[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Rules and Regulations]
[Pages 81674-81707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32506]



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Vol. 80

Wednesday,

No. 250

December 30, 2015

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 405 and 414





Medicare Program; Prior Authorization Process for Certain Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies; Final Rule

  Federal Register / Vol. 80 , No. 250 / Wednesday, December 30, 2015 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405 and 414

[CMS-6050-F]
RIN 0938-AR85


Medicare Program; Prior Authorization Process for Certain Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies

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

ACTION: Final rule.

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SUMMARY: This final rule establishes a prior authorization program for 
certain durable medical equipment, prosthetics, orthotics, and supplies 
(DMEPOS) items that are frequently subject to unnecessary utilization. 
This rule defines unnecessary utilization and creates a new requirement 
that claims for certain DMEPOS items must have an associated 
provisional affirmed prior authorization decision as a condition of 
payment. This rule also adds the review contractor's decision regarding 
prior authorization of coverage of DMEPOS items to the list of actions 
that are not initial determinations and therefore not appealable.

DATES: These regulations are effective February 29, 2016.

FOR FURTHER INFORMATION CONTACT:
    Maria Ciccanti, (410) 786-3107.
    Jennifer McCormick, (410) 786-2852.
    Lynne Zaccaria, (410) 786-2485.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    The purpose of this final rule is to implement a new prior 
authorization program aimed at reducing unnecessary utilization and 
aberrant billing of certain DMEPOS items. Section 1834(a)(15) of the 
Social Security Act (the Act) authorizes the Secretary to develop and 
periodically update a list of DMEPOS that the Secretary determines, on 
the basis of prior payment experience, are frequently subject to 
unnecessary utilization and to develop a prior authorization process 
for these items. This final rule implements that authority by 
interpreting ``frequently subject to unnecessary utilization,'' by 
specifying a list of items that meet our criteria, and by establishing 
a prior authorization process.
2. Summary of the Major Provisions
    The following provisions are addressed in this final rule:
     Establishment of a prior authorization process for DMEPOS 
items that are frequently subject to unnecessary utilization. We define 
``unnecessary utilization'' as the furnishing of items that do not 
comply with one or more of Medicare's coverage, coding, and payment 
rules. We believe a prior authorization process will ensure 
beneficiaries receive medically necessary care while minimizing the 
risk of improper payments, and will therefore protect both 
beneficiaries and the Medicare program.
     Creation of a Master List of certain DMEPOS items 
potentially subject to prior authorization. The final rule will create 
an initial Master List that includes items that meet the following 
criteria:
    ++ Appear on the DMEPOS Fee Schedule list.
    ++ Meet either of the following criteria:
    --Identified in a General Accountability Office (GAO) or Department 
of Health and Human Services Office of Inspector General (OIG) report 
that is national in scope and published in 2007 or later as having a 
high rate of fraud or unnecessary utilization.
    --Listed in the 2011 or later Comprehensive Error Rate Testing 
(CERT) program's Annual Medicare Fee-For-Service (FFS) Improper Payment 
Rate Report Durable Medical Equipment (DME) Report's Service Specific 
Overpayment Rate Appendix.
    We note that, in the proposed rule, this report was titled as 
stated in the previous sentence. However, for the purposes of this 
final rule, we are changing the name to the CERT Annual Medicare Fee-
For-Service (FFS) Improper Payment Rate Report DME and/or DMEPOS 
Service Specific Report(s). The Annual Medicare Fee-For-Service (FFS) 
Improper Payment Rate Report DME and/or DMEPOS Service Specific 
Report(s) will hereafter be referred to as the CERT DME and/or DMEPOS 
Service Specific Report(s). We believe that changing the term to 
Report(s) (rather than Appendix) and removing the Overpayment Rate 
wording could limit possible future confusion if the CERT DME and/or 
DMEPOS Service Specific report(s) are reported in the narrative rather 
than the appendices or if the name of the report changes in future 
annual publications.
    ++ Have an average purchase fee of $1,000 or greater (adjusted 
annually for inflation) or an average monthly rental fee schedule of 
$100 or greater (adjusted annually for inflation). (These dollar 
amounts are referred to as the payment threshold).
     Maintenance of the Master List of certain DMEPOS items 
potentially subject to prior authorization is conducted based on the 
following:
    ++ The Master List is self-updating annually. That is, items on the 
DMEPOS Fee Schedule that meet the payment threshold are added to the 
list when the item is listed in a future OIG or GAO report of a 
national scope or listed in a future CERT DME and/or DMEPOS Service 
Specific Report(s).
    ++ Items remain on the Master List for 10 years from the date the 
item was added to the Master List.
    ++ Items are updated on the Master List when the Healthcare Common 
Procedure Coding System (HCPCS) codes representing an item have been 
discontinued and cross-walked to an equivalent item.
    ++ Items are removed from the list sooner than 10 years if the 
purchase amount drops below the payment threshold (currently an average 
purchase fee of $1,000 or greater or an average monthly rental fee 
schedule of $100 or greater).
    ++ Items that age off the Master List because they have been on the 
list for 10 years can remain on or be added back to the Master List if 
a subsequent GAO/OIG, or CERT DME and/or DMEPOS Service Specific 
Report(s) identifies the item to be frequently subject to unnecessary 
utilization.
    ++ Items already on the Master List that are identified by a GAO/
OIG, or CERT DME and/or DMEPOS Service Specific Report(s) will remain 
on the list for 10 years from the publication date of the new 
report(s).
    ++ We will notify the public annually of any additions and 
deletions from the Master List by posting the notification in the 
Federal Register and on the CMS Prior Authorization Web site.
     The Required Prior Authorization List--Presence on the 
Master List will not automatically require prior authorization. In 
order to balance minimizing provider and supplier burden with our need 
to protect the Medicare program, we are initially implementing prior 
authorization for a subset of items on the Master List (hereafter 
referred to as ``Required Prior Authorization List'').
     The Prior Authorization Process--This provision requires 
that prior to furnishing the item and prior to submitting the claim for 
processing, a prior authorization requester must submit evidence that 
the item complies

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with all applicable Medicare coverage, coding, and payment rules. After 
receipt of all applicable required Medicare documentation, CMS or one 
of its review contractors will conduct a medical review and communicate 
a decision that provisionally affirms or non-affirms the request. We 
will issue specific prior authorization guidance in subregulatory 
communications.
     A provisional affirmation prior authorization decision is 
a condition of payment. We are finalizing the provision to 
automatically deny payment for a claim for an item on the Required 
Prior Authorization List that is submitted without a provisional 
affirmation prior authorization decision.
     A prior authorization decision is not a payment decision, 
and thus a prior authorization decision is not appealable. We have 
added new section 405.926(t) to our regulations to specify that a 
review contractor's prior determination of coverage is not an initial 
determination.
3. Summary of Costs, Benefits, and Transfers
    The overall economic cost of this final rule is approximately $1.3 
million in the first year. The 5 year cost is approximately $57 million 
and the 10 year cost 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 suppliers 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 FFS payments (note that not 
all improper payments are fraudulent).
    The overall benefits of this final rule include a change in billing 
practices that also enhances the coordination and collaboration of care 
between the primary care provider and the supplier to provide the most 
appropriate DMEPOS item to meet the needs of the beneficiary. The 
provider and supplier community will benefit from the increased 
education and outreach that is planned during year 1 of the prior 
authorization program.
    Savings, net of premium offsets, to the Medicare program due to 
reductions in payments to DMEPOS suppliers are estimated to be $10 
million in 2016, potentially rising over time to between $10 million 
and $110 million in 2025, yielding a 10-year annualized amount of $10 
to $68.1 million with a 7 percent discount rate or $10 to $71.4 million 
with a 3 percent discount rate.

B. Background

1. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS)
    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 42 CFR 
414.202 as equipment furnished by a supplier or a home health agency 
(HHA) that--
     Can withstand repeated use;
     Effective with respect to items classified as DME after 
January 1, 2012, has an expected life of at least 3 years;
     Is primarily and customarily used to serve a medical 
purpose;
     Generally is not useful to an individual in the absence of 
an illness or injury; and
     Is appropriate for use in the home.
    Section 1861(s)(9) of the Act provides for the coverage of leg, 
arm, back, and neck braces; and artificial legs, arms, and eyes, 
including replacement if required because of a change in the patient's 
physical condition. As indicated by section 1834(h)(4)(C) of the Act, 
together with certain shoes described in section 1861(s)(12) of the 
Act, these items are often referred to as ``orthotics and 
prosthetics.'' Under section 1834(h)(4)(B) of the Act, the term 
''prosthetic devices'' does not include parenteral and enteral 
nutrition, supplies and equipment, and implantable items payable under 
section 1833(t) of the Act.
    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.
    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, other conditions of payment must be satisfied for 
the claim to be paid. These conditions of payment vary by item, but are 
specified in statute and in CMS regulations. They are further detailed 
in our manuals and in local and national coverage determinations. Among 
other things, there must be a valid order for the item obtained from a 
physician or, when permitted, an eligible professional.
    Once Medicare coverage, coding, and payment rules are satisfied, 
the supplier dispenses the item to the beneficiary. In general, items 
are delivered directly to the beneficiary or to an authorized 
representative, delivered to the beneficiary by shipping or delivery 
service, or delivered to a nursing facility on behalf of the 
beneficiary. The supplier is required to maintain proof of delivery in 
its files in keeping with the supplier standards contained in 42 CFR 
424.57(c). The claim is then submitted to the Medicare Administrative 
Contactor (MAC) for payment. If a claim is denied, the beneficiary or 
supplier may appeal the MAC's decision. Claims may also be selected for 
pre- or post-payment review. As discussed in the following section, the 
prior authorization process will require applicable documentation to be 
submitted for review before an item is delivered to the beneficiary.
2. DMEPOS Payment Rules--Advance Determination of Coverage
    Section 1834(a)(15) of the Act authorizes the Secretary to develop 
and periodically update a list of DMEPOS items that the Secretary 
determines, on the basis of prior payment experience, are frequently 
subject to unnecessary utilization and to develop a prior authorization 
process for these items.
    This final rule implements that authority by interpreting 
``frequently subject to unnecessary utilization,'' specifying a list of 
items that meet our criteria, and establishing a prior authorization 
process.
3. Improper Payments for DMEPOS Items
    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.
    Payment made for the furnishing of an item that does not meet one 
or more of Medicare's coverage, coding, and

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payment rules is an improper payment. The CERT program measures 
improper payments in the Medicare FFS program. CERT is designed to 
comply with the Improper Payments Elimination and Recovery Act of 2010 
(IPERA) (Pub. L. 111-204).
    For the 2014 CERT reporting period, approximately 5.1 billion 
dollars was improperly paid for DMEPOS items. This represents a 53.1 
percent improper payment rate for DMEPOS and represents 10.4 percent of 
the overall improper payment rate.\1\ Ninety-two percent of DMEPOS 
improper payments were due to insufficient documentation.\2\
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    \1\ The Medicare Fee-For-Service 2014 Improper Payments Report: 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/CERT/CERT-Reports-Items/Medicare-FeeforService-2014-Improper-Payments-Report.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=descending 
Accessed July 30, 2015.
    \2\ The Supplementary Appendices for the Medicare Fee-for-
Service 2014 Improper Payment Report retrieved January 2015 from 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/CERT/CERT-Reports-Items/Downloads/AppendicesMedicareFee-for-Service2014ImproperPaymentsReport.pdf?agree=yes&next=Accept.
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    Given that for the 2014 reporting period, 92 percent of the DMEPOS 
improper payment rate is attributed to insufficient documentation, we 
believe we must develop a mechanism for DMEPOS to have sufficient 
associated documentation before the item is furnished and before the 
claim is submitted for payment. We believe a prior authorization 
program can accomplish this by reviewing many of the required 
documentation elements outlined in applicable Medicare policies before 
the item is furnished and before the claim is submitted for payment.
    Prior authorization has the added benefit of providing a supplier 
some assurance of payment for items receiving a provisional affirmation 
decision. (However, as described later in this section, certain 
requirements--such as proof of delivery--can only be evaluated after 
the claim has been submitted). In addition, beneficiaries will have 
information regarding coverage prior to receiving the item, and will 
benefit by knowing in advance of receiving an item, if they will incur 
financial liability for non-covered items. If a supplier does not 
submit all of the required documentation with its first prior 
authorization request, it will be notified of the missing documentation 
and may resubmit its request. We proposed that requesters be permitted 
to submit a prior authorization request an unlimited number of times.
    We note claims for which there is a provisional affirmation prior 
authorization decision will be afforded some protection from future 
audits, both pre- and post-payment. However, review contractors may 
audit claims if potential fraud, inappropriate utilization or changes 
in billing patterns are identified. In addition, IPERA requires all 
federal agencies to evaluate their programs for improper payments. The 
CMS CERT program reviews a stratified, random sample of claims annually 
to identify and measure improper payments. It is possible for a DMEPOS 
claim subject to prior authorization to fall within the sample. In this 
situation, the subject claim would not be protected from the CERT 
audit. While implementing a new prior authorization program will 
require suppliers to modify their processes, we believe suppliers can 
minimize disruption to their business processes by learning in advance 
what information or documentation is required for coverage of specific 
items. We will partner with the supplier, provider, and beneficiary 
community to make sure they have all the information about the new 
program needed to submit a prior authorization request. We believe that 
some assurance of payment and some protection from future audits may 
ultimately reduce burdens associated with denied claims and appeals.
4. Access to Care
    Of the approximately 37 million beneficiaries enrolled in the 
Medicare FFS program in 2013, 11 million had a DMEPOS claim.\3\ 
Beneficiaries utilized approximately 91,000 DME suppliers.\4\ For 2014, 
there were approximately 37.5 million beneficiaries enrolled in the 
Medicare FFS program and 10 million had a DMEPOS claim. Beneficiaries 
utilized approximately 90,000 DME suppliers.\5\
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    \3\ CY 2013 Data from OnePI Business Objects, NCH DMEPOS claims, 
obtained January 16, 2015: All NCH DMEPOS Claims dated between 
January 1, 2013 to December 31, 2013: 10,680,646 unique 
beneficiaries.
    \4\ CMS Fast Facts retrieved January 2015 from http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMS-Fast-Facts/index.html.
    \5\ CMS Fast Facts retrieved October 2015 from http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMS-Fast-Facts/index.html and CY 2014 Data from OnePI 
Business Objects, NCH DMEPOS claims, obtained October 15, 2015: All 
NCH DMEPOS Claims dated between January 1, 2014 to December 31, 
2014.
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    We have experience in implementing a prior authorization program 
that enables beneficiaries to receive a needed DME item, without access 
issues or barriers to care. We have monitored the beneficiary 
experience in The Medicare Prior Authorization of Power Mobility 
Devices (PMDs) Demonstration, which began in 2012. Prior to 
implementation, we spoke to numerous Medicare beneficiary groups that 
expressed support for the demonstration. Feedback from beneficiaries 
has been largely positive. We are not aware of any access issue or 
barriers to care created by the prior authorization process for PMDs.
    The Medicare Prior Authorization of PMDs Demonstration was 
initially implemented in California, Illinois, Michigan, New York, 
North Carolina, Florida, and Texas. Since implementation, we have 
observed a decrease in expenditures for PMDs in the demonstration 
states and non-demonstration states. Based on claims processed from 
September 1, 2012 through November 14, 2014, monthly expenditures for 
the PMD codes included in the demonstration decreased from $12 million 
to $3 million in the demonstration states and from $20 million in 
September 2012 to $6 million in June 2014 in the non-demonstration 
states. Subsequently, we expanded the demonstration to 12 additional 
states on October 1, 2014, and on July 15, 2015, we extended the 
demonstration for all 19 states until August 31, 2018.\6\ In 2013, 
there were approximately 91,000 national DMEPOS suppliers which may 
have adjusted their billing practices nationwide as a result of the 
demonstration (not just in the demonstration states that included 
16,000 suppliers). This may have led to the savings documented in both 
the demonstration and non-demonstration states. As stated previously, 
savings were realized in both the demonstration and non-demonstration 
states. The decrease in spending may be due only in part to the 
demonstration, as other changes in policies regulating the provision of 
DMEPOS also took effect during this time. In addition, suppliers may 
have also started complying with CMS policies based on their 
experiences with prior authorization in the demonstration states.\7\
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    \6\ https://www.federalregister.gov/articles/2015/07/15/2015-17365/medicare-program-extension-of-medicare-prior-authorization-for-power-mobility-devices-pmds.
    \7\ Medicare Prior Authorization of Power Mobility Devices 
Demonstration Status Update retrieved January 2015 from http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/MedicalReview/Downloads/PMDDemoDecemberStatusupdate12302014.pdf.
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    We promote a high quality health care system by aiming for better 
care at lower costs and for improved health outcomes. Crucial to this 
is maintaining beneficiary access to quality care. We

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believe the Medicare Prior Authorization of PMDs Demonstration shows 
that by collaborating with beneficiaries and beneficiary advocacy 
groups, we can develop a prior authorization program that contributes 
to higher quality health care at lower costs without compromising 
access to care. This final rule creates a prior authorization program 
that supports our goals and makes sure beneficiaries are not hindered 
from accessing necessary DMEPOS items and services when they need them.

II. Provisions of the Proposed Rule and Analysis of and Responses to 
Public Comments

    In the May 28, 2014 Federal Register (79 FR 30511 through 30531), 
we published a proposed rule titled ``Medicare Program; Prior 
Authorization Process for Certain Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies Items.'' In response to the 
publication of that proposed rule, we received 1,009 comments from the 
prosthetics and orthotics community, beneficiaries (including amputees) 
and beneficiary advocacy groups, professional and trade organizations, 
physicians and other clinicians, suppliers, and other interested 
parties.
    In the following sections of this final rule, we include a summary 
of the provisions of the May 28, 2014 proposed rule, the public 
comments received, our responses, and our final decisions.

