reasonable Charges Under the ESRD 
Program

    3. In Sec. 414.330 the introductory text of paragraph (a)(2) is 
revised to read as follows:


Sec. 414.330  Payment for home dialysis equipment, supplies, and 
support services.

    (a) * * *
    (2) Exception. If the conditions in paragraphs (a)(2)(i) through 
(a)(2)(iv) of this section are met, Medicare pays for home dialysis 
equipment and supplies on a fee schedule basis in accordance with 
Sec. 414.70, but the amount of payment may not exceed the limit for 
equipment and supplies in paragraph (c)(2) of this section.
* * * * *
(Catalog of Federal Domestic Assistance Programs No. 93.774, 
Medicare-Supplementary Medical Insurance Program)

    Dated: January 3, 1999.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
    Dated: February 25, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 99-19115 Filed 7-26-99; 8:45 am]
BILLING CODE 4120-01-P