A. Proposed Prior Authorization for Certain DMEPOS Items

    In Sec.  414.234(a), we proposed that ``prior authorization'' be 
defined as a process through which a request for provisional 
affirmation of coverage is submitted to CMS or its contractors for 
review before the item is furnished to the beneficiary and before the 
claim is submitted for processing. We also proposed that ``provisional 
affirmation'' be defined as a preliminary finding that a future claim 
meets Medicare coverage, coding, and payment rules.
    We also proposed in Sec.  414.234(a) that ``unnecessary 
utilization'' be defined as the furnishing of items that do not comply 
with one or more of Medicare's coverage, coding, and payment rules. In 
accordance with section 1834(a)(15)(A) of the Act, we proposed to use 
``prior payment experience'' to establish which items are 
``frequently'' subject to unnecessary utilization. The Government 
Accountability Office (GAO), the Department of Health and Human 
Services' (HHS) Office of Inspector General (OIG), and CMS through CERT 
reports publish analyses of prior payment data and identify Medicare 
DMEPOS items that have high improper payment rates. We proposed that 
since the findings in these reports are the result of analysis of prior 
payment experience, we would use these reports to establish which items 
are frequently subject to unnecessary utilization. We discuss the use 
of GAO, OIG, and CERT reports to establish Master List inclusion 
criteria in section II.B. of this final rule.
    We strive in every case to pay the right amount to a legitimate 
provider, for covered, correctly coded, and correctly billed services 
provided to an eligible beneficiary. We believe that a prior 
authorization process for DMEPOS items frequently subject to 
unnecessary utilization can help suppliers comply with Medicare's 
coverage, coding, and payment rules by having the required information 
and documentation reviewed before the item is furnished and before the 
claim is submitted. In addition, claims for which there is a 
provisional affirmation prior authorization decision will be afforded 
some protection from future audits. The review contractors may continue 
to audit claims if potential fraud, inappropriate utilization or 
changes in billing patterns are identified. In addition, IPERA requires 
all federal agencies to evaluate their programs for improper payments. 
The CMS CERT program reviews a stratified, random sample of claims 
annually to identify and measure improper payments. It is possible for 
a DMEPOS claim subject to prior authorization to fall within the 
sample. In this situation, the subject claim would not be protected 
from the CERT audit. In addition, OIG's authority to audit claims is 
not impacted by the protection from future audits provided by the 
provisional affirmation prior authorization decision.
    When unnecessary utilization (as defined by this final rule) of a 
covered Medicare service, item or device is identified, we have a 
responsibility to evaluate the errors and develop processes to mitigate 
or reduce the unnecessary utilization. This is sometimes difficult 
since we must not only safeguard the Medicare program, but we must also 
safeguard beneficiaries' full access to the covered care they need. We 
believe using a prior authorization process would help to make sure 
items frequently subject to unnecessary utilization are furnished in 
compliance with applicable Medicare coverage, coding, and payment rules 
before they are delivered. This would safeguard against unnecessary 
utilization while also protecting beneficiaries' access to medically 
necessary items. We believe this is an effective way to reduce or 
prevent improper payments for unnecessary DMEPOS items while preserving 
beneficiary access to quality care and services.
    The following summarizes comments on our proposed definitions of 
``prior authorization,'' ``provisional affirmation,'' and ``unnecessary 
utilization'' at Sec.  414.234(a).
    Comment: While some commenters agreed with the proposed definition 
of ``unnecessary utilization,'' the majority disagreed. We defined 
unnecessary utilization as the furnishing of items that do not comply 
with one or more of Medicare's coverage, coding, and payment rules. We 
did not receive any suggestions for alternate definitions of 
unnecessary utilization. However, several commenters noted that 
unnecessary utilization is not a question of beneficiaries receiving 
unnecessary DMEPOS items but instead a lack of provider or supplier 
clarity on how to document medical necessity, and that the lack of 
documentation does not equal unnecessary utilization.
    Response: We acknowledge ``unnecessary utilization'' may be 
interpreted from several perspectives. Our proposed definition is 
constructed for the purpose of implementing Medicare coverage and 
payment policies. A DMEPOS item may be medically necessary for a 
particular beneficiary, but without sufficient documentation to support 
compliance with Medicare coverage and payment policies, we cannot 
confirm whether Medicare payment for a particular item is appropriate. 
Furthermore, if the provider or supplier has not complied with Medicare 
coverage, coding or payment rules, we do not have authority to make 
payment. Accordingly, we interpret and define the phrase ``unnecessary 
utilization'' to mean the furnishing of items that do not comply with 
one or more of Medicare's coverage, coding, and payment rules.
    We are finalizing the definitions of ``prior authorization,'' 
``provisional affirmation,'' and ``unnecessary utilization'' at Sec.  
414.234(a) as proposed. In addition, we are finalizing the use of GAO, 
OIG, and CERT reports to establish prior payment history. Public 
comments and our responses pertaining to the use of GAO, OIG, and CERT 
reports are described in section II.B. of this final rule.

[[Page 81678]]

B. Proposed Criteria for Inclusion on the Master List of DMEPOS Items 
Frequently Subject to Unnecessary Utilization (Master List)

1. Inclusion Criteria
    In the May 28, 2014 proposed rule (79 FR 30516 through 30519), we 
proposed a Master List of initial items that, based on proposed 
criteria, are frequently subject to unnecessary utilization, hereafter 
referred to as the ``Master List.'' We solicited public comments on the 
proposed inclusion criteria and the proposed Master List maintenance 
process. We proposed to include an item on the initial Master List if 
the item appears on the DMEPOS Fee Schedule list, meets one of the two 
criteria described later in this section, and has an average purchase 
fee of $1,000 or greater or an average rental fee schedule of $100 or 
greater. We refer to these dollar amounts as the payment threshold. We 
stated that having the payment threshold for DMEPOS items included on 
the Master List would allow us to focus our limited resources on items 
for which prior authorization will result in the largest potential 
savings for the Medicare program. The DMEPOS Fee Schedule is updated 
annually and lists Medicare allowable pricing for DMEPOS, including the 
full payment amount for capped rental items. For administrative 
simplicity, we proposed that we would not annually adjust the average 
purchase fee of $1,000 or greater or the average monthly rental fee 
schedule of $100 or greater threshold for inflation. Under our 
proposal, any changes to this threshold would be proposed through 
notice and comment rulemaking.
    In addition to the payment threshold, we proposed that the item 
must meet one of the two following criteria:
     The item is identified in a GAO or HHS OIG report that is 
national in scope and published in 2007 or later as having a high rate 
of fraud or unnecessary utilization.
     The item is listed in the 2011 or later published CERT 
program's Annual Medicare Fee-For-Service (FFS) Improper Payment Rate 
Report Durable Medical Equipment (DME) Service Specific Overpayment 
Rate Appendix.
    We proposed using reports dated from 2007 or later because the GAO 
and OIG do not always repeat analysis of specific items annually. We 
believed it necessary to look back a number of years to capture 
findings on a variety of DMEPOS items. The GAO audits agency operations 
to determine whether federal funds are being spent efficiently and 
effectively as well as identifies areas where Medicare may be 
vulnerable to fraud and improper payments. Section 1834(a)(15) of the 
Act directs the Secretary to use prior payment experience as a basis 
for identifying DMEPOS items frequently subject to unnecessary 
utilization. We believe utilizing GAO evaluations that identify DMEPOS 
items as having a high rate of fraud or unnecessary utilization 
accomplishes this directive because GAO's analysis includes an 
evaluation of paid claims history.
    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.
    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 final rule which is the 2014 CERT Report. 
We believe limiting this criterion to items listed in the 2011 or later 
CERT DME and/or DMEPOS Service Specific Report(s) (and also meeting the 
payment threshold) accomplishes the directive of section 1834(a)(15) of 
the Act. Interested parties can access the CERT reports at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/CERT/CERT-Reports.html.
    We proposed that nationwide findings by OIG or by GAO of 
potentially high rates of fraud, unnecessary utilization, or aberrant 
or improper billings, and CERT reports of the incidence and rates of 
improper payments are good indicators that an item is ``frequently 
subject to unnecessary utilization'' as set out in section 1834(a)(15) 
of the Act. The use of GAO, OIG, and CERT reports to establish which 
items are frequently subject to unnecessary utilization are discussed 
in detail in section II.B. of the proposed rule (79 FR 30513).
2. Maintenance of the Master List
    In the May 28, 2014 proposed rule (79 FR 30514), we described the 
proposed Master List maintenance process. We proposed the following:
     The Master List is self-updating annually. That is, items 
on the DMEPOS Fee Schedule that meet the payment threshold are added to 
the list when the item is listed in a future OIG or GAO report of a 
national scope or a future CERT DME and/or DMEPOS Service Specific 
Report(s).
     Items remain on the Master List for 10 years from the date 
the item was added to the Master List.
     Items are updated on the Master List when the Healthcare 
Common Procedure Coding System (HCPCS) code representing an item has 
been discontinued and cross-walked to an equivalent item.
     Items are removed from the list sooner than 10 years if 
the purchase amount drops below the payment threshold (an average 
purchase fee of $1,000 or greater or an average monthly rental fee 
schedule of $100 or greater).
     Items age off the Master List because they have been on 
the list for 10 years and can remain on or be added back to the Master 
List if a subsequent GAO/OIG or CERT DME and/or DMEPOS Service Specific 
Report(s) identifies the item to be frequently subject to unnecessary 
utilization.
     Items already on the Master List that are identified by a 
GAO/OIG, or CERT DME and/or DMEPOS Service Specific Report(s) will 
remain on the list for 10 years from the date of the new report.
     We notify the public annually of any additions and 
deletions from the Master List by posting the notification in the 
Federal Register and on the CMS Prior Authorization Web site.
    In the proposed rule we stated that we selected a 10-year timeframe 
because we believe 10 years without a finding that the item has a 
potentially high rate of fraud, unnecessary utilization or aberrant or 
improper billing makes the original placement no longer current.
    We received the following comments on the proposed Master List 
inclusion criteria and Master List maintenance process in section 
414.234(b) and our responses follow:
    Comment: A few commenters suggested we apply the Secretary's 
authority from section 1834(a)(15)(B) of the Act rather than apply the 
Secretary's authority from section 1834(a)(15)(A) of the Act, which is 
the basis for this final rule. Section 1834(a)(15)(B) of the Act allows 
the Secretary to develop a list of suppliers that have had a 
substantial number of claims denied on the basis of the application of 
section 1862(a)(1) or that have a pattern of overutilization resulting 
from the business practice of the supplier.
    Response: We conducted an analysis of the improper payment rate for 
DMEPOS items listed on the CERT DME and/or DMEPOS Service Specific 
Report(s) as well as findings from 2007 or later GAO/OIG reports and 
found that the errors generally did not trend to

[[Page 81679]]

specific suppliers. We found that the root cause of the improper 
payments was lack of appropriate documentation and the issue was 
widespread. The list of DMEPOS items focuses our efforts on the root 
cause of improper payments-- inadequate documentation. In addition, 
several suppliers have indicated they prefer some assurance of payment, 
which prior authorization affords. By focusing on items rather than 
aberrant suppliers, more suppliers will benefit from documentation 
education and some assurance of payment that prior authorization 
provides.
    Comment: Some commenters stated that the proposed payment threshold 
was too low; other commenters stated that there should be a separate 
threshold for specific items on the proposed Master List. For example, 
several commenters suggested that the payment threshold should be 167 
percent of the Medicare average purchase price for the proposed 
prosthetic codes on the proposed Master List. Other commenters 
expressed concerns regarding the threshold and competitive bidding, 
stating that some DMEPOS items in some competitive bidding areas and in 
19 of the largest states for traditional Medicare are under this $100 
rental-rate threshold. Commenters requested that CMS clarify which 
geographical areas and fee schedules were used to calculate the 
proposed threshold. Commenters were also concerned that the proposed 
threshold may cause suppliers to deny Medicare beneficiaries their 
DMEPOS supplies. Several commenters were concerned that CMS proposed no 
annual adjustment in payment threshold for inflation. Commenters also 
suggested that any changes to the threshold should be done through 
public notice and comment.
    Response: We conducted a return on investment analysis and found 
that we realize savings when items with an average rental price of $100 
monthly or an average payment price of $1,000 are subject to prior 
authorization. If we went to higher thresholds, we noted that many of 
the DMEPOS items known to have an associated high improper payment rate 
would not be included. If we went to lower thresholds, we did not 
realize the expected savings to support implementation of a prior 
authorization. For example, applying a payment threshold of several 
thousand dollars would not capture many of the DMEPOS items known to 
have associated high improper payments such as continuous positive 
airway pressure (CPAP). While pricing for Competitive Bidding areas may 
differ, we did not use particular geographical areas to determine the 
payment and rental threshold. Instead, we selected the payment 
threshold after evaluating the average payment and rental fees for all 
the states on the Medicare DMEPOS fee schedule.\8\ We calculated the 
average payment and rental fees by averaging the sum of all the states' 
fees and then dividing the sum by the total number of states, including 
the District of Columbia, Puerto Rico, and the Virgin Islands.
---------------------------------------------------------------------------

    \8\ Medicare DMEPOS Fee Schedule. Accessed 10/13/15: https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/DMEPOSFeeSched/DMEPOS-Fee-Schedule-Items/DME15-A.html?DLPage=1&DLEntries=10&DLSort=2&DLSortDir=descending.
---------------------------------------------------------------------------

    We believed using the payment threshold as described would allow us 
to focus our limited resources on the more expensive DMEPOS items 
frequently subject to unnecessary utilization. However, we agree with 
the commenters who believed a fixed-payment threshold would not be 
appropriate in future years. While there were several price points 
suggested, we have decided that the best solution would be to keep the 
current payment threshold, but adjust it annually for inflation. The 
DMEPOS Fee Schedule is updated every year and announced in November 
with an effective date of January 1. In accordance with the statutory 
sections 1834(a)(14) and 1886(b)(3)(B)(xi)(II) of the Act, the DMEPOS 
fee schedule amounts are updated annually by the percentage increase in 
the consumer price index for all urban consumers (United States city 
average) or CPI-U for the 12-month period ending with June of the 
previous year, adjusted by the change in the economy-wide productivity 
equal to the 10-year moving average of changes in annual economy-wide 
private non-farm business multifactor productivity (MFP). For example, 
for CY 2015, the MFP adjustment is 0.6 percent and the CPI-U percentage 
increase is 2.1 percent. Thus, the 2.1 percentage increase in the CPI-U 
is reduced by the 0.6 percentage increase in the MFP resulting in a net 
increase of 1.5 percent for the update factor. For CY 2015, the update 
factor of 1.5 percent was applied to the applicable CY 2014 DMEPOS fee 
schedule amounts.
    In response to public comment, we will make an annual inflation 
adjustment to the payment threshold. This adjustment will be the same 
percentage as the DMEPOS fee schedule annual adjustments. This 
adjustment will apply to the Master List maintenance process as well. 
Specifically, items already on the Master List with an average rental 
price that drops below $100 (adjusted for inflation) or average 
purchase price that drops below $1,000 (adjusted for inflation) will be 
removed from the list.
    We disagree with the commenter that stated that the payment 
threshold may cause suppliers to deny Medicare beneficiaries their 
DMEPOS items. The payment threshold does not establish a new price for 
the DMEPOS; rather it establishes the criteria to initiate a prior 
authorization process. The PMD demonstration has shown that unnecessary 
utilization has decreased while beneficiaries have continued to receive 
a PMD when medically necessary.\9\ However, we do believe that the 
proposed prior authorization timelines, 10 business days for an initial 
prior authorization decision to be returned to the requester, may 
create some access or barriers to care. To address this, we are not 
finalizing the proposed prior authorization timelines. This is 
discussed further in section II.E. of this final rule. Finally, while 
the payment threshold would adjust annually for inflation, a change to 
the threshold base would require new rulemaking.
---------------------------------------------------------------------------

    \9\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/Downloads/PMDDemoDecemberStatusupdate12302014.pdf. Accessed 10/13/
15.
---------------------------------------------------------------------------

    Comment: Some commenters disagreed with the use of the OIG/GAO 
reports as Master List inclusion criteria. For example, several 
commenters stated that the OIG/GAO reports are arbitrary and were not 
open for public comment. Other commenters expressed concern with the 
age of the OIG/GAO reports used. Many commenters believed that the OIG 
data analysis misrepresented utilization and Medicare spending for 
certain items on the list especially lower-limb prostheses.
    Some commenters disagreed with the use of the CERT 2011 report or 
later as Master List inclusion criteria stating that some items on the 
2011 do not appear on later reports, indicating that policy or other 
factors have already reduced the improper payment rate for those items. 
Others believed that the sample size for the CERT reports is too small 
to conclude improper payment rates. Several commenters recommended that 
CMS consider using more recent CERT reports as well as internal data 
sources. Other commenters stated that CMS should look into the reasons 
for the high error rates for the proposed Master list items, such as, 
overly complex regulations, a need for targeted education to medical 
professionals and suppliers, and the misapplication of policies by CERT 
personnel.

[[Page 81680]]

    Response: The mission of the OIG and GAO is to protect the 
integrity and improve the efficiency of HHS programs, including 
Medicare. We disagree with the commenter who stated that the OIG/GAO 
report topics selected were arbitrary. For example, the OIG publishes 
their work plan annually. Some of their reports are statutorily 
required, while others are based on known program vulnerabilities. Some 
other reports are based on congressional requests which are sometimes 
made public. Disagreements with the findings of their reports are 
outside the scope of this final rule. We proposed using reports dated 
from 2007 or later because GAO/OIG do not always repeat an analysis of 
specific items annually and it is necessary to look back a number of 
years to capture findings on a variety of DMEPOS items.
    We disagree with the commenter that stated the CERT sample was too 
small. The CERT sample is stratified so that the sample and its 
findings are representative of the universe of Medicare FFS claims; we 
believe using stratification provides greater precision and that using 
these tools provides validity to the criteria. In addition to these 
criteria, we may choose to take current claims data into consideration 
when determining which Master List item(s) will be on the Required 
Prior Authorization List.
    Items appearing on earlier CERT reports but not later ones will 
stay on the Master List for 10 years from their inclusion date. While 
some commenters believed an item no longer appearing in the CERT report 
should be dropped from the Master List, we believe the item should 
remain on the list to assure that the improved billing practice is 
sustained over time.
    In response to the commenters who stated that we should look into 
the reasons for the high error rates for the proposed Master list 
items, such as: Having overly complex regulations; lacking targeted 
education to medical professionals and suppliers; and misapplying 
policies, we conduct analyses on the root causes for high improper 
payment rates, including CMS policies, and auditor application of the 
policies to their reviews. Medicare review contractors undergo frequent 
education and inter-rater reliability assessments to assure consistency 
in review approaches. Inter-rater reliability assessment is a 
performance measurement tool used to assess the level of consistency 
among medical review staff and adherence to organizational standards. 
It is used to promote quality and consistency in reviews. Where 
findings indicate that the problem may be overly complex CMS policies, 
we initiate policy revision. A recent example is the substantially 
increased improper payment rate for home health services published in 
the 2013 Annual CERT report. In response, we published a final rule in 
November 2014 that simplified the home health service face-to-face 
documentation requirements because most of the increased errors were 
related to the face-to-face documentation.
    We believe using both the CERT report and the OIG/GAO reports allow 
us to create safeguards for a broader category of items.
    Comment: Some commenters disagreed with a self-updating Master 
List. Several commenters suggested that the public should have input 
regarding the Master List updates. Commenters also suggested that the 
Master List be updated more frequently (that is, quarterly). Some 
recommended that the 10-year timeframe for removal of items from the 
Master List is too long and arbitrary.
    Response: We respectfully disagree. We believe an annual update 
aligns best with the annual publication of the fee schedule. A more 
frequent update would be administratively burdensome to suppliers, 
providers, and CMS. We are finalizing the Master List maintenance 
procedure; all new items that meet the inclusion criteria will be added 
to the Master List on an annual basis.
    We recognize commenters requested public input on Master List 
updates. However, we respectfully disagree. We believe by the nature of 
the criteria, the Master List is inherently self-updating. We note that 
there will be no discretion about which items are added or updated 
because it will be based on the inclusion criteria about which the 
public provided comment. However, inclusion on the Master List does not 
mean that the item will automatically be subject to prior 
authorization. (Only a subset of the Master List items will be selected 
and added to the ``Required Prior Authorization List.'' This is further 
discussed in section II.D. of this final rule.) We believe 10 years 
without a finding that the item has a potentially high rate of fraud, 
unnecessary utilization or aberrant or improper billing makes the 
original placement no longer current. We recognize some commenters 
believe 10 years is too long, but this timeframe will enable us to have 
a thorough and complete Master List. However, we may choose to take 
current claims data into consideration when determining which items 
will be on the Required Prior Authorization List.
    We are finalizing the Master List inclusion criteria and Master 
List maintenance process as proposed in section 414.234(b). Section 
1834(a)(15)(A) of the Act requires us to use ``prior payment history'' 
when identifying DMEPOS items frequently subject to unnecessary 
utilization. We believe using past and future GAO and OIG reports as 
well as CERT DME data is a way to meet this requirement.
    We are finalizing the Master List inclusion criteria and Master 
List maintenance process as proposed in section 414.234(b). In 
addition, we are finalizing the proposed payment threshold, but are 
including an annual adjustment for inflation as stated in revised 
section 414.234(b)(1). The adjusted payment threshold will apply to the 
inclusion criteria as well as the Master List maintenance process. We 
are also finalizing our proposal to notify the public annually of any 
additions and deletions from the Master List by posting the 
notification in the Federal Register and on the CMS Prior Authorization 
Web site, as stated in section 414.234(f)(2).

C. Proposed List of DMEPOS Items Frequently Subject to Unnecessary 
Utilization (Master List)

    In the May 28, 2014 proposed rule (79 FR 30516 through 30519), we 
proposed a Master List of Items Frequently Subject to Unnecessary 
Utilization. There have been several reports that were national in 
scope and published by the HHS OIG since 2007 identifying DMEPOS items 
that meet the payment threshold and are frequently subject to 
unnecessary utilization. They are as follows:
     An August 2011 OIG report titled ``Questionable Billing by 
Suppliers of Lower Limb Prostheses'' found that between 2005 and 2009, 
Medicare spending for lower limb prostheses increased 27 percent, from 
$517 million to $655 million.\10\ During the same time period, the 
number of Medicare beneficiaries receiving lower limb prostheses 
decreased by 2.5 percent, from almost 76,000 to about 74,000. The 
report cited several examples of unnecessary utilization.
---------------------------------------------------------------------------

    \10\ OIG, Questionable Billing By Suppliers Of Lower Limb 
Prostheses. OEI-02-10-00170, August 2011.
---------------------------------------------------------------------------

    One finding, billing for prostheses when the beneficiary had no 
claims from the referring physician, raised questions about whether the 
physician ever evaluated the beneficiary and whether the billed devices 
were medically necessary. Another finding related to billing for a high 
percentage

[[Page 81681]]

of beneficiaries with no history of an amputation or missing limb also 
raised questions about medical necessity. These findings based on prior 
payment history indicate that certain lower limb prostheses are 
frequently subject to questionable utilization.
     A July 2011 OIG report titled ``Most Power Wheelchairs in 
the Medicare Program Did Not Meet Medical Necessity Guidelines'' found 
that 61 percent of power wheelchairs provided in the first half of 2007 
were medically unnecessary or lacked sufficient documentation to 
determine medical necessity.\11\ This 61 percent accounted for $95 
million of the $189 million allowed DMEPOS claims in that period of 
time.
---------------------------------------------------------------------------

    \11\ OIG, Most Power Wheelchairs In The Medicare Program Did Not 
Meet Medical Necessity Guidelines. OEI-04-09-00260, July 2011.
---------------------------------------------------------------------------

    There were two previous OIG reports based on the same sample of 
claims that found noncompliance problems with documentation 
requirements and coding requirements (``Medicare Power Wheelchair 
Claims Frequently Did Not Meet Documentation Requirements'' \12\ and 
``Miscoded Claims for Power Wheelchairs in the Medicare Program.'' 
\13\). Across both reports, it was found that 80 percent of claims did 
not meet Medicare requirements for the sample period of 2007.
---------------------------------------------------------------------------

    \12\ OIG, Medicare Power Wheelchair Claims Frequently Did Not 
Meet Documentation Requirements. OEI-04-07-00401, December 2009.
    \13\ OIG, Miscoded Claims for Power Wheelchairs in the Medicare 
Program, OEI-04-07-00403, July 2009.
---------------------------------------------------------------------------

     An August 2009 OIG 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.\14\ This 
amounted to an estimated $33 million in improper payments during that 
time.
---------------------------------------------------------------------------

    \14\ OIG, Inappropriate Medicare Payments for Pressure Reducing 
support Surfaces. OEI-02-07-00420, August 2009.
---------------------------------------------------------------------------

     A June 2007 OIG report titled ``Medicare Payments for 
Negative Pressure Wound Therapy Pumps in 2004'' found that 24 percent 
of negative pressure wound therapy pumps did not meet Medicare coverage 
criteria in 2004.\15\ This amounted to an estimated $21 million in 
improper payments. Furthermore, the report found that in 44 percent of 
the claims with medical records and supplier prepared statement, the 
information on the supplier prepared statement was not supported by the 
medical record.
---------------------------------------------------------------------------

    \15\ OIG, Medicare Payments for Negative Pressure Wound Therapy 
Pumps in 2004. OEI-02-05-00370, June 2007.
---------------------------------------------------------------------------

    In Tables 1 through 4, we provide the 2011 through 2014 Annual 
Medicare FFS Improper Payment Rate Report DME and/or DMEPOS Service 
Specific Reports. These tables illustrate the overpayment rates for 
specified DMEPOS items and the corresponding overpayment amounts. Items 
from these tables are included on the Master List if they meet the 
payment threshold. The listed DMEPOS items and the information in the 
``projected dollars overpaid'' column were provided by the CERT 
program. CERT includes DMEPOS items on this list if the items have 30 
or more claims sampled and are in the top 20 services by descending 
projected overpayment amount. Any services that have less than 30 
claims are wrapped up into the ``Less than 30 Claims'' line. Numbers 
are projected to the universe (or population) using a weighting system 
that accounts for both the volume of a stratified service and 
expenditures. Each claim is individually weighted based upon the strata 
it was sampled in and the jurisdiction it was processed in. Dollar 
amounts are then multiplied by this weight value.

                      Table 1--2011 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Number of       Number of        Dollars
             Service billed to DME (HCPCS)                 claims in       lines in       overpaid in    Total dollars      Projected       Overpayment
                                                            sample          sample          sample      paid in sample  dollars overpaid  rate (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Codes With Less Than 30 Claims....................           1,769           2,742        $300,255        $531,107    $2,212,120,825            57.8
Oxygen concentrator (E1390)...........................           1,258           1,293         148,631         193,810     1,133,180,723            77.7
Blood glucose/reagent strips (A4253)..................           1,457           1,466         126,344         150,622       929,031,554            84.4
Hosp bed semi-electr w/Matt (E0260)...................             227             232          19,078          21,779       135,908,667            88.5
Budesonide non-comp unit (J7626)......................              72              74          13,555          24,420       106,061,471            57.9
Tacrolimus oral per 1 MG (J7507)......................              68              72          16,147          31,803       104,040,006            52.4
Lancets per box (A4259)...............................             852             858          12,940          15,323        99,822,219            84.8
Cont airway pressure device (E0601)...................             303             318          12,665          21,987        98,014,011            60.1
Portable gaseous 02 (E0431)...........................             634             658          12,774          16,517        97,194,278            77.4
Diab shoe for density insert (A5500)..................             125             136          11,949          15,420        88,965,667            78.2
Multi den insert direct form (A5512)..................              78              84           9,561          11,631        71,586,004            81.8
Enteral feed supp pump per d (B4035)..................              67              68           8,452          14,853        66,560,532            58.2
RAD w/o backup non-inv Intfc (E0470)..................              68              75           9,264          13,079        64,412,596            69.8
CPAP full face mask (A7030)...........................              81              81           8,336          12,774        64,248,424            65.6
Nasal application device (A7034)......................             145             145           9,043          14,366        62,469,031            62.0
High strength ltwt whlchr (K0004).....................              84              88           7,870           8,315        61,980,799            94.9
Disp fee inhal drugs/30 days (Q0513)..................             386             389           7,590          12,210        57,749,018            62.0
Multi den insert custom mold (A5513)..................              45              52           7,333           9,366        54,355,934            80.5
Lightweight wheelchair (K0003)........................             114             115           6,995           7,503        52,201,255            92.6
Mycophenolate mofetil oral (J7517)....................              43              43           7,669          12,566        49,929,224            64.1
All Other Codes.......................................           3,482           4,795         125,245         194,402       943,311,918            65.9
Combined..............................................           8,110          13,784         881,693       1,333,852     6,553,144,155            67.4
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 81682]]


                      Table 2--2012 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Number of       Number of        Dollars
             Service billed to DME (HCPCS)                 claims in       lines in       overpaid in    Total dollars      Projected       Overpayment
                                                            sample          sample          sample      paid in sample  dollars overpaid  rate (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Codes With Less Than 30 Claims....................           2,354           3,738      $1,256,083      $2,231,572    $1,536,420,429            51.9
Oxygen concentrator (E1390)...........................           1,286           1,317         156,295         194,294     1,168,366,128            80.9
PWC gp 2 std cap chair (K0823)........................             999           1,002         513,426         553,349       201,693,896            97.3
Hosp bed semi-electr w/matt (E0260)...................             283             289          23,544          27,437       137,852,967            87.2
Lancets per box (A4259)...............................             742             748          10,761          13,088        98,992,634            83.1
Tacrolimus oral per 1 MG (J7507)......................              58              63          12,118          23,120        97,807,986            54.3
Portable gaseous 02 (E0431)...........................             590             608          12,296          15,203        96,375,515            80.9
Cont airway pressure device (E0601)...................             210             213           7,914          14,860        80,812,581            50.0
Budesonide non-comp unit (J7626)......................             100             105          13,453          24,905        78,369,581            54.1
Neg press wound therapy pump (E2402)..................              39              39          17,464          47,731        72,189,807            51.0
Enteral feed supp pump per d (B4035)..................              91              92          10,283          19,145        70,291,185            54.8
Nasal application device (A7034)......................             121             122           8,030          12,254        70,244,578            65.3
Diab shoe for density insert (A5500)..................              97             102           8,271          11,594        68,920,996            73.2
RAD w/o backup non-inv intfc (E0470)..................              68              75           9,166          13,213        63,658,439            69.6
Disp fee inhal drugs/30 days (Q0513)..................             413             413           7,392          13,068        58,594,189            57.0
CPAP full face mask (A7030)...........................              75              75           7,308          11,524        57,481,278            59.3
High strength ltwt whlchr (K0004).....................              80              83           7,826           8,016        56,257,539            97.7
Lightweight wheelchair (K0003)........................              99             110           6,250           6,821        55,809,106            94.2
Multi den insert direct form (A5512)..................              61              63           6,805           8,548        55,671,152            79.4
All Other Codes.......................................           5,311           9,107       1,735,735       2,669,607     1,380,908,350            64.4
Combined..............................................          10,117          19,627       3,933,943       6,048,632     6,412,968,806            66.0
--------------------------------------------------------------------------------------------------------------------------------------------------------


                      Table 3--2013 Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Number of       Number of        Dollars
             Service billed to DME (HCPCS)                 claims in       lines in       overpaid in    Total dollars      Projected       Overpayment
                                                            sample          sample          sample      paid in sample  dollars overpaid  rate (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Oxygen concentrator (E1390)...........................           1,212           1,262        $136,312        $181,075      $983,768,125            75.6
All Codes With Less Than 30 Claims....................           2,147           3,235         545,968       1,053,401       867,058,104            37.4
Blood glucose/reagent strips (A4253)..................           1,131           1,148          85,298         114,282       791,786,761            75.1
PWC gp 2 std cap chair (K0823)........................             734             747         181,940         212,803       201,643,982            85.4
Hosp bed semi-electr w/matt (E0260)...................             364             386          28,235          34,055       137,106,877            84.1
Tacrolimus oral per 1MG (J7507).......................              70              71          11,920          26,692        88,099,443            43.4
Cont airway pressure devce (E0601)....................             118             126           4,255           8,732        84,740,816            48.8
Lancets per box (A4259)...............................             607             615           8,409          11,030        82,958,405            76.3
Portable gaseous 02 (E0431)...........................             525             567           9,876          13,516        78,011,911            73.2
Enteral feed supp pump per d (B4035)..................              90              90          11,685          18,809        69,222,164            61.7
Diab shoe for density Insert (A5500)..................              82              90           7,384           9,580        65,194,062            78.3
Nasal application device (A7034)......................              78              79           4,808           8,022        59,780,922            56.8
Budesonide non-compUnit (J7626).......................             136             141          13,136          33,672        59,537,844            39.0
CPAP full face mask (A7030)...........................              62              62           5,982           9,206        53,974,803            66.0
Lightweight wheelchair (K0003)........................              67              69           4,291           4,606        53,344,568            95.5
Standard wheelchair (K0001)...........................              74              79           2,736           3,016        52,628,676            92.5
High strength ltwt whlchr (K0004).....................              80              91           7,419           9,046        51,690,372            90.9
LSO sag-coro rigid frame pre (L0631)..................              62              62          28,990          48,450        51,310,493            60.4
Multi den insert direct form (A5512)..................              45              48           5,649           6,623        49,722,593            86.0
Disp fee inhal drugs/30 Days (Q0513)..................             424             426           7,062          13,398        47,738,353            53.1
All Other Codes.......................................           7,274          13,747       3,982,290       7,804,614     1,736,897,848            55.4
Combined..............................................          11,204          23,141       5,093,646       9,624,629     5,666,217,120            58.2
--------------------------------------------------------------------------------------------------------------------------------------------------------


                    Table 4--2014 Annual Medicare FFS Improper Payment Rate Report DMEPOS Service Specific Overpayment Rate Appendix
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Number of       Number of        Dollars
             Service billed to DME (HCPCS)                 claims in       lines in       overpaid in    Total dollars      Projected       Overpayment
                                                            sample          sample          sample      paid in sample  dollars overpaid  rate (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Codes W Less Than 30 Claims.......................           2,451           3,594        $669,407      $1,753,102      $933,768,888            51.9
Oxygen concentrator (E1390)...........................           1,044           1,081          93,657         152,154       783,718,989            61.2
Blood glucose/reagent strips..........................             962             979          52,086          91,761       569,440,653            57.1
PWC gp 2 std cap chair (K0823)........................             581             587         124,754         155,463       154,185,886            80.6
Hosp bed semi-electr w/matt (E0260)...................             228             232          16,834          19,626       117,275,279            83.4
Cont airway pressure device (E0601)...................             104             111           2,875           8,197        75,196,567            34.3
Enteral feed supp pump per d (B4035)..................              79              82          11,389          17,282        69,895,164            64.3

[[Page 81683]]

 
CPAP full face mask (A7030)...........................              66              66           6,083          10,595        63,826,897            51.8
Portable gaseous 02 (E0431)...........................             446             463           6,527          10,981        59,862,194            59.3
Lancets per box (A4259)...............................             518             523           4,937           8,633        59,652,076            57.8
Nasal application device (A7034)......................              73              73           3,971           6,814        58,848,469            57.1
NDC 00004-1101-51 Capecitabi (WW093)..................              38              38          19,149          86,881        56,535,421            22.8
Arformoterol non-compunit (J7605).....................              71              72           8,132          21,217        53,572,352            48.8
Diab shoe for density insert (A5500)..................              77              85           6,203           8,790        52,941,678            68.0
EF spec metabolic noninherit (B4154)..................              53              56          13,512          18,333        52,564,481            78.2
RAD w/o backup non-inv intfc (E0470)..................              54              56           5,612           9,227        51,504,678            58.9
Lightweight wheelchair (K0003)........................              61              61           3,704           3,852        50,812,414            97.3
Budesonide non-comp unit (J7626)......................             101             103           7,748          27,022        50,266,076            27.8
High strength ltwt whlchr (K0004).....................              60              60           5,400           5,543        46,672,538            96.5
Standard wheelchair (K0001)...........................              70              72           2,228           2,497        46,021,996            87.1
All Other Codes.......................................           7,286          19,766       5,123,515      14,266,388     1,686,721,479            48.1
Combined..............................................          10,979          28,170       6,187,724      16,684,357     5,093,284,175            53.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We received the following comments with regard to items that were 
included on the proposed Master List and our responses follow.
    Comment: Several commenters recommended that any DMEPOS items 
needed for chronic/lifelong conditions should not require prior 
authorization (for example, missing a limb). Many commenters stated 
lower-limb prosthetic(s) (LLP) or items used in the prosthesis process 
(that is, gel liners) should be exempt from the Master List due to 
concerns regarding complex functional criteria documentation 
requirements and because of possible numerous changes in the 
beneficiary's functional capabilities throughout their lifetime.
    Some commenters noted that certain contractor local coverage 
determinations are based, in part, on the pricing, data analysis, and 
coding (PDAC) contractor assignment of functional levels for specific 
prosthetics and their components. Commenters went on to state that 
there are no studies showing that specific prosthetic components are 
inappropriate for any functional level. With this, some commenters 
expressed concern that even if the beneficiary had the appropriate 
functional level, he or she may still be denied prior authorization 
thus, they state, LLPs should not be included on the Master List.
    Several commenters were concerned because prostheses can change 
frequently when the beneficiary changes (for example, weight changes) 
and many prostheses are customized. Commenters were concerned that with 
the advent of the prior authorization program, subsequent limbs would 
not receive a provisional affirmative decision.
    Many commenters expressed concerns that including LLPs on the 
proposed Master List would cause a delay in care, increased 
complications, comorbidities, higher out-of-pocket costs, and poor 
clinical outcomes. Some commenters recommended a private insurance 
company handle the prior authorization of all LLPs on the proposed 
Master List.
    Some commenters noted that success of the prior authorization of 
PMD demonstration should not be applied to the prior authorization 
developed by this final rule since PMDs are ``commodities'' while many 
other DMEPOS items (such as LLPs) are not.
    Response: Timely beneficiary access to care is of utmost concern to 
us. Regarding the comment that prior authorization of the PMD 
demonstration should not influence how or why we apply prior 
authorization to other DMEPOS items, we want to assure the public that 
we understand that clinical considerations differ with each DMEPOS 
item. For example, we realize some LLPs are required soon after surgery 
and we do not want to delay care or rehabilitation. Prior authorization 
is not meant to be a barrier to care; it is a process to make sure 
products and services provided meet applicable Medicare coverage, 
coding, and payment rules prior to the service being furnished.
    We disagree with the suggestion that any item needed for chronic or 
life-long conditions be exempt from the Master List. Most of the Master 
List items are used for chronic or life-long medical conditions and 
documentation requirements for these items remains unchanged. We 
believe we can address access issues by designing a prior authorization 
process that is nimble and efficient when an item is needed quickly. In 
section II.E. of this final rule, we discuss in more detail the 
proposed timelines for the prior authorization process and our final 
decision regarding timelines.
    Regarding some commenters' concern that a beneficiary may not 
receive the appropriate LLP because of functional requirements criteria 
or because the beneficiary's functional capabilities have changed, we 
again reassure commenters that we support a beneficiary's access to the 
appropriate prosthetic. The submitted medical documentation must 
support the request for payment of the subject LLP. As noted 
previously, we will issue specific guidance regarding the prior 
authorization timelines in subregulatory guidance. One reason for this 
is to create timelines/processes that are logical for each DMEPOS item 
selected for prior authorization. For example, timelines and contractor 
processes for prior authorization of LLPs may be uniquely different 
than for other DMEPOS items. We disagree with the commenter who 
suggested that we use a private insurance company to process prior 
authorizations for LLPs. Any entity doing work on behalf of the 
government is an agent of the government and must abide by all 
applicable Medicare coverage, coding, and payment rules when making 
payment determinations. We recognize that the Pricing, Data Analysis, 
and Coding (PDAC) contractor developed the functional levels of LLPs. 
However, longstanding documentation requirements based on PDAC 
assignment have not changed and will also apply to documentation

[[Page 81684]]

requirements for the prior authorization process.
    Finally, we do not understand how a prior authorization program 
could increase beneficiary out-of-pocket expenses for LLPs. The same 
coverage, coding, and payment rules apply. A beneficiary will still 
have access to medically necessary LLPs and his or her costs should not 
change due to prior authorization processes.
    Comment: Several commenters recommended using a clinical threshold 
to identify when an expedited review request is justified for 
respiratory and oxygen items on the Master List. Suggested examples 
included when a patient's respiratory disturbance index is greater than 
20, the oxygen saturation falls below 80 percent or complex cardiac 
arrhythmias accompany obstructive episodes. If clinical laboratories 
and studies show less severe obstructive sleep apnea, the 
recommendation was that the standard prior authorization process, not 
the expedited process, should be used.
    Some commenters requested that we include all oxygen and 
respiratory devices, while many commenters requested that we exclude 
all of them. Commenters recommended that CMS exclude respiratory 
assistive devices from the prior authorization requirement because of 
the administrative burden to furnish medical documentation before the 
device is given to the beneficiary. Specifically, a commenter expressed 
concern regarding the impact of a prior authorization process on the 
commercial driver community. Commenters noted that those commercial 
drivers who have a diagnosis of obstructive sleep apnea must undergo a 
clearance process that requires the beneficiary to utilize a 
respiratory assistive device prior to obtaining commercial driver 
clearance. Commenters were concerned that the proposed prior 
authorization process would prolong the process of obtaining the 
clearance necessary to perform their job duties. Other commenters 
believe that the proposed prior authorization timeline would give 
beneficiaries the impression that respiratory therapy is not mandatory; 
which would then lead to more costly treatment(s) of obstructive sleep 
apnea.
    Response: We disagree with the suggestion to exclude all oxygen and 
respiratory devices, and we have included respiratory devices that meet 
the inclusion criteria on the finalized Master List. Again, not all 
items on the Master List will require prior authorization. We recognize 
that the original proposed prior authorization process timeframes may 
have caused some commenters to suggest excluding all oxygen and 
respiratory devices. The original proposed prior authorization process 
timeframes, as discussed in section II.E. of this final rule, may have 
presented a barrier to timely care in certain circumstances. We will 
take these comments into consideration when developing the prior 
authorization timeframes. We will issue the timeframes in subregulatory 
guidance. We believe that by doing so, we create flexibility to quickly 
modify the timeframes if issues are identified. For more information on 
the prior authorization processes, including timeframes, see section 
II.E. of this final rule.
    Comment: Several commenters were concerned that for some Master 
List items, the proposed prior authorization program would discourage 
suppliers from working with Medicare beneficiaries. These commenters 
believed that this would leave beneficiaries unable to find suppliers, 
resulting in a potential for increased beneficiary liability and out-
of-pocket expenses.
    Some commenters recommended that the beneficiary should be liable 
if a supplier did not obtain a prior authorization. Other commenters 
recommended that CMS use its authority to suspend or cease any prior 
authorization program if patient access is jeopardized. In addition, 
commenters requested that CMS clarify the Advance Beneficiary Notice of 
Non-Coverage (ABN) process and the proposed prior authorization 
process.
    Response: We appreciate the concerns about access but disagree that 
the Master List creates access issues or barriers to care. Since we are 
not finalizing the proposed prior authorization process timeframes as 
discussed in section II.E. of this final rule, we believe we can 
address beneficiary access and care delivery issues by creating a prior 
authorization process that safeguards beneficiary access to care and 
avoids creating any barriers for beneficiaries and suppliers. We will 
issue the timeframes in subregulatory guidance, as discussed in section 
II.E. of this final rule. Additionally, we are finalizing our authority 
to suspend or cease prior authorization for the entire list or 
individual items at any time, as discussed at the end of this section.
    In the May 28, 2014 proposed rule, we included a discussion of 
Medicare's ABN and liability policies. This discussion can be found 
under section II.F. of this final rule. However, interested persons can 
find more information regarding Medicare's ABN process at this site: 
http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/abn_booklet_icn006266.pdf.
    Comment: Some commenters recommended adding more items to the 
proposed Master List, including, but not limited to, oxygen and all 
oxygen equipment, enteral and parenteral nutrients and supplies, all 
manual wheelchairs, all hospital beds, all bi-level respiratory devices 
and ventilators, and knee and back braces. Some commenters recommended 
including items on the proposed Master List regardless of the payment 
threshold for which there is proven disregard for medical necessity 
requirements or do not have associated LCDs or NCDs. Other commenters 
suggested narrowing the criteria for the proposed Master List.
    Response: We are finalizing the items on the Master List as 
proposed with two modifications, discussed at the end of this section. 
The statutory basis and definition of DMEPOS items for this final rule, 
combined with our analysis, require us to include only those items 
that, based on prior payment experience, are subject to frequent 
overutilization. We believe this will allow us to focus finite 
resources on the higher cost items more frequently subject to over 
utilization.
    Comment: Some commenters believe that all items on the Master List 
will be subject to the prior authorization requirements. A commenter 
stated that the HCPCS codes on the proposed Master List had errors, but 
did not list which HCPCS code(s) were in error.
    Response: The criteria discussed previously determine inclusion on 
the Master List. As such, we have updated the Master List from what was 
published in the May 28, 2014 proposed rule to reflect the most current 
application of these criteria. As discussed earlier, updating the 
Master List for this final rule required us to review the 2015 DMEPOS 
fee schedule as well as OIG/GAO/CERT reports published after the 
proposed rule was published. Consequently, we added one item to the 
Master List: E1390: Oxygen concentrator (mistakenly left off the 
proposed Master List). Aside from the omission of HCPCS code E1390, we 
did not find additional errors in the listed HCPCS codes in the 
proposed Master List.
    Regarding the commenters who believe that all items on the Master 
List will be subject to the prior authorization requirements, we would 
like to clarify that only a subset of the Master List items will be 
selected and added to the ``Required Prior Authorization List.''

[[Page 81685]]

This is further discussed in section II.D. of this final rule.
    We are finalizing the Master List as proposed with two 
modifications. First, we are adding oxygen concentrator (E1390) since 
it meets the criteria and should have been added to the proposed Master 
List. The addition is bolded and italicized for easy reference on the 
Master List (Table 5). Second, we are removing five proposed items from 
the list that did not meet the 2015 DMEPOS Fee Schedule list criteria 
of $1,000 or greater average purchase fee schedule or an average rental 
fee schedule of $100 or greater. These items include the following:
     Custom shaped protective cover, above knee (L5705).
     Custom shaped protective cover, knee disarticulation 
(L5706).
     Addition, exoskeletal knee-shin system, polycentric, 
friction swing and stance phase control (L5718).
     Addition, exoskeletal knee-shin system, single axis, 
pneumatic swing, friction stance phase control (L5722).
     Addition, endoskeletal knee-shin system, polycentric, 
mechanical stance phase lock (L5816).
    DMEPOS items meeting the proposed criteria are listed in the Final 
Master List, which is found in Table 5.

     Table 5--Final Master List of DMEPOS Items Subject to Frequent
             Unnecessary Utilization for Prior Authorization
   [Items added to the proposed Master List are bolded and italicized]
------------------------------------------------------------------------
            HCPCS                             Description
------------------------------------------------------------------------
E0193.......................  Powered air flotation bed (low air loss
                               therapy).
E0260.......................  Hosp bed semi-electr w/matt.
E0277.......................  Powered pres-redu air mattrs.
E0371.......................  Nonpowered advanced pressure reducing
                               overlay for mattress, standard mattress
                               length and width.
E0372.......................  Powered air overlay for mattress, standard
                               mattress length and width.
E0373.......................  Nonpowered advanced pressure reducing
                               mattress.
E0470.......................  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).
E0601.......................  Continuous Airway Pressure (CPAP) Device.
E1390.......................  Oxygen Concentrator.
E2402.......................  Negative pressure wound therapy electrical
                               pump, stationary or portable.
K0004.......................  High strength, lightweight wheelchair.
K0813.......................  Power wheelchair, group 1 standard,
                               portable, sling/solid seat and back,
                               patient weight capacity up to and
                               including 300 pounds.
K0814.......................  Power wheelchair, group 1 standard,
                               portable, captains chair, patient weight
                               capacity up to and including 300 pounds.
K0815.......................  Power wheelchair, group 1 standard, sling/
                               solid seat and back, patient weight
                               capacity up to and including 300 pounds.
K0816.......................  Power wheelchair, group 1 standard,
                               captains chair, patient weight capacity
                               up to and including 300 pounds.
K0820.......................  Power wheelchair, group 2 standard,
                               portable, sling/solid seat/back, patient
                               weight capacity up to and including 300
                               pounds.
K0821.......................  Power wheelchair, group 2 standard,
                               portable, captains chair, patient weight
                               capacity up to and including 300 pounds.
K0822.......................  Power wheelchair, group 2 standard, sling/
                               solid seat/back, patient weight capacity
                               up to and including 300 pounds.
K0823.......................  Power wheelchair, group 2 standard,
                               captains chair, patient weight capacity
                               up to and including 300 pounds.
K0824.......................  Power wheelchair, group 2 heavy duty,
                               sling/solid seat/back, patient weight
                               capacity 301 to 450 pounds.
K0825.......................  Power wheelchair, group 2 heavy duty,
                               captains chair, patient weight capacity
                               301 to 450 pounds.
K0826.......................  Power wheelchair, group 2 very heavy duty,
                               sling/solid seat/back, patient weight
                               capacity 451 to 600 pounds.
K0827.......................  Power wheelchair, group 2 very heavy duty,
                               captains chair, patient weight capacity
                               451 to 600 pounds.
K0828.......................  Power wheelchair, group 2 extra heavy
                               duty, sling/solid seat/back, patient
                               weight capacity 601 pounds or more.
K0829.......................  Power wheelchair, group 2 extra heavy
                               duty, captains chair, patient weight 601
                               pounds or more.
K0835.......................  Power wheelchair, group 2 standard, single
                               power option, sling/solid seat/back,
                               patient weight capacity up to and
                               including 300 pounds.
K0836.......................  Power wheelchair, group 2 standard, single
                               power option, captains chair, patient
                               weight capacity up to and including 300
                               pounds.
K0837.......................  Power wheelchair, group 2 heavy duty,
                               single power option, sling/solid seat/
                               back, patient weight capacity 301 to 450
                               pounds.
K0838.......................  Power wheelchair, group 2 heavy duty,
                               single power option, captains chair,
                               patient weight capacity 301 to 450
                               pounds.
K0839.......................  Power wheelchair, group 2 very heavy duty,
                               single power option sling/solid seat/
                               back, patient weight capacity 451 to 600
                               pounds.
K0840.......................  Power wheelchair, group 2 extra heavy
                               duty, single power option, sling/solid
                               seat/back, patient weight capacity 601
                               pounds or more.
K0841.......................  Power wheelchair, group 2 standard,
                               multiple power option, sling/solid seat/
                               back, patient weight capacity up to and
                               including 300 pounds.
K0842.......................  Power wheelchair, group 2 standard,
                               multiple power option, captains chair,
                               patient weight capacity up to and
                               including 300 pounds.
K0843.......................  Power wheelchair, group 2 heavy duty,
                               multiple power option, sling/solid seat/
                               back, patient weight capacity 301 to 450
                               pounds.
K0848.......................  Power wheelchair, group 3 standard, sling/
                               solid seat/back, patient weight capacity
                               up to and including 300 pounds.
K0849.......................  Power wheelchair, group 3 standard,
                               captains chair, patient weight capacity
                               up to and including 300 pounds.
K0850.......................  Power wheelchair, group 3 heavy duty,
                               sling/solid seat/back, patient weight
                               capacity 301 to 450 pounds.
K0851.......................  Power wheelchair, group 3 heavy duty,
                               captains chair, patient weight capacity
                               301 to 450 pounds.
K0852.......................  Power wheelchair, group 3 very heavy duty,
                               sling/solid seat/back, patient weight
                               capacity 451 to 600 pounds.
K0853.......................  Power wheelchair, group 3 very heavy duty,
                               captains chair, patient weight capacity
                               451 to 600 pounds.
K0854.......................  Power wheelchair, group 3 extra heavy
                               duty, sling/solid seat/back, patient
                               weight capacity 601 pounds or more.
K0855.......................  Power wheelchair, group 3 extra heavy
                               duty, captains chair, patient weight
                               capacity 601 pounds or more.
K0856.......................  Power wheelchair, group 3 standard, single
                               power option, sling/solid seat/back,
                               patient weight capacity up to and
                               including 300 pounds.
K0857.......................  Power wheelchair, group 3 standard, single
                               power option, captains chair, patient
                               weight capacity up to and including 300
                               pounds.
K0858.......................  Power wheelchair, group 3 heavy duty,
                               single power option, sling/solid seat/
                               back, patient weight 301 to 450 pounds.
K0859.......................  Power wheelchair, group 3 heavy duty,
                               single power option, captains chair,
                               patient weight capacity 301 to 450
                               pounds.

[[Page 81686]]

 
K0860.......................  Power wheelchair, group 3 very heavy duty,
                               single power option, sling/solid seat/
                               back, patient weight capacity 451 to 600
                               pounds.
K0861.......................  Power wheelchair, group 3 standard,
                               multiple power option, sling/solid seat/
                               back, patient weight capacity up to and
                               including 300 pounds.
K0862.......................  Power wheelchair, group 3 heavy duty,
                               multiple power option, sling/solid seat/
                               back, patient weight capacity 301 to 450
                               pounds.
K0863.......................  Power wheelchair, group 3 very heavy duty,
                               multiple power option, sling/solid seat/
                               back, patient weight capacity 451 to 600
                               pounds.
K0864.......................  Power wheelchair, group 3 extra heavy
                               duty, multiple power option, sling/solid
                               seat/back, patient weight capacity 601
                               pounds or more.
L5010.......................  Partial foot, molded socket, ankle height,
                               with toe filler.
L5020.......................  Partial foot, molded socket, tibial
                               tubercle height, with toe filler.
L5050.......................  Ankle, symes, molded socket, sach foot.
L5060.......................  Ankle, symes, metal frame, molded leather
                               socket, articulated ankle/foot.
L5100.......................  Below knee, molded socket, shin, sach
                               foot.
L5105.......................  Below knee, plastic socket, joints and
                               thigh lacer, sach foot.
L5150.......................  Knee disarticulation (or through knee),
                               molded socket, external knee joints,
                               shin, sach foot.
L5160.......................  Knee disarticulation (or through knee),
                               molded socket, bent knee configuration,
                               external knee joints, shin, sach foot.
L5200.......................  Above knee, molded socket, single axis
                               constant friction knee, shin, sach foot.
L5210.......................  Above knee, short prosthesis, no knee
                               joint (`stubbies'), with foot blocks, no
                               ankle joints, each.
L5220.......................  Above knee, short prosthesis, no knee
                               joint (`stubbies'), with articulated
                               ankle/foot, dynamically aligned, each.
L5230.......................  Above knee, for proximal femoral focal
                               deficiency, constant friction knee, shin,
                               sach foot.
L5250.......................  Hip disarticulation, canadian type; molded
                               socket, hip joint, single axis constant
                               friction knee, shin, sach foot.
L5270.......................  Hip disarticulation, tilt table type;
                               molded socket, locking hip joint, single
                               axis constant friction knee, shin, sach
                               foot.
L5280.......................  Hemipelvectomy, canadian type; molded
                               socket, hip joint, single axis constant
                               friction knee, shin, sach foot.
L5301.......................  Below knee, molded socket, shin, sach
                               foot, endoskeletal system.
L5312.......................  Knee disarticulation (or through knee),
                               molded socket, single axis knee, pylon,
                               sach foot, endoskeletal system.
L5321.......................  Above knee, molded socket, open end, sach
                               foot, endoskeletal system, single axis
                               knee.
L5331.......................  Hip disarticulation, canadian type, molded
                               socket, endoskeletal system, hip joint,
                               single axis knee, sach foot.
L5341.......................  Hemipelvectomy, canadian type, molded
                               socket, endoskeletal system, hip joint,
                               single axis knee, sach foot.
L5400.......................  Immediate post surgical or early fitting,
                               application of initial rigid dressing,
                               including fitting, alignment, suspension,
                               and one cast change, below knee.
L5420.......................  Immediate post surgical or early fitting,
                               application of initial rigid dressing,
                               including fitting, alignment and
                               suspension and one cast change `ak' or
                               knee disarticulation.
L5500.......................  Initial, below knee `ptb' type socket, non-
                               alignable system, pylon, no cover, sach
                               foot, plaster socket, direct formed.
L5505.......................  Initial, above knee--knee disarticulation,
                               ischial level socket, non-alignable
                               system, pylon, no cover, sach foot,
                               plaster socket, direct formed.
L5510.......................  Preparatory, below knee `ptb' type socket,
                               non-alignable system, pylon, no cover,
                               sach foot, plaster socket, molded to
                               model.
L5520.......................  Preparatory, below knee `ptb' type socket,
                               non-alignable system, pylon, no cover,
                               sach foot, thermoplastic or equal, direct
                               formed.
L5530.......................  Preparatory, below knee `ptb' type socket,
                               non-alignable system, pylon, no cover,
                               sach foot, thermoplastic or equal, molded
                               to model.
L5535.......................  Preparatory, below knee `ptb' type socket,
                               non-alignable system, no cover, sach
                               foot, prefabricated, adjustable open end
                               socket.
L5540.......................  Preparatory, below knee `ptb' type socket,
                               non-alignable system, pylon, no cover,
                               sach foot, laminated socket, molded to
                               model.
L5560.......................  Preparatory, above knee--knee
                               disarticulation, ischial level socket,
                               non-alignable system, pylon, no cover,
                               sach foot, plaster socket, molded to
                               model.
L5570.......................  Preparatory, above knee--knee
                               disarticulation, ischial level socket,
                               non-alignable system, pylon, no cover,
                               sach foot, thermoplastic or equal, direct
                               formed.
L5580.......................  Preparatory, above knee--knee
                               disarticulation ischial level socket, non-
                               alignable system, pylon, no cover, sach
                               foot, thermoplastic or equal, molded to
                               model.
L5585.......................  Preparatory, above knee--knee
                               disarticulation, ischial level socket,
                               non-alignable system, pylon, no cover,
                               sach foot, prefabricated adjustable open
                               end socket.
L5590.......................  Preparatory, above knee--knee
                               disarticulation ischial level socket, non-
                               alignable system, pylon no cover, sach
                               foot, laminated socket, molded to model.
L5595.......................  Preparatory, hip disarticulation-
                               hemipelvectomy, pylon, no cover, sach
                               foot, thermoplastic or equal, molded to
                               patient model.
L5600.......................  Preparatory, hip disarticulation-
                               hemipelvectomy, pylon, no cover, sach
                               foot, laminated socket, molded to patient
                               model.
L5610.......................  Addition to lower extremity, endoskeletal
                               system, above knee, hydracadence system.
L5611.......................  Addition to lower extremity, endoskeletal
                               system, above knee--knee disarticulation,
                               4 bar linkage, with friction swing phase
                               control.
L5613.......................  Addition to lower extremity, endoskeletal
                               system, above knee--knee disarticulation,
                               4 bar linkage, with hydraulic swing phase
                               control.
L5614.......................  Addition to lower extremity, exoskeletal
                               system, above knee--knee disarticulation,
                               4 bar linkage, with pneumatic swing phase
                               control.
L5616.......................  Addition to lower extremity, endoskeletal
                               system, above knee, universal multiplex
                               system, friction swing phase control.
L5639.......................  Addition to lower extremity, below knee,
                               wood socket.
L5643.......................  Addition to lower extremity, hip
                               disarticulation, flexible inner socket,
                               external frame.
L5649.......................  Addition to lower extremity, ischial
                               containment/narrow m-l socket.
L5651.......................  Addition to lower extremity, above knee,
                               flexible inner socket, external frame.
L5681.......................  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).

[[Page 81687]]

 
L5683.......................  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).
L5700.......................  Replacement, socket, below knee, molded to
                               patient model.
L5701.......................  Replacement, socket, above knee/knee
                               disarticulation, including attachment
                               plate, molded to patient model.
L5702.......................  Replacement, socket, hip disarticulation,
                               including hip joint, molded to patient
                               model.
L5703.......................  Ankle, symes, molded to patient model,
                               socket without solid ankle cushion heel
                               (sach) foot, replacement only.
L5707.......................  Custom shaped protective cover, hip
                               disarticulation.
L5724.......................  Addition, exoskeletal knee-shin system,
                               single axis, fluid swing phase control.
L5726.......................  Addition, exoskeletal knee-shin system,
                               single axis, external joints fluid swing
                               phase control.
L5728.......................  Addition, exoskeletal knee-shin system,
                               single axis, fluid swing and stance phase
                               control.
L5780.......................  Addition, exoskeletal knee-shin system,
                               single axis, pneumatic/hydra pneumatic
                               swing phase control.
L5781.......................  Addition to lower limb prosthesis, vacuum
                               pump, residual limb volume management and
                               moisture evacuation system.
L5782.......................  Addition to lower limb prosthesis, vacuum
                               pump, residual limb volume management and
                               moisture evacuation system, heavy duty.
L5795.......................  Addition, exoskeletal system, hip
                               disarticulation, ultra-light material
                               (titanium, carbon fiber or equal).
L5814.......................  Addition, endoskeletal knee-shin system,
                               polycentric, hydraulic swing phase
                               control, mechanical stance phase lock.
L5818.......................  Addition, endoskeletal knee-shin system,
                               polycentric, friction swing, and stance
                               phase control.
L5822.......................  Addition, endoskeletal knee-shin system,
                               single axis, pneumatic swing, friction
                               stance phase control.
L5824.......................  Addition, endoskeletal knee-shin system,
                               single axis, fluid swing phase control.
L5826.......................  Addition, endoskeletal knee-shin system,
                               single axis, hydraulic swing phase
                               control, with miniature high activity
                               frame.
L5828.......................  Addition, endoskeletal knee-shin system,
                               single axis, fluid swing and stance phase
                               control.
L5830.......................  Addition, endoskeletal knee-shin system,
                               single axis, pneumatic/swing phase
                               control.
L5840.......................  Addition, endoskeletal knee/shin system, 4-
                               bar linkage or multiaxial, pneumatic
                               swing phase control.
L5845.......................  Addition, endoskeletal, knee-shin system,
                               stance flexion feature, adjustable.
L5848.......................  Addition to endoskeletal knee-shin system,
                               fluid stance extension, dampening
                               feature, with or without adjustability.
L5856.......................  Addition to lower extremity prosthesis,
                               endoskeletal knee-shin system,
                               microprocessor control feature, swing and
                               stance phase, includes electronic
                               sensor(s), any type.
L5857.......................  Addition to lower extremity prosthesis,
                               endoskeletal knee-shin system,
                               microprocessor control feature, swing
                               phase only, includes electronic
                               sensor(s), any type.
L5858.......................  Addition to lower extremity prosthesis,
                               endoskeletal knee shin system,
                               microprocessor control feature, stance
                               phase only, includes electronic
                               sensor(s), any type.
L5930.......................  Addition, endoskeletal system, high
                               activity knee control frame.
L5960.......................  Addition, endoskeletal system, hip
                               disarticulation, ultra-light material
                               (titanium, carbon fiber or equal).
L5964.......................  Addition, endoskeletal system, above knee,
                               flexible protective outer surface
                               covering system.
L5966.......................  Addition, endoskeletal system, hip
                               disarticulation, flexible protective
                               outer surface covering system.
L5968.......................  Addition to lower limb prosthesis,
                               multiaxial ankle with swing phase active
                               dorsiflexion feature.
L5973.......................  Endoskeletal ankle foot system,
                               microprocessor controlled feature,
                               dorsiflexion and/or plantar flexion
                               control, includes power source.
L5979.......................  All lower extremity prosthesis, multi-
                               axial ankle, dynamic response foot, one
                               piece system.
L5980.......................  All lower extremity prostheses, flex foot
                               system.
L5981.......................  All lower extremity prostheses, flex-walk
                               system or equal.
L5987.......................  All lower extremity prosthesis, shank foot
                               system with vertical loading pylon.
L5988.......................  Addition to lower limb prosthesis,
                               vertical shock reducing pylon feature.
L5990.......................  Addition to lower extremity prosthesis,
                               user adjustable heel height.
------------------------------------------------------------------------

    In addition, we are finalizing our proposal to notify the public 
annually of any additions and deletions from the Master List by posting 
the notification in the Federal Register and on the CMS Prior 
Authorization Web site as described in Sec.  414.234(b)(2). We are also 
finalizing our proposal to suspend or cease prior authorization for the 
entire list or individual items at any time as described in Sec.  
414.234(f)(1).

D. Process for Selecting Items From the Master List To Be Subject to 
the Prior Authorization Program

    In the May 28, 2014 proposed rule (79 FR 30519), we stated that an 
item's presence on the Master List would not automatically require 
prior authorization. We proposed implementing the prior authorization 
program by limiting the number of items from the Master List that would 
be subject to prior authorization. We stated that by implementing prior 
authorization for a subset of Master List items, we would minimize 
provider and supplier burden while safeguarding the Medicare program. 
This subset of Master List items is hereafter referred to as the 
``Required Prior Authorization List'' as described in Sec.  414.234 
(c). We proposed that we would inform the public of the Required Prior 
Authorization List in the Federal Register with 60-day notice before 
implementation.
    Additionally, we proposed a prior authorization program for 
eligible items that may be implemented nationally or locally. For 
example, we noted that OIG and GAO reports and the CERT DME and/or 
DMEPOS Service Specific Report(s) often include regional data, and we 
proposed that we could elect to limit the prior authorization 
requirement to a particular region of the country if claims data show 
that unnecessary utilization of the selected item(s) is concentrated in 
a particular region. Alternately, we proposed that we may elect to 
implement prior authorization nationally if claims data show that 
unnecessary utilization of the selected item(s) is widespread and

[[Page 81688]]

occurring across multiple geographic areas.
    We also proposed to have the authority to suspend or cease the 
prior authorization program generally, or for a particular item or 
items at any time, without undertaking a separate rulemaking. An 
example of when we may elect to exercise this authority, described in 
the proposed rule, is suspending or ceasing the prior authorization 
program due to new payment policies, which may render the prior 
authorization requirement obsolete or remove the item from Medicare 
coverage. If we suspend or cease the prior authorization requirement, 
we proposed we would post notification of the suspension on the CMS 
Prior Authorization Web site, contractor Web sites, publications, and 
bulletins and include the date of suspension.
    The proposed rule did not announce the first items on the Required 
Prior Authorization List. In the proposed rule, we requested 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.
    We noted in the May 28, 2014 proposed rule (79 FR 30520) that the 
proposed Master List contains DMEPOS items currently included in the 
CMS Prior Authorization of PMD Demonstration, and that we would not 
require prior authorization for PMDs under this rule, at least until 
the demonstration was complete. We proposed that the finalized rule 
would not affect the current Prior Authorization of PMD Demonstration.
    In the following discussion, we summarize the comments and our 
responses for section II.D. of this final rule along with our final 
decision applicable to this section.
    Comment: Commenters requested clarification regarding the 
definition of implementing a prior authorization program locally and 
nationally.
    Response: Locally is a geographical area such as a state or 
jurisdiction; nationally is nationwide, as in all states/jurisdictions. 
As such, we may elect to establish a prior authorization program for a 
certain Master List item for a particular state, or a particular MAC 
jurisdiction, or nationally, as authorized by section 1834(a)(15) of 
the Social Security Act and as stated in new Sec.  414.234(c)(1)(ii) of 
our regulations.
    Comment: A commenter recommended that CMS implement prior 
authorization for all items on the proposed Master List at the same 
time with a nationwide rollout. Others suggested that CMS implement a 
pilot for select items locally, in a small region. Some commenters 
expressed their objection to CMS's decision to not identify in the 
proposed rule which Master List item(s) would initially be subject to 
prior authorization. Another commenter believed the Required Prior 
Authorization List process should include a notice for public input in 
the Federal Register. Others believed the proposed Federal Register 60-
day public notice of items selected for the Required Prior 
Authorization List was not a long enough notice for suppliers to 
accommodate a change in their business practice. Commenters did not 
provide specific recommendations on the number of items to move from 
the Master List to the Required Prior Authorization List for initial 
implementation or in the future. Most commenters wanted the least 
amount of burden possible, but did not indicate what number of items 
would minimize the burden. A commenter suggested adding an undetermined 
number of items to the Required Prior Authorization List quarterly. 
Some commenters expressed concern that undue burden may be created if 
too many Master List items are added to the Required Prior 
Authorization List at once. Other commenters found having two lists, 
the Master List and the Required Prior Authorization List, confusing.
    Response: We appreciate commenters' suggestion that we pilot prior 
authorization in a small region before fully implementing the program 
and we will take it under advisement. We do not agree with the 
suggestion to initially implement all Master List items nationally or 
to add items to the Required Prior Authorization List on a regular 
quarterly basis. We believe doing so may create undue burden for 
suppliers and beneficiaries. For instance, if we update the Required 
Prior Authorization List in January and we quickly learn that the 
proposed timeline for an item newly added to the list is problematic, 
we would want to change that as quickly as possible. Waiting until the 
next quarter would be potentially harmful to beneficiaries. However, we 
also recognize that it may be difficult for suppliers and beneficiaries 
to keep up with changes if there are frequent additions to the list.
    We point out that the public commented on the Master List items, 
which we published as part of the proposed rule. Thus we disagree with 
the commenters that believed the Required Prior Authorization List (a 
subset of the Master List) process should include another public 
comment. We are finalizing our proposal to implement the prior 
authorization program locally or nationally or to suspend or cease the 
prior authorization requirement program generally or for a particular 
item or items at any time without undertaking a separate rulemaking. 
Providing subregulatory guidance will allow us to implement the prior 
authorization program in such a way that if we encounter problems, we 
can quickly halt the program as a whole, or for a particular item.
    We are aware that some suppliers believe they need more than 60-day 
notice to prepare for prior authorization of a selected item on the 
Required Prior Authorization List. However, while the notice in the 
Federal Register will be published 60 days before the start of prior 
authorization for a particular item, CMS will be communicating to the 
community in a variety of ways before posting the 60-day notice. For 
example, we may conduct Open Door Forum calls or the MACs may host 
informational webinars. We believe that through education and community 
interaction before the 60-day notice, suppliers will be well informed 
of the upcoming prior authorization program requirements and can be 
ready 60 days after the official posting of the public notice.
    We agree with commenters who believed initially implementing prior 
authorization for all items on the Master List creates undue burden for 
suppliers and physicians. In response to commenters that expressed 
their objections to CMS's decision to not identify in the proposed rule 
which Master List item(s) would initially be subject to prior 
authorization, we believe a number of factors will guide our selection. 
For example, CMS may consider factors such as geographic location, item 
utilization or cost, system capabilities, administrative burden, 
emerging trends, vulnerabilities identified in official agency reports, 
or other data analysis. Therefore, we may initially elect to require 
prior authorization on only one item in a small region and quickly 
suspend the requirement if we find there are unintended effects.
    In response to a commenter who believed having two lists was too 
confusing, we believe having two lists is necessary. The Required Prior 
Authorization List is selected from the Master List of Items Frequently 
Subject to Unnecessary Utilization. The Required Prior Authorization 
List is defined as a subset of Master List items subject to prior 
authorization.
    We believe having the two lists minimizes burdens associated with 
implementation of prior authorization. For example, CMS may elect to

[[Page 81689]]

implement prior authorization a limited number of items. Having only 
one list would require us to implement prior authorization on all items 
on the list. As we mentioned previously, we believe implementing prior 
authorization for the entire list would create undue burden for 
suppliers, physicians, and beneficiaries. In addition, it would create 
administrative burden for the review contractor. We believe 
implementing prior authorization on a subset of the items on the Master 
List allows us to closely monitor the prior authorization program for 
each selected item and make changes, if needed.
    Comment: Public comments were solicited on the number of items 
selected for initial implementation of the prior authorization 
requirement and potential impact on the burden to the DMEPOS community. 
However, commenters did not provide a recommendation for a certain 
number of items. Instead, commenters expressed their concerns in more 
general terms. For example, most commenters recommended the least 
amount of burden possible, but did not indicate what number of items 
would minimize the burden. Other commenters believe that the public 
should be given the opportunity to comment on each item we select from 
the Master List and move to the Required Prior Authorization List. A 
commenter suggested adding an undetermined number of items to the 
Required Prior Authorization List quarterly. Some commenters believe 
that CMS should ``pilot'' the program in a small area before going 
national. Commenters believe that by doing so, CMS could identify and 
address any unforeseen challenges before implementing nationally.
    Response: Earlier in this final rule, we reminded commenters that 
both the final rule and the Act gives us the authority to select the 
item, implement the prior authorization requirement for that item 
locally or nationally, and suspend or cease the prior authorization 
process generally or for a particular item. We believe that this 
authority allows us to be quickly responsive to any general 
implementation issue(s) that may surface, or issues related to the 
prior authorization implementation for a specific item.
    We are finalizing our proposal to select an item(s) from the Master 
List and include it on the Required Prior Authorization List, to 
implement the prior authorization program locally or nationally, and to 
suspend or cease the prior authorization requirement program generally, 
or for a particular item without undertaking a separate rulemaking. We 
are also finalizing our authority to determine the number of item(s) 
selected upon initial implementation, determine the number of items 
selected for future implementation, and determine the frequency with 
which we would select the item(s).
    Lastly, we are finalizing the proposal that we inform the public of 
the Required Prior Authorization List in the Federal Register with 60-
day notice before implementation.
    Comment: Some commenters suggested each item selected for prior 
authorization be time limited (a beginning and ending date) for the 
prior authorization requirements; other commenters suggested that items 
be subject to prior authorization for the duration of the capped rental 
period.
    Response: We will take these comments into consideration. The 
length of time a prior authorization requirement is valid for a 
particular item may be dependent on the item chosen for prior 
authorization. We believe these operational logistics are more 
appropriately addressed in CMS guidance.
    Comment: Some commenters stated that the proposed rule fails to 
outline factors or any methodology that CMS will use when selecting 
Master List items for the Required Prior Authorization List. Other 
commenters stated that no limits are placed on the number of items to 
move from the Master List to the Required Prior Authorization List. 
Commenters stated that without this information, the decision-making 
process is unclear and fails to provide adequate notice for physicians 
and other stakeholders.
    Response: We solicited comments on the number of items we should 
implement initially and in the future, as well as the frequency in 
which we move the items from the Master List to the Required Prior 
Authorization list. We did not receive specific recommendations on the 
number of items to move from the Master List to the Required Prior 
Authorization List for initial implementation or in the future, except 
for a few commenters who recommended we implement all of the items at 
the same time. In addition to the inclusion criteria discussed 
previously, future policies, regulations or response to stakeholder 
needs may be factored into the Master List item selection(s). While we 
are not finalizing any methodology or criteria for selection of items 
to be included on the Required Prior Authorization List, CMS may 
consider factors such as geographic location, item utilization or cost, 
system capabilities, administrative burden, emerging trends, 
vulnerabilities identified in official agency reports, or other data 
analysis. Such exemplary factors are not being provided to create a 
definitive list or set of pre-determined considerations, nor to 
indicate whether such factors could be reviewed in singular or 
aggregate, nor to indicate the level of priority to be applied to a 
specific item(s). Rather, they are cited for the limited purpose of 
notifying stakeholders of the types of factors CMS may take into 
consideration to create the Required Prior Authorization List.
    We note that all provisions finalized in this rule apply in 
competitive bidding areas because CMS conditions of payment apply under 
the Medicare DMEPOS Competitive bidding Program.

E. The Proposed Prior Authorization Process

    As described in the May 28, 2014 proposed rule (79 FR 30520), the 
proposed prior authorization process would not create new or change 
existing clinical documentation requirements. As proposed, it would 
require the same information necessary to support Medicare payment, 
just earlier in the process. This process allows the review contractor 
to confirm, to the extent possible, that all relevant coverage, coding, 
and clinical documentation requirements are met before the item is 
furnished to the beneficiary and before the claim is submitted for 
payment.
    We proposed that prior to furnishing the item and prior to 
submitting the claim for processing, a prior authorization requester 
would submit evidence that the item complies with all applicable 
Medicare coverage, coding, and payment rules. Information regarding 
Medicare coverage, coding, and payment rules for DMEPOS items is found 
in the Act, our regulations, National Coverage Determinations (NCDs), 
Local Coverage Determinations (LCD), CMS manuals and transmittals, as 
well as Durable Medical Equipment Medicare Administrative Contractors' 
(DME MAC) Web sites. All Medicare coverage, coding, and payment rules 
would apply. Medicare coverage, coding, and payment rules applicable to 
items on the Required Prior Authorization List would also be posted on 
the CMS Prior Authorization Web site. Furthermore, we proposed we would 
not change existing requirements regarding the entity responsible for 
creating required clinical documentation. For example, clinical 
documentation that is required to be created by a practitioner would 
still be required to be created by the practitioner. Similarly, 
documentation requiring supplier origination (for

[[Page 81690]]

example, product description) would still be generated by the supplier.
    We stated in the proposed rule that CMS or its review contractors 
would review the prior authorization request to determine whether the 
item ordered for the beneficiary complies with applicable Medicare 
coverage, coding, and payment rules. After receipt of all applicable 
required Medicare documentation, CMS or its review contractors would 
conduct a medical review and communicate a decision that provisionally 
affirms or non-affirms the request. We proposed that 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 proposed 
making this distinction clear by adding a new paragraph (t) to Sec.  
405.926 stating that a review contractor's prior determination of 
coverage is not an initial determination.
    In the May 28, 2014 proposed rule (79 FR 30520), we stated that 
claims associated with a non-affirmation decision, as well as claims 
for items subject to prior authorization but for which no prior 
authorization was requested, would be denied if submitted for 
processing. A requester who submits a claim for which there was a non-
affirmation decision or for which no prior authorization request was 
obtained would be afforded full appeal rights on the claim.
    We proposed that CMS or its review contractors would make 
reasonable efforts to communicate the decision within 10 days of 
receipt of all applicable information. However, we stated that final 
timelines for communicating a provisionally affirmed or non-affirmed 
decision to the requester would be described in CMS guidance and posted 
on the CMS Prior Authorization Web site. We proposed allowing unlimited 
resubmissions of prior authorization requests.
    To address circumstances where applying the standard timeframe for 
making a prior authorization decision could seriously jeopardize the 
life or health of the beneficiary, we proposed a mechanism for an 
expedited review. We proposed that if CMS or its review contractors 
agree that using the standard timeframes for review places the 
beneficiary at risk as previously described, then we would allow an 
expedited review of the prior authorization request and communicate an 
expedited decision. In these situations, we stated that CMS or its 
review contractors would make reasonable efforts to communicate the 
decision within 2 business days of receipt of all applicable Medicare 
required documentation. We stated this process would be further defined 
in CMS guidance and posted on the CMS Prior Authorization Web site. We 
proposed that a prior authorization request for an expedited review 
would include documentation that shows that applying the standard 
timeframe for making a decision could seriously jeopardize the life or 
health of the beneficiary. For example, documentation could include 
medical records, supplier documentation, home health documentation or 
any other documentation deemed to support the necessity of an expedited 
review. We solicited public comment on whether the proposed process 
would meet our objective of maintaining beneficiary access to care and 
protecting the Medicare program without placing undue burden on 
practitioners and suppliers.
    We proposed 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 affirmation 
or a non-affirmation would be communicated to the affected parties in 
the same manner as an initial request. We stated 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. We proposed that a request outside 
of those parameters would be treated as a new initial request. We 
sought public comment on the number of resubmitted prior authorization 
requests allowed.
    In the May 28, 2014 proposed rule, we suggested that Medicare or 
its review contractors make a reasonable effort to render a provisional 
affirmation or a non-affirmation decision within 10 days of receiving 
the initial request, 2 days for an expedited request or 20 days for a 
resubmission. We also sought public comment on suggested timeframes for 
provisional affirmation or non-affirmation decisions on resubmitted 
prior authorization requests. Furthermore, in the proposed rule, we 
stated additional information about timeframes for all decisions would 
be described in CMS guidance to its contractors. In the May 28, 2014 
proposed rule, we included the following illustrations of possible 
prior authorization scenarios:
    Scenario 1: A requester submits to CMS (or its review contractors) 
a prior authorization request along with all required documentation. 
CMS (or its review contractors) finds that the request meets all 
applicable Medicare requirements. CMS (or its review contractors) would 
communicate a provisional affirmation decision to the affected parties. 
The supplier would submit the claim following receipt of a provisional 
affirmation decision, and the claim would be paid, as long as all other 
requirements were met.
    In the preceding example, the granted affirmation decision is 
provisional because payment decisions can only be made after all 
requirements are evaluated. For example, a claim could have received a 
provisional affirmation prior authorization decision. However, after 
submission, the claim could be denied due to technical payment reasons, 
such as the claim was a duplicate claim or the claim was for a deceased 
beneficiary. In addition, certain documentation needed in support of 
the claim, such as proof of delivery, are unavailable for review on a 
prior authorization request.
    Scenario 2: A requester submits to CMS (or its review contractors) 
a prior authorization request. CMS (or its review contractors) conducts 
a medical review of submitted documentation and determines that the 
request and submitted documentation does not comply with one or more 
applicable Medicare coverage, coding, and payment rules. CMS (or its 
review contractors) communicates a decision that non-affirms the 
request. A non-affirmation is a preliminary finding that a future claim 
associated with the submitted documentation and prior authorization 
request would be denied if submitted because the associated request and 
submitted documentation did not meet one or more of Medicare's 
coverage, coding, and payment rules. The communication to the affected 
parties would identify which Medicare coverage, coding or payment 
rule(s) was not supported in the request and submitted documentation 
and thus served as the basis for the non-affirmation decision. The 
requester could resubmit the prior authorization

[[Page 81691]]

request. If the claim is submitted for payment without a provisional 
affirmation decision, it would be automatically denied. The supplier 
would assume liability if the item was furnished after receiving a non-
affirmation decision, unless conditions for assigning liability to the 
beneficiary or Medicare are met. (For more information, see section 
1879(h)(2) of the Act for assigned claims, section 1834(j)(4) of the 
Act for non-assigned claims, and our discussion in section II.F. of 
this final rule). A prior authorization request that is non-affirmed 
under section 1834(a)(15) of the Act is not an initial decision on a 
claim for payment for items furnished, and therefore would not be 
appealable. However, a claim for which a non-affirmation prior 
authorization decision was received, submitted, and subsequently denied 
could be appealed.
    Scenario 3: A claim is submitted without a prior authorization 
decision. The claim would be denied because there was no prior 
authorization request, which is a condition of payment. The supplier is 
liable unless the conditions for assigning liability to the beneficiary 
or Medicare are met. (For more information, see section 1879(h)(2) of 
the Act for assigned claims, section 1834(j)(4) of the Act for non-
assigned claims, and our discussion in section II.F. of this final 
rule).
    We proposed to automatically deny payment for a claim for an item 
on the Required Prior Authorization List that is submitted without a 
provisional affirmation prior authorization decision. We believe that 
section 1834(a)(15) of the Act established an advanced determination 
process (that is, a prior authorization process) as a condition of 
payment for items on the list developed by the Secretary. We stated in 
the May 28, 2014 proposed rule that absent this potential penalty for 
noncompliance with the prior authorization process, section 1834(a)(15) 
of the Act would be rendered moot, as suppliers would not be required 
to seek an advance decision of coverage for these items. A mandatory 
prior authorization process for these items best ensures that CMS 
effectuates its goal of reducing unnecessary utilization for the items 
identified by the Secretary in accordance with section 1834(a)(15)(A) 
of the Act.
    We proposed in Sec.  414.234(c) that 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. We stated that the new 
requirement would reduce the unnecessary utilization and the resulting 
overpayment for certain DMEPOS items.
    In addition, we proposed adding a new paragraph (t) to Sec.  
405.926 stating that a review contractor's prior determination of 
coverage is not an initial determination and is thus not appealable 
because the prior authorization decision is not an initial 
determination with respect to a claim for benefits under Part A or Part 
B. Section 405.926 contains the list of actions that are not initial 
determinations and thus not appealable. However, we noted that a 
requester who submits a claim for which there was a non-affirmation 
decision or for which no prior authorization request was obtained would 
be afforded appeal rights.
    We believe that a prior authorization process is an effective way 
to address unnecessary utilization, particularly since most items 
frequently subject to unnecessary utilization are identified as such 
because of insufficient supporting documentation. Inherent in a prior 
authorization process is a review of supportive evidence for the 
medical necessity of the item. Traditionally, this review has involved 
the beneficiary's medical record.
    In summary, we proposed the following prior authorization process:
     Prior to furnishing the item and prior to submitting the 
claim for processing, a prior authorization requester would submit 
evidence that the item complies with all coverage, coding, and payment 
rules.
     CMS or its review contractors would review the prior 
authorization request and accompanying documentation to determine 
whether the item ordered for the beneficiary complies with applicable 
Medicare coverage, coding, and payment rules.
     After receipt of all applicable required Medicare 
documentation, CMS or its review contractors would conduct a medical 
review and communicate a decision that provisionally affirms or non-
affirms the request.
     For the initial prior authorization request, CMS or its 
review contractors would make reasonable efforts to communicate a 
provisionally affirmed or a non-affirmed decision within 10 business 
days of receipt of all applicable information.
     A requester may resubmit a prior authorization request if 
the initial request was non-affirmed. Unlimited resubmissions are 
permitted.
     For each resubmitted prior authorization request, CMS or 
its review contractors would make reasonable efforts to communicate a 
provisionally affirmed or a non-affirmed decision within 20 business 
days of receipt of all applicable information.
     For circumstances where applying the standard timeframe 
for making a prior authorization decision could seriously jeopardize 
the life or health of the beneficiary, an expedited review could be 
requested. For expedited reviews, CMS or its review contractors would 
expect the submitted documentation to include evidence that applying 
the standard timeframe for making a decision could seriously jeopardize 
the life or health of the beneficiary. If CMS or its review contractors 
agreed that applying the standard timeframe would jeopardize the life 
or health of the beneficiary, then CMS or its review contractors would 
make reasonable efforts to communicate a provisionally affirmed or a 
non-affirmed decision within 2 business days of receipt of all 
applicable information.
    In the proposed rule, we specifically solicited public comment on 
the following:
     The number of resubmitted prior authorization requests 
allowed.
     The suggested timeframes for provisional affirmation or 
non-affirmation decisions on resubmitted prior authorization requests.
     Whether the proposed process would meet our objective of 
maintaining beneficiary access to care and protecting the Medicare 
program without placing undue burden on practitioners and suppliers.
    Comment: Commenters stated that some items on the Master List were 
needed sooner than the proposed prior authorization process could 
permit. For example, commenters stated that electric hospital beds 
(E0260 on the Master List) were often ordered for beneficiaries the day 
they are discharged from the hospital. Commenters stated that the 
proposed expedited review process was still too long for a beneficiary 
being discharged from the inpatient setting and who required an 
electric bed to be in their home upon arrival. For example, the 
proposed expedited process timeframe was 2 business days. If the 2 
business days were split by a weekend or a holiday, it could take up to 
5 days for the review contractor to render a prior authorization 
decision. The vast majority of commenters stated that the suggested 
timeframes would create delays in care or access issues for 
beneficiaries. Some commenters believed the proposed timeframe created 
undue burden for suppliers and ordering physicians as well. Several 
commenters submitted detailed

[[Page 81692]]

suggestions on creating a prior authorization process that would more 
quickly return a prior authorization decision to the requester. For 
example, we received several suggestions to use forms rather than 
medical records to evidence the need for the requested item. There were 
suggestions to create a 24-hour, 7-days-a-week call-in service that 
could give a prior authorization decision after verbal conversation 
between the prior authorization requester and the call-in service 
personnel.
    Response: We agree that additional flexibility beyond the proposed 
timeframes may be necessary under particular circumstances to ensure 
adequate beneficiary access to DMEPOS on the Required Prior 
Authorization List. In the interest of promoting beneficiary access to 
care and protecting the Medicare program without placing undue burden 
on practitioners and suppliers, we are not finalizing the proposed 
prior authorization timeframes. Therefore, prior authorization 
timeframe requirements will be made available to stakeholders and the 
public in subregulatory guidance, which allows for greater flexibility 
in the event timeline modifications are warranted. We note the prior 
authorization timeframe(s) detailed in subregulatory guidance will not 
exceed the timeframes described in the proposed rule.
    We will take the comments regarding alternate processes that afford 
more expedient responses to the requestor (for example, the 24-hour 7-
day a week model) into consideration when developing the prior 
authorization timeframes.
    Comment: Many commenters were confused about actions that are 
afforded appeal rights. Commenters understood that denied claims can be 
appealed, but also wanted appeal rights for non-affirmation prior 
authorization decisions.
    Response: We remind commenters that a request for prior 
authorization is not a claim for benefits, and a non-affirmation prior 
authorization decision is not an initial determination. See, section 
1869(a) of the Act, and 42 CFR 405.904(a)(2), 405.920, and 405.924(b) 
of the regulations. Rather, a non-affirmation prior authorization 
decision is a finding by the review contractor that the prior 
authorization request and accompanying documentation had at least one 
error or omission of an applicable Medicare coverage, coding or payment 
rules. If the error remains uncorrected but the claim is still 
submitted for processing, the claim would be denied.
    We believe that permitting resubmissions of non-affirmation prior 
authorization decisions allows the requester to be educated about what 
is missing in the initial prior authorization request before the claim 
is submitted. The review contractor will list the specific information 
that is missing for any prior authorization request receiving a non-
affirmation prior authorization decision. For example, a requester who 
received a non-affirmation prior authorization decision because medical 
necessity documentation was missing can resubmit the request and 
include the required documentation previously missing. If all 
applicable Medicare coverage, coding, and payment rules are satisfied 
with the resubmitted prior authorization request, the formerly non-
affirmation prior authorization decision would be changed to a 
provisional affirmation decision. If the requester disagreed with the 
review contractor's non-affirmation decision and believed that the 
prior authorization request met all requirements, the requester could 
submit the claim for payment. The supplier would receive a payment 
denial. After receiving the payment denial, the supplier may appeal the 
claim. The beneficiary may also appeal the denied claim.
    We remind readers that an affirmation prior authorization decision 
is provisional because other information that is only available after 
the claim is submitted may result in a denial. For example, there may 
be technical issues, such as a duplicate claim, or an absent or 
improperly listed proof of delivery date that can be known only after 
the claim is submitted. However, we believe that reviewing the 
documentation and information in advance of submitting the claims does 
provide some assurance that the claim is likely to be paid. We believe 
that suppliers and beneficiaries prefer to have some assurance that 
their claim is likely to be paid because all the required information 
was provided in advance of submitting the claim and furnishing the item 
to the beneficiary.
    Comment: Some suppliers stated that providing documentation before 
the claim is submitted is less burdensome than having to submit the 
documentation after the claim is submitted and after the item is 
furnished. Some believed that prior authorization would reduce their 
need to access the appeals process, which they state is costly and 
burdensome.
    Response: We agree that prior authorization may reduce a supplier's 
need to access the appeals process because a requester may resubmit a 
prior authorization request an unlimited number of times. We believe 
that allowing requesters to resubmit an unlimited number of times 
allows the requester multiple opportunities to understand documentation 
or other requirements of payment, correct the omission before the claim 
is submitted, and thereby avoid having the subject claim denied. We 
agree that a prior authorization process is less burdensome than 
accessing and preparing an appeal request.
    Comment: Many commenters expressed a general concern that the 
proposed prior authorization process would create an overall delay in 
care, possibly resulting in poor beneficiary health outcomes. For 
example, several commenters stated that the review timeframes for 
negative pressure wound therapy items would create a delay in care and 
result in poor outcomes. They stated that poor outcomes could include a 
delay in healing which would increase hospital readmissions and poor 
patient satisfaction. Commenters also stated that a delay in outpatient 
negative pressure wound therapy would delay beneficiary discharges, 
extend hospital stays, and increase inpatient costs. Similarly, 
commenters stated that requiring prior authorization for pressure 
reducing support surfaces could also delay beneficiary discharges and 
extend hospital stays.
    Response: We understand commenters' concerns and agree that 
requiring a lengthy prior authorization process for negative pressure 
wound therapy devices, pressure reducing support surfaces, and perhaps 
other Master List items, could potentially delay care and lead to 
negative outcomes. We will take these comments as well as other similar 
comments into consideration as we develop the timeframes for the prior 
authorization process. We will issue the timeframes in subregulatory 
guidance because we believe that this will create the flexibility to 
quickly modify the timeframes as needed, if issues are identified.
    Comment: Some commenters recommended that CMS compare and contrast 
the private insurance industry's prior authorization programs with the 
proposed prior authorization program and recommended that CMS mirror 
the private insurance industry as much as possible.
    Response: We understand many commenters would like to see the 
Medicare Prior Authorization program mirror the private sector programs 
as much as possible. Due to the differences in how the private sector 
and Medicare do business with providers and suppliers, having the same 
process is

[[Page 81693]]

not entirely possible. However, in the development of the prior 
authorization process timeframes, we plan to reach out to the private 
industry, whenever possible, for examples and best practices that we 
can adopt.
    Comment: Commenters expressed concern about varying aspects of the 
required prior authorization medical record documentation. For example, 
many commenters from the prosthetics and orthotics community stated 
that the prosthetists' notes and records should be considered part of 
the medical record. Several commenters stated that LCD and NCD medical 
record documentation requirements will increase the review time, delay 
the time the beneficiary receives the equipment, and decrease clinician 
productivity. Some commenters stated individual documentation 
requirements for certain items on the proposed Master List are more 
burdensome than others (that is, the monthly documentation requirement 
for negative pressure wound therapy and physician orders for 
respiratory assistive devices). Other commenters recommended 
eliminating some required documentation like date stamps and face-to-
face encounters. A commenter recommended synchronizing the medical 
record documentation requirements of this rule with the medical record 
documentation requirements of the face-to-face encounter rule.
    Response: As discussed previously, prior authorization does not 
create new or change any existing documentation requirements. This 
final rule does not change or create new Medicare medical necessity, 
coverage, coding or payment rules. As a long-standing expectation, all 
of the following requirements must be met to receive an affirmation 
prior authorization decision--
     Coverage and other requirements of NCDs/LCDs;
     Technical requirements (for example, date stamps);
     Statutory requirements (for example, face-to-face 
encounter documentation); and
     All other requirements.
    We will provide education specific to each item subject to prior 
authorization so that suppliers are informed of specific documentation 
requirements.
    In response to commenters that requested that the prosthetists' 
notes and records stand alone in fulfilling medical necessity 
documentation requirements for a beneficiary's prostheses, we note that 
the expertise of prosthetists is very important and contributes to 
beneficiaries' recovery. However, a prosthetist's records alone do not 
illustrate the comprehensive clinical picture of the beneficiary. For 
example, a physician order alone does not satisfy Medicare's medical 
necessity criteria. Rather, it is the documentation of multiple 
healthcare team members working on behalf of the beneficiary that 
conveys the complete picture of the beneficiary's medical need and 
appropriate delivery of care. As a principle, when reviewing any claim 
for medical necessity, we look for corroboration between all entries 
(including physician's orders) in a beneficiary's medical record.
    Comment: Commenters requested that CMS provide clear guidance 
regarding required documentation. Other commenters suggested that CMS 
develop a form or questionnaire for the requester to complete in place 
of submitting beneficiaries' medical records.
    Response: We strive to continually educate providers on required 
documentation. As always, we expect that any request for Medicare 
payment is supported in the beneficiary's medical record. Suppliers are 
permitted to create forms or questionnaires for ordering physicians. 
However, templates and forms are subject to corroboration with 
information in the medical record.
    Comment: Some commenters questioned who is held responsible for 
providing the review contractor with the required medical 
documentation: The primary care provider, the ordering physician or the 
supplier. Other commenters recommended holding the ordering physicians 
accountable for lack of documentation and not the supplier. Other 
commenters recommended that CMS be responsible and accountable for 
obtaining missing documentation from the ordering physician, not the 
requester (supplier).
    Response: The entity requesting payment for a Medicare-covered item 
or service is responsible for meeting all Medicare coverage, coding, 
and payment rules. That responsibility cannot be delegated. We 
understand obtaining medical records from the beneficiary's other 
healthcare providers can be challenging for suppliers. However, 
Medicare's long-standing expectation is that no DMEPOS item(s) should 
be furnished by a supplier unless the supplier has in its possession or 
can easily obtain the required medical documentation. This is not 
unique to DMEPOS suppliers. Other health care entities providing 
services to Medicare beneficiaries who were referred to them by other 
practitioners have an obligation to obtain all the pertinent medical 
documentation from the referring practitioner. This may require more 
collaboration among the beneficiary's health care providers, but this 
collaboration is needed. Research shows that the lack of collaboration 
between the beneficiary's treatment team can result in the 
beneficiary's readmission to the inpatient setting or in the 
beneficiary not receiving other needed care.\16\
---------------------------------------------------------------------------

    \16\ The Revolving Door: A Report on U.S. Hospital Readmissions. 
Robert Wood Johnson Foundation, February 2013. Retrieved on February 
2, 2015 from http://www.rwjf.org/content/dam/farm/reports/reports/2013/rwjf404178.
---------------------------------------------------------------------------

    Comment: A commenter recommended that we provide information on 
lower cost alternatives in cases when the review contractor returns a 
non-affirmation prior authorization decision to the requester.
    Response: We expect providers to order and suppliers to provide the 
medically necessary item for a beneficiary, regardless of cost. If the 
review contractor determines that a prior authorization request does 
not meet all applicable Medicare coverage, coding, and payment rules 
based on the documentation received, it will be non-affirmed. The 
requester has the option of resubmitting the request with the required 
documentation an unlimited number of times. Receiving a non-affirmation 
prior authorization decision does not authorize the supplier to submit 
a claim for a similar but less costly item. All DMEPOS claims must have 
an associated physician's order submitted. That is, suppliers may not 
substitute DMEPOS items that are not ordered by the physician. A 
physician determines what DMEPOS item is medically necessary for the 
beneficiary.
    Comment: Some commenters recommended using the tax ID and not the 
Provider Transactions Access Number (PTAN) in the prior authorization 
process. This way, commenters stated, the prior authorization is 
transferrable to new suppliers if the beneficiary relocates.
    Response: We are developing the system capabilities to attach a 
prior authorization request to a claim. We will issue claims processing 
instructions in CMS guidance.
    Comment: Several commenters recommended that suppliers be able to 
deliver the item to the beneficiary before a prior authorization 
decision is made.
    Response: We recognize that some commenters' concerns about 
providing timely care to the beneficiary included a suggestion to allow 
suppliers to deliver the item to the beneficiary before a prior 
authorization decision is made, thus preventing any access issue. We 
proposed using a 10 business day timeline for initial prior 
authorization

[[Page 81694]]

requests, 20 business days for resubmitted prior authorization request 
and 2 business days for request for expedited reviews. Many commenters 
believed that these timeframes could create barriers to care for 
beneficiaries. In response to the concern, we will not finalize the 
proposed timelines. As mentioned previously, creating a prior 
authorization process in subregulatory guidance that is customized for 
the DMEPOS item subject to prior authorization provides flexibility to 
develop a process that involves fewer days, as may be appropriate. We 
believe this flexibility allows us to safeguard beneficiary access to 
care and avoid creating any barriers for beneficiaries and suppliers. 
Rather, under particular circumstances, we may develop a prior 
authorization timelines for certain items that permits fewer days than 
the proposed 10 or 20 business days. At any time we become aware that 
the prior authorization process is creating barriers to care, we can 
suspend the program.
    Comment: Some commenters recommended that if the review contractor 
does not provide a prior authorization decision within the proposed 
timeframe, an automatic approval should be given. Several commenters 
believed that the review contractor should guarantee payment if they 
issue an affirmation prior authorization decision since the submitted 
documentation established medical necessity, even if technical errors 
are found after the claim is processed.
    Response: We respectfully disagree with these suggestions. In order 
for a prior authorization request to receive an affirmation prior 
authorization decision, all Medicare coverage, coding, and payment 
rules must be met, including technical requirements. If medical 
necessity criteria are met with the initial prior authorization 
documentation, an affirmed prior authorization would be issued. If a 
prior authorization request receives an affirmation prior authorization 
decision, there is an assurance that the claim will not be denied on 
the basis of medical necessity. However, it is possible the claim could 
be denied because it did not meet a coding or billing requirement.
    We expect that the review contractor will provide a prior 
authorization decision within the timeframes established in 
subregulatory guidance. We conduct day-to-day oversight, as well as 
formal annual performance evaluations of Medicare contractors, to make 
sure that they are meeting the requirements of their contract. We may 
require action plans for standards that are not met and also consider 
documented past performance for future contract awards.
    Comment: Some commenters recommended that suppliers receiving a 
non-affirmation prior authorization decision for an advanced LLP should 
be allowed to submit another request after 30 days if the beneficiary's 
functional potential improves after 30 days.
    Response: Prior authorization does not create or eliminate 
documentation requirements. Therefore, in the case of prostheses being 
subject to prior authorization, improved functional potential after 30 
days does not take the place of documentation and medical necessity 
requirements evidencing this improvement. Provisionally affirmed prior 
authorizations are based on the submitted documentation. If the 
beneficiary's functional potential improves and the original prior 
authorization decision was a non-affirmation, the supplier would need 
to submit another prior authorization request with the change in 
beneficiary status in the clinical documentation and all of Medicare's 
coverage, coding, and payment rules must again be met. A prior 
authorization request can be submitted at any time and there are an 
unlimited number of resubmissions. However, if a new DMEPOS item is 
needed because the status of the beneficiary changes, then a new prior 
authorization request must be submitted.
    Comment: A commenter suggested that the review contractor be fined 
100 percent of the allowable amount for an item if one supplier 
receives a non-affirmation prior authorization for a particular item, 
for a particular beneficiary, but another supplier receives an 
affirmation decision for the same item, for the same beneficiary.
    Response: A prior authorization request must meet all Medicare 
coverage, coding, and payment rules. Therefore, if one supplier did not 
provide all the required documentation or information, but another 
supplier did, the second supplier would receive a provisional 
affirmation prior authorization decision while the first one would not. 
In this situation, two suppliers submitted a prior authorization 
request at different times for the same item and same beneficiary, but 
only one supplier furnished the item. Our claims processing system will 
track prior authorization requests and we will conduct frequent 
monitoring. Thus, we can avoid situations when a beneficiary receives 
two of the same items from two different suppliers.
    Beneficiaries and suppliers may file a complaint in cases where 
they believe access to a DMEPOS item or a supplier was improperly 
denied or if they believe a prior authorization request was not handled 
properly. More information on ways to file a complaint is available at 
https://www.medicare.gov/claims-and-appeals/file-a-complaint/durable-medical-equipment/complaints-about-dme.html. One of the described 
processes is through the Competitive Acquisition Ombudsman (CAO). The 
CAO position was established by the Congress and operates within CMS' 
Office of Hearings and Inquiries. The CAO plays a vital role in 
ensuring that Agency processes respond effectively to inquiries and 
complaints about the Program. The CAO notifies Agency leadership about 
potential systemic issues that may affect beneficiaries' access to 
quality DMEPOS items and services.
    Federal procurement regulations effectively prohibit issuing fines 
or similar financial penalties to Medicare Administrative Contractors 
for not meeting performance standards. We provide incentives to 
contractors for exceeding the requirements in their contracts. This is 
done through a formal award fee process. Contractors are awarded extra 
fees for exemplary accuracy in their medical review determinations. We 
conduct quality checks of the prior authorization decisions through a 
sample of random claims. Findings from this quality check are 
communicated to CMS' Medicare Contractor Management Group (MCMG) and 
are used to determine if a contractor is eligible for an award fee. We 
also perform annual performance evaluations of MACs to ensure that they 
are meeting all requirements of their contract. We may require action 
plans for standards that are not met and also consider documented past 
performance for future MAC contract awards. In situations where two 
suppliers in the same contractor jurisdiction submit identical 
documentation to support medical necessity and receive two different 
determinations, we would refer the incident to MCMG for review.
    In addition, we conduct day-to-day contractor oversight by, among 
other things, frequent communication with the contractor medical review 
components. In these communications, we receive status updates about 
the different types of medical review decisions. For example, we 
monitor contractors' pre- and post-pay medical review strategies. Upon 
implementation, we will also monitor contractors' prior authorization 
processes, including the decisions they render and the timeframes in 
which the decisions are rendered.

[[Page 81695]]

    As noted earlier, prior authorization timeframe requirements will 
be made available to stakeholders and the public in subregulatory 
guidance, which allows for greater flexibility in the event timeline 
modifications are warranted. We remind commenters that both the final 
rule and the Act gives us the authority to implement the prior 
authorization requirement for a DMEPOS item locally or nationally, and 
suspend or cease the prior authorization process generally or for a 
particular item. We note the prior authorization timeframe(s) detailed 
in subregulatory guidance will not exceed the timeframes described in 
the May 28, 2014 proposed rule (79 FR 30521). We believe that this 
authority allows us to be quickly responsive to any general 
implementation issue(s) that may surface, including any unforeseen 
beneficiary access issues.
    Comment: Some commenters questioned if receiving a non-affirmation 
prior authorization request is curable. For example, commenters sought 
clarification on whether a requestor could submit the prior 
authorization request multiple times until the requestor receives a 
provisional affirmative prior authorization decision.
    Response: If a prior authorization request receives a non-
affirmation decision, the prior authorization request can be 
resubmitted an unlimited number of times. If on subsequent 
submission(s) the requester provides information previously missing, 
and the resubmitted request complies with all applicable Medicare 
coverage, coding, and payment rules, the non-affirmation decision will 
be changed to a provisional affirmation decision.
    We are finalizing prior authorization as a condition of payment. As 
such, if a claim subject to prior authorization is received without an 
associated affirmed prior authorization request, it will be denied. 
Once the claim is denied, standard appeal rights apply.
    Comment: Several commenters expressed concern that there is no 
process to appeal a non-affirmation determination on an initial 
request. Some commenters recommended that after two non-affirmation 
decisions, the supplier should have an option for appeal. Several 
commenters stated that an appeals backlog would occur. Some commenters 
recommended that the contractors be subject to a fine for every denial 
that is overturned by appeal in the amount of 25 percent of the 
allowable amount for the claim.
    Response: We are finalizing prior authorization as a condition of 
payment. As such, lack of an affirmed prior authorization request in 
cases where a prior authorization is required will result in a claim 
denial. Once the claim is denied, standard appeal rights apply. As 
previously clarified, a non-affirmed prior authorization is not an 
initial determination of payment and therefore not appealable. The 
prior authorization process does not change traditional appeal rights 
once a claim is submitted and denied. Claims appeals processes are 
outside the scope of this rule.
    Additionally we believe that permitting unlimited resubmissions 
gives the requester multiple opportunities to make a prior 
authorization request with all of the required documentation and 
receive a provisional affirmation decision. As such, we expect fewer 
denials because a significant percentage of denials have been due to 
insufficient documentation. With fewer denials, we expect fewer 
appeals.
    Comment: Several commenters recommended that the prior 
authorization process should be tailored to each individual item on the 
proposed Master List. For example, some commenters suggested we use 
diagnosis codes in electronic health records to demonstrate medical 
necessity because coding is based upon the assumption that all devices 
within a code are equivalent in ability to provide medically necessary 
performance.
    Response: We believe these operational logistics of the prior 
authorization process are more appropriately addressed in subregulatory 
guidance. Issuing subregulatory guidance will give us the ability to 
continually improve upon the process going forward and tailor it to 
individual items, if necessary. Typically, a diagnosis code alone is 
not sufficient to demonstrate medical necessity. We expect diagnosis 
codes to be backed up with evidence in the medical record.
    Comment: Some commenters requested that CMS clarify circumstances 
where a ``technical requirement'' not met for a claim that has an 
associated affirmed prior authorization could result in a payment 
denial.
    Response: Examples of not meeting a ``technical requirement'' 
include situations where a claim is a duplicate claim or where the 
claim is coded improperly. A claim reporting a HCPCS code for a DMEPOS 
item that differs from the DMEPOS item associated with the issued 
provisional affirmation prior authorization decision is an example of a 
claim that is coded improperly. A claim with an associated affirmation 
prior authorization decision would be denied if these types of 
technical requirements were not met.
    Comment: Several commenters recommended that CMS have a way of 
tracking and reporting the contractors' response times and inbound and 
outbound documentation submitted. Several commenters recommended that 
CMS make statistics of the prior authorization programs available to 
the public.
    Response: We will take these comments into consideration as we 
implement the prior authorization process. We will meet regularly with 
our review contractors and will keep them informed on all aspects of 
the prior authorization program.
    Comment: Some commenters recommended that after three non-
affirmation prior authorization decisions, the suppliers should be 
allowed to talk directly to the review contractor's medical director. 
Some commenters recommended that there should be a verbal determination 
process, while others recommended that we create a central Web site 
where physicians can order DMEPOS and provide required information by 
answering a few questions, and that the Web site can provide an 
affirmed prior authorization approval in real time.
    Response: We expect to create a process through subregulatory 
guidance that provides requesters with an efficient experience and 
takes into consideration public recommendations. For example, our 
review contractor will document specific requirements that were not met 
when issuing a non-affirmation decision. We believe that with knowledge 
of the applicable Medicare coverage, coding, and payment rules and 
communication from the review contractor, a supplier can receive a 
provisional affirmation decision for covered medically necessary items. 
In addition, we believe that timelines for the prior authorization 
process may need to be different for some DMEPOS items. For example, 
the prior authorization timeline for PMDs would likely differ from the 
prior authorization timelines for oxygen concentrator. We believe these 
operational logistics and the commenters' suggestions are more 
appropriately addressed in subregulatory guidance. This gives us the 
greatest flexibility for making improvements in the process in the 
future.
    Comment: Some commenters recommended that CMS begin vigorous 
outreach and education on existing documentation requirements and 
prioritize providers for this education.

[[Page 81696]]

    Response: We agree that outreach and education are extremely 
important. We will take these comments into consideration as we 
implement the prior authorization process.
    We are finalizing the following proposed provisions summarized in 
section II.E. of this final rule:
     Create prior authorization as a condition of payment for 
items on the Required Prior Authorization List, as proposed in Sec.  
414.234(c)(1). Claims receiving a non-affirmation decision, as well as 
claims for items subject to prior authorization but for which no prior 
authorization was requested, will be denied if submitted for 
processing.
     Add a new paragraph (t) to Sec.  405.926 stating that a 
contractor's prior determination of coverage is not an initial 
determination. Section 405.926 contains the list of actions that are 
not initial determinations and thus not appealable.
     Define a ``provisional affirmation'' prior authorization 
request decision, as proposed in Sec.  414.234(a).
     Require all relevant documentation necessary to show that 
the item meets applicable Medicare coverage, coding, and payment rules 
be submitted before the item is furnished to the beneficiary and before 
the claims is submitted for processing, as proposed in Sec.  
414.234(d)(1).
     Permit unlimited resubmissions of the prior authorization 
request, as proposed in Sec.  414.234(e)(3)(ii).
     Include an expedited review option and process, as 
proposed in Sec.  414.234(e)(4).

F. Other

    We received several comments that were outside the scope of the 
proposed rule. Other comments were related to the proposed prior 
authorization rule, but did not address any of the topics discussed in 
this final rule. In the following discussion, we summarize and respond 
to these comments.
    Comment: Several commenters believe section 1834(a)(15) of the Act 
requires that the prior authorization process be fully electronic and 
use a valid ASC x12 278 transaction.
    Response: We are aware of the need to be HIPAA compliant. We expect 
to have the ability to accept electronic 278 transmissions and will 
notify the public when electronic 278 transmissions can be accepted.
    Comment: Several commenters recommended that the prior 
authorization decision should be communicated to both physician/
practitioner and the supplier.
    Response: We will take this comment under advisement as we develop 
operational guidance for this rule.
    Comment: Commenters suggested that CMS continue to study the long-
term impact of the PMD demonstration. Other commenters recommended that 
CMS should discontinue the PMD demonstration when finalizing this rule.
    Response: The prior authorization of PMD demonstration will 
continue to its scheduled completion at which time we may choose to 
move any PMD codes on the Master List to the Required Prior 
Authorization List.
    Comment: Several commenters recommended enforcing section 427 of 
the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Act of 2000.
    Response: Section 427 of BIPA regarding enforcement is outside the 
scope of this final rule.
    Comment: Several commenters recommended that claims for serial 
items subject to prior authorization be exempt from future audits. For 
example, commenters recommended that claims for first month rental as 
well as future months be exempt from future audits.
    Response: As noted previously, in response to public concern that a 
supplier may be subject to audits even after meeting the documentation 
requirements for a prior authorization request, paid claims for which 
there is an associated affirmed prior authorization decision will be 
afforded some protection from future audits. However, when the subject 
claim falls within the CERT annual sample or when a supplier's billing 
patterns signal potential fraud, inappropriate utilization or changes 
in billing patterns, the claim may be subject to an audit. Claims for 
subsequent and serial rental items will be covered under the initial 
prior authorization decision for time periods stated in NCDs, LCDs, 
statutes, regulations, and CMS issued manuals and publication. For 
example, if a policy for the subject DMEPOS item requires medical 
necessity documentation to be updated annually, the initial prior 
authorization decision will cover the claims for the subject DMEPOS 
item for 12 months.
    Comment: Some commenters recommended we create an exception to the 
Stark Law.
    Response: Exceptions to the Stark Law are outside the scope of this 
final rule.
    Comment: A commenter recommended that Stage 1 meaningful use and 
2013 Clinical Quality Measures (CQM's) should be allowed to qualify for 
meaningful use and incentive payments for 2014 because there is not 
enough time for the community to be able to successfully attest for 
2014 meaningful use.
    Response: Meaningful use incentive payments are outside of the 
scope of this final rule.
    Comment: Several commenters gave alternate options to implement, 
instead of prior authorization. For example, rather than imposing prior 
authorization on suppliers, some commenters suggested that CMS recoup 
improper payments made by review contractors by having review 
contractors reimburse Medicare for the improper payments they made. 
Some commenters recommended that CMS continue to pay an incentive 
payment and to waiver temporary devices.
    Response: We agree with commenters that CMS should avoid improper 
payments. In part, this is the reason we are implementing prior 
authorization for DMEPOS items subject to frequent unnecessary 
utilization that meet the inclusion criteria. We believe that a prior 
authorization request that meets the necessary requirements helps 
review contractors avoid making and suppliers avoid receiving improper 
payments. However, when an improper payment is identified, we must 
recoup the payment from the entity receiving it. Incentive payments and 
temporary device waivers are outside the scope of this final rule.
    Comment: Some commenters stated that prior authorization will cost 
more than it will save and that the care of the beneficiaries, not 
cost, is most important.
    Response: We agree that the care of beneficiaries is of utmost 
importance. We believe cost should not be the only consideration. There 
are likely to be other benefits 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 FFS payments (note that not 
all improper payments are fraudulent). We believe we must make sure 
that beneficiaries are receiving medically necessary care, items, and 
drugs when needed and can make informed financial decisions prior to 
receiving items and services that are not covered under the Medicare 
program. We believe providers and suppliers participating in the 
Medicare program have a responsibility to make sure their documentation 
evidences that the care/item/drug they provide is medically necessary 
for the diagnosis or treatment of illness or injury or to improve the 
functioning of a malformed

[[Page 81697]]

body member (section 1862(a)(1)(A) of the Act).
    Comment: A commenter expressed concern about claims for dually-
eligible beneficiaries. They questioned whether a supplier would be 
allowed to use a provisional non-affirmation prior authorization 
decision to submit a request for payment to a Medicaid program. Other 
commenters recommended creating an exception for suppliers to submit 
eligible claims without a prior authorization if there was a 
coordination of benefits error.
    Response: Clarifying Medicaid requirements for coverage of DME is 
outside of the scope of this final rule, though we stated that we do 
not consider such a prior authorization decision on its own to be a 
Medicare payment decision. However, we are aware that there are 
opportunities to better align the two programs' coverage of DME, and 
note that we received comments on this opportunity in response to our 
May 16, 2011 Notice for Comment (76 FR 28196) in which we launched the 
Alignment Initiative. We will continue to work internally across 
components to find solutions to better serve dually-eligible 
beneficiaries.
    Comment: Clarification was requested by some commenters whether the 
average cost of purchasing or renting an item would influence how long 
a contractor may have to reply to a request for prior authorization.
    Response: Currently we do not believe purchase price or rental fee 
will impact the timeframe. We will issue the timeframes for making 
prior authorization decisions in subregulatory guidance. We believe 
that by doing so we create flexibility to quickly modify the timeframes 
if issues are identified.
    Comment: Some commenters recommended that the requirement for 
physicians to co-sign and bill for the items should be removed. Some 
commenters requested clarification regarding the physician co-signature 
requirements.
    Response: This final rule does not change any physician co-
signature requirements. Physician co-signature requirements are outside 
the scope of this final rule.
    Comment: A commenter recommended that CMS provide reimbursement for 
home care agencies to let medical social workers conduct visits with 
the sole intent of completing an updated advance directive and 
Physician Orders for Life-Sustaining Treatment (POLST).
    Response: Home care reimbursements are outside the scope of this 
final rule.
    Comment: Some commenters expressed concern regarding bundled items 
and that not all individual codes on the proposed Master List over 
$1,000 are standalone items and that they are used in combination with 
an entire multi-coded device.
    Response: We recognize that some items on the Master List could be 
ordered together. Our prior authorization process will accommodate this 
circumstance. For example, a requester could list all related items on 
their prior authorization request and receive one prior authorization 
decision that covers all the items listed in the request. Specific 
instructions will be given in subregulatory guidance.

G. Liability

    In the May 28, 2014 proposed rule (79 FR 30520), we discussed how 
CMS' liability policies apply to the prior authorization process. A 
request for prior authorization must be submitted prior to furnishing 
the item to the beneficiary and prior to submitting the claim for 
processing. When a claim for an item on the Required Prior 
Authorization List is submitted and denied, the contractor determines 
liability for the denied item based on sections 1834(j)(4) of the Act 
for non-assigned claims and 1879(h)(2)of the Act for assigned claims. 
Under these sections, any expenses incurred for the denied item or 
service are the responsibility of the supplier unless liability is 
transferred to the beneficiary in instances where beneficiaries are 
given an ABN, Form CMS-R-131, because the beneficiary knows or could be 
expected to know that payment would not be made. Sections 1834(j)(4) 
and 1879(h)(2) of the Act, both of which reference the refund 
procedures in section 1834(a)(18)(A) of the Act, address liability 
decisions made after assessing actual or expected knowledge, based on 
all the relevant facts pertaining to each particular denial.
    The limitation on liability provision in section 1879 of the Act 
establishes a process for determining financial liability for certain 
denials of items or services. In the case of assigned DME that is 
subject to the prior authorization requirement established in this 
final rule, under section 1879(h) of the Act, a supplier is presumed to 
be financially liable for a claim denied if there is no prior 
authorization affirmation. The same holds true for non-assigned DME 
under section 1834(j)(4) of the Act. If the supplier collected any 
monies from the beneficiary for such denied items, the supplier is 
required to refund such monies. Under section 1879(a) of the Act, the 
determination of financial liability for certain categories of denied 
claims is based on actual or constructive knowledge that Medicare is 
not expected to cover or make payment for such denied items or 
services. In general, the supplier is held financially liable under 
section 1879 of the Act because it is expected to be familiar with 
Medicare coverage and payment requirements. However, as explained later 
in this section, under sections 1879(h) and 1834(a)(18) of the Act, 
liability may be shifted from the supplier to the beneficiary if the 
supplier delivers a valid ABN, Form CMS-R-131, to the beneficiary. 
Similarly, under section 1879(a) of the Act, if the supplier believes, 
for example, that an item may not be considered medically reasonable 
and necessary under section 1862(a)(1)(A) of the Act, the supplier may 
shift financial liability to the beneficiary by delivering a valid ABN 
to the beneficiary.
    After promulgation of the prior authorization requirement through 
this final rule, CMS or its review contractors 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 review contractors 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.
    Under sections 1834(j)(4) and 1879(h)(2) of the Act, when a 
beneficiary receives an item or service and does not know that CMS or 
its review contractors may deny the claim based on an unmet prior 
authorization requirement, the supplier is financially liable for the 
denied claim and is obligated to refund any payments received from the 
beneficiary. In cases where the beneficiary insists on getting the item 
without the prior authorization decision or while the decision is 
pending, or in cases where the prior authorization decision is non-
affirmed, the supplier must issue a valid ABN to the beneficiary, in 
order to shift liability to the beneficiary. If the beneficiary agrees 
to pay for the item when signing the ABN, liability rests with the 
beneficiary if Medicare does, in fact, deny the claim. The ABN notifies 
the beneficiary that an item usually covered by Medicare may not be 
paid for in this instance. When completing the ABN, the supplier must 
provide a clear reason why Medicare may deny payment. The ABN must not 
be used to bypass the prior authorization process, and existing policy 
prohibits routine ABN issuance. In order for the ABN to be considered 
valid, the ABN must be issued to the

[[Page 81698]]

beneficiary before the beneficiary receives the item or services.
    Detailed requirements for valid ABN issuance can be found in 
Chapter 30 of the Medicare Claims Processing Manual (Internet Only 
Manual (IOM) Pub 100-04): https://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.
    We did not receive any comments on this discussion of how CMS's 
liability policies apply to the prior authorization process and we are 
not making any changes.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
(PRA) of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In compliance with the PRA we solicited public comment on each of 
these issues for the following sections of this document that contain 
information collection requirements (ICRs). We note to readers that CMS 
is in compliance with the requirements of the PRA with respect to 
information collection requirements associated with the day-to-day 
medical review activities. The information collection requirements 
associated with day-to-day medical review activities are currently 
approved under OMB control number 0938-0969 and have an expiration date 
of July 31, 2018.
    The base medical review information collection requirements assess 
the burden associated with the time and effort necessary for the 
provider and/or supplier of services to locate and obtain the 
supporting documentation for the Medicare claim and to forward the 
materials to the Medicare contractor for the medical review process. We 
note that the burden analysis for the prior authorization process 
proposed by this rule only addresses additional burdens created in 
excess of the standard medical review process utilized by CMS 
contractors and addressed in the base medical review information 
collection requirements. We will create a new information collection 
requirement package that is in addition to the current base medical 
review information collection requirement.
    We are finalizing our proposal in Sec.  414.234(c), that as a 
condition of payment for certain DMEPOS items frequently subject to 
unnecessary utilization, a prior authorization request must be 
submitted prior to the submission of a claim. As a condition of 
payment, program policies specify that certain documentation 
requirements be met prior to payment. Section 1833(e) of the Act states 
that no payment shall be made to any provider of services or other 
person unless there has been furnished such information as may be 
necessary in order to determine the amounts due such provider or other 
person for the period with respect to which the amounts are being paid 
or for any prior period. Section 1815(a) of the Act states that no such 
payments shall be made to any provider unless it has furnished such 
information as the Secretary may request in order to determine the 
amounts due such provider for the period with respect to which the 
amounts are being paid or any prior period. We are not changing the 
documentation requirements. Prior authorization would require 
information to support a Medicare provisional payment decision earlier 
in the process, before the item is delivered. A prior authorization 
request would include evidence that the request for payment complies 
with applicable Medicare clinical documentation, coverage, coding, and 
payments rules. All documentation requirements specified in applicable 
policy would still apply. We note that it is a long standing 
expectation that supportive documentation be kept on file by affected 
providers/suppliers prior to furnishing a DMEPOS item.
    This final rule does not add or change any current documentation 
requirements. However, we believe it will initially increase the time 
burden associated with collecting and submitting said documentation. 
The increase of time burden will vary depending on the volume of claims 
requiring prior authorization. Based on our previously described 
experience with the PMD demonstration, we similarly expect the time 
burden to ultimately decrease due to a decrease in utilization of the 
item(s) subject to prior authorization. Before or on the date in which 
this final rule is published, we will submit a new information 
collection request for OMB review and approval that will illustrate the 
new time burden associated with collecting and submitting prior 
authorization documentation.
    We further note that the anticipated increase in cost associated 
with the collection and submission of the requested data is offset 
somewhat by the limited protection from future audits that is afforded 
to suppliers under this final rule. While the prior authorization 
program created by this final rule may share some select features with 
the PMD demonstration, they are disparate enough that we cannot 
quantify the cost reductions. We would need sufficient item-by-item 
historical prior authorization program data created by this final rule 
to perform the necessary calculations. Until the program is 
operational, we can only make this assertion based on our limited 
experience with the PMD demonstration.
    We are finalizing the definition of unnecessary utilization as the 
furnishing of items or services that do not comply with one or more of 
Medicare's clinical documentation, coverage, coding, and payment rules. 
Specifically, and for the purpose of this final rule, an item 
frequently subject to unnecessary utilization is identified as having a 
high incidence of fraud, improper payments or unnecessary utilization 
in GAO or OIG reports or the CERT DME and/or DMEPOS Service Specific 
Report(s), has an average purchase fee of $1,000 or greater or an 
average rental fee schedule of $100 or greater, and is listed on the 
DMEPOS fee schedule.
    This final rule implements prior authorization, a tool utilized by 
private sector health care payers to prevent unnecessary utilization of 
certain DMEPOS items. In 2014, the total utilization for all items 
listed in the Master List was over $1.6 billion. The Master List 
includes DMEPOS items frequently subject to unnecessary utilization 
meeting criteria described earlier in this final rule. Presence of an 
item(s) on the Master List would not automatically result in that item 
being subject to prior authorization. In order to balance provider and 
supplier burden

[[Page 81699]]

with our need to protect the Medicare program, we are finalizing our 
proposal to initially implement prior authorization for a subset of 
items on the Master List. This subset of items will be called the 
Required Prior Authorization List.
    In 2014, there were over 2.3 million beneficiaries receiving an 
item from the Master List. Cost, utilization, and improper payment 
rates of items on the Master List vary greatly. It is important to note 
that not all items on the Master List have a known improper payment 
rate since their Master List inclusion may have been based on a 2007 or 
later OIG/GAO report and not the CERT DME and/or DMEPOS Service 
Specific Report(s). The CERT program develops improper payment rates 
for those items for which at least 30 claims are included in their 
sample. Consequently, DMEPOS items have an associated improper payment 
rate if at least 30 claims for that code were included in the CERT 
sample.
    To best estimate the impact of this final rule within a range of 
programmatic activity, we isolated those items on the Master List that 
had an associated improper payment rate. Historically, the agency has 
focused its finite resources towards reducing the improper payment 
rate. We believe that we can best estimate the impact of this final 
rule using that approach.
    We remind readers that items on the Master List are identified as 
those frequently subject to unnecessary utilization, have a high 
incidence of fraud, improper payments or unnecessary utilization in GAO 
or OIG reports and/or appear on the CERT DME and/or DMEPOS Service 
Specific Report(s), have an average purchase fee of $1,000 or greater 
or an average rental fee schedule of $100 or greater, and are listed on 
the DMEPOS fee schedule. The total number of items on the Master List 
is 135.
    In order to determine what might be on the Required Prior 
Authorization List to estimate the burden of this final rule, we 
excluded PMDs from the Master List since they are currently subject to 
prior authorization under a CMS demonstration and thus not eligible to 
be selected from the Master List to the Required Prior Authorization 
List until the demonstration is completed. The remaining items were 
cross referenced against CERT DME and/or DMEPOS Service Specific 
Report(s) for an associated improper payment rate. We ranked the cross-
referenced 20 items by average improper payment dollars per line. Using 
2014 CERT data, we developed low, primary, and high estimates of 
potentially affected claims for each year for the first 10 years of the 
program.
    To calculate our low estimate of affected claims, we focused on 
Master List items with the highest average improper payment dollars per 
line. For example, during the 2014 CERT reporting period, Medicare paid 
for the top three DMEPOS items on the Master List associated with the 
highest improper payment dollars per line nearly 7,500 times. We 
believe limiting prior authorization to the top three items results in 
a low programmatic activity compared to implementing prior 
authorization for all items in the Master List. Consequently we use 
7,500 as our low estimate of potentially affected claims for our 10-
year projection (see Table 6). We did not account for Medicare growth 
or ramp up activities of this program for our low estimate since we 
selected 7,500 to represent the minimum level of program activity 
regardless of other factors. Based on the 2014 CERT data, if we avoided 
100 percent of payment errors for the top three items, we would realize 
the largest gain on investment. Again, it is important to note that the 
ranking could change every year since it is based on the acquired CERT 
sample and the highest average improper payment dollars.
    To calculate the highest estimate of affected claims, we looked for 
the top 15 DMEPOS items on the Master List with the highest average 
improper payments dollars per line. These items were provided nearly 
400,000 times. If we avoid 100 percent of improper payments for the top 
15 Master List DMEPOS items with the highest average improper payment 
dollars per line, we realize a significantly lower gain on investment. 
Subjecting 15 items to prior authorization results in high programmatic 
activity, thus we used 500,000 as our highest estimate of affected 
claims for years 8 through 10 in our projections (Calendar Years (CY)s 
2023 through 2025 Table 6). We believe 500,000 accounts for Medicare 
growth as well as the potential variability in ranking the highest 
average improper payment dollars per line of Master List DMEPOS items 
which may result in higher than 400,000 claim counts.
    We derive our primary estimate (see Table 6) by averaging the low 
and high estimate of potential claims affected. Based on the 2014 CERT 
data, there were over 200,000 Medicare payments made for the top 14 
Master List DMEPOS items with the highest average improper payment 
dollars per line. If we avoid 100 percent of improper payments for the 
top 14 Master List DMEPOS items with the highest improper payment 
dollars per line, we realize a moderate gain on investment. Subjecting 
14 items to prior authorization results in moderate programmatic 
activity, thus we used 253,750 as our primary estimate of affected 
claims for years 8 through 10 in our projections (CYs 2023 through 2025 
(see Table 6)). We believe the primary estimates accounts for Medicare 
growth as well as the potential variability in ranking the highest 
improper payment rates of Master List DMEPOS items which may result in 
higher than 200,000 claim counts.
    We provide the preceding discussion to explain how we arrived at 
the estimated number of potential claims affected. However, we note 
that other factors may contribute to the number of claims ultimately 
affected. For example, future policies, regulations or response to 
stakeholder needs may be factored into the Master List item 
selection(s) and consequently impact the number of claims ultimately 
affected.
    As noted earlier in this section, Table 6 lists our estimated range 
of potentially affected claims.

                                                                   Table 6--Range of Estimates of Potentially Affected Claims
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Number of potentially affected claims
                           Estimate                            ---------------------------------------------------------------------------------------------------------------------------------
                                                                  CY 2016      CY 2017      CY 2018      CY 2019      CY 2020      CY 2021      CY 2022      CY 2023      CY 2024      CY 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Low...........................................................        7,500        7,500        7,500        7,500        7,500        7,500        7,500        7,500        7,500        7,500
Primary.......................................................        8,750       53,750       53,750      128,750      128,750      128,750      128,750      253,750      253,750      253,750
High..........................................................       10,000      100,000      100,000      250,000      250,000      250,000      250,000      500,000      500,000      500,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    To account for the possibility of unlimited resubmissions, we 
multiplied the low, primary, and high estimates of potentially affected 
claims in Table 6 by 2.25. We selected 2.25 as the multiplier based on 
preliminary analysis of

[[Page 81700]]

resubmitted prior authorization requests in the CMS Prior Authorization 
of PMD Demonstration. We divided the total number of resubmissions by 
the total number of initial submissions and arrived at an average of 
2.25. Once we multiplied the low, primary, and high estimates of 
potentially affected claims by 2.25, the value no longer reflects 
estimated individual affected claims. Rather, the value represents the 
estimated number of potential cases (potential claims plus 
resubmission(s) of associated prior authorization requests).
    We note that it is a long standing expectation that supportive 
documentation be kept on file by affected providers/suppliers prior to 
furnishing a DMEPOS item. While it cannot be considered a usual and 
customary business practice as defined in the implementing regulations 
of the PRA at 5 CFR 1320.3(b)(2), we believe that the burden associated 
with maintaining the documentation represents a negligible increase 
above what is currently required for compliance with the base medical 
review information collection requirements approved under OMB control 
number 0938-0969. We also recognize that there will be an associated 
cost to the affected providers/suppliers when requiring full compliance 
with this expectation. This associated cost is incurred with the 
unlimited resubmission of prior authorization requests that this rule 
provides and the costs associated with documentation collection and 
submission during the prior authorization resubmission process. We 
believe this cost is justified in the case of unlimited resubmissions 
as the process affords the supplier more than one opportunity to 
receive a provisional affirmative prior authorization determination 
that ultimately could result in claim payment. In addition, the 
resubmission process allows for supplier education about the 
documentation requirements. We anticipate that as the supplier becomes 
more familiar with those requirements, the amount of resubmissions 
would decrease over time for that particular item or service as would 
the associated costs of documentation collection and submission. We 
further note, that by allowing an unlimited number of resubmissions, we 
ultimately reduce supplier burden as we expect that a fewer number of 
appeals will be pursued. We believe that the resubmission process would 
provide the supplier with an increased opportunity for claims to be 
paid; however, no data exists to validate this assertion so it is not 
assumed in the associated burden calculations.
    Table 7 provides low, primary, and high estimates of potentially 
affected cases (claims and resubmissions of associated prior 
authorization requests). The average of the high estimate of 
potentially affected cases in years 1 through 3 is 157,500 ((22,500 + 
225,000 + 225,000)/3) cases per year for the first 3 years.

                                                                          Table 7--Range of Potentially Affected Cases
                                                         [Potential claims and resubmissions of associated prior authorization requests]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Number of potentially affected claims
                           Estimate                            ---------------------------------------------------------------------------------------------------------------------------------
                                                                  CY 2016      CY 2017      CY 2018      CY 2019      CY 2020      CY 2021      CY 2022      CY 2023      CY 2024      CY 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Low...........................................................       16,875       16,875       16,875       16,875       16,875       16,875       16,875       16,875       16,875       16,875
Primary.......................................................       19,688      120,938      120,938      289,688      289,688      289,688      289,688      570,938      570,938      570,938
High..........................................................       22,500      225,000      225,000      562,500      562,500      562,500      562,500    1,125,000    1,125,000    1,125,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    We estimate that the private sector's per-case time burden 
attributed to submitting documentation and associated clerical 
activities in support of a prior authorization request is equivalent to 
that of submitting documentation and clerical activities associated for 
prepayment review, which is 0.5 hours per submission. We apply this 
time burden estimate to initial submissions, resubmissions, and 
expedited requests (that is, affected cases). The total high estimated 
burden for the first year is 11,250 hours (22,500 x 0.5 hours) and the 
total high estimated burden per year for years 2 and 3 is 112,500 hours 
(225,000 x 0.5 hours). Table 8 lists the low, primary, and high 
estimated time burden associated with potentially affected cases.

                                                             Table 8--Range Estimate of Information Collection Time Burden in Hours
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Number of hours
                           Estimate                            ---------------------------------------------------------------------------------------------------------------------------------
                                                                  CY 2016      CY 2017      CY 2018      CY 2019      CY 2020      CY 2021      CY 2022      CY 2023      CY 2024      CY 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Low...........................................................     8,437.50     8,437.50     8,437.50     8,437.50     8,437.50     8,437.50     8,437.50     8,437.50     8,437.50     8,437.50
Primary.......................................................     9,843.75    60,468.75    60,468.75   144,843.75   144,843.75   144,843.75   144,843.75   285,468.75   285,468.75   285,468.75
High..........................................................    11,250.00   112,500.00   112,500.00   281,250.00   281,250.00   281,250.00   281,250.00   562,500.00   562,500.00   562,500.00
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Then, we multiply the time burden estimate to an average loaded 
hourly rate of $35.36 (mean hourly rate of $18.13 + fringe benefits) 
for the Medical Record and Health Information Technician classification 
\17\ 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 9, lists the range estimate of PRA burden in 
dollars. This impact is allocated across providers and suppliers 
nationwide.
---------------------------------------------------------------------------

    \17\ Bureau of Labor Statistics. Accessed February 20, 2015 at 
http://www.bls.gov/oes/current/oes292071.htm.

[[Page 81701]]



                                                               Table 9--Range Estimate of Information Collection Burden in Dollars
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     PRA burden (in dollars)
                           Estimate                            ---------------------------------------------------------------------------------------------------------------------------------
                                                                  CY 2016      CY 2017      CY 2018      CY 2019      CY 2020      CY 2021      CY 2022      CY 2023      CY 2024      CY 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Low...........................................................      298,350      298,350      298,350      298,350      298,350      298,350      298,350      298,350      298,350      298,350
Primary.......................................................      348,075    2,138,175    2,138,175    5,121,675    5,121,675    5,121,675    5,121,675   10,094,175   10,094,175   10,094,175
High..........................................................      397,800    3,978,000    3,978,000    3,978,000    9,945,000    9,945,000    9,945,000   19,890,000   19,890,000   19,890,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    We also estimate the cost of mailing medical records to be $5 per 
request for prior authorization. Some commenters questioned how we 
arrived at the $5 estimate cost for mailing medical records. Our 
estimation is based on the mailing costs of medical records for prepay 
review. However, many of the records are received via fax machines 
which have lower associated costs than traditional mail. Additionally, 
we offer methods of electronic submission of medical documentation to 
providers and suppliers who wish to use a less expensive alternative 
for sending in medical documents. Additional information is available 
on Medicare review contractor Web sites.
    In instances when the supplier must first obtain the medical 
records from a health care provider, we estimate that the mailing costs 
are doubled ($10), as records are transferred from provider to 
supplier, and then to CMS or its contractors. We estimate that there 
are 22,500 cases (high estimate cases, see Table 7) for which the 
mailing costs could be doubled in the first year. Based on CMS' 
experience within the agency and Medicare medical review contractor 
feedback, it is reasonable to believe that less than half (11,250) of 
the medical records are mailed in. Therefore, we estimate the costs are 
$112,500 (11,250 x $10) for the first year. The total high estimated 
mailing cost for years 2 and 3 is $4,500,000, or $2,250,000 per year. 
Mailing costs for the CYs 2016 through 2018 average $3,037,500.
    To summarize, based on the average of the high estimate of 
potentially affected claims for CYs 2016 through 2018 (Table 6), the 
information collection requirements discussed earlier in this section 
will affect an average of 70,000 claims in CYs 2016 through 2018. 
Please note that while we have provided data for 10 calendar years, our 
estimates are based off of the 3-year average of CYs 2016 through 2018. 
Three years is the maximum term of an OMB approval period for an 
information collection request. We estimate that the average 70,000 
claims will have an associated prior authorization request submission 
2.25 times resulting in an average of 157,500 cases. The total 
estimated average annual time burden for CYs 2016 through 18 is 78,750 
hours per year at a cost of $2.8 million per year. After adding CYs 
2016-2018 average mailing costs, the burden rises to $5.8 million per 
year.
    We solicited public comment on our proposed review and cost time 
estimates. A summary of the comments and our responses follows.
    Comment: Several commenters disagreed with the proposed review cost 
and time estimate believing that the estimates were too low. Some 
believed that the proposed review cost and time estimate may not be 
appropriate for certain items on the proposed Master List (that is, 
review of negative pressure wound therapy). Several commenters 
disagreed with the cost analysis for mailing the records. Some 
commenters stated that if the review time estimate included 
administrative support time, it was underestimated. Some commenters 
recommended including the cost of appeals.
    Response: The Medicare Administrative Contractors (MACs) have 
experience conducting reviews and we based our time and cost estimates 
on their previous experience. We understand some reviews take longer 
than others; consequently, our estimates are averages. Suppliers have 
several options for submitting records. They may mail the document 
through postal service, they may submit them online through the MACs 
secure web portal or other secure electronic means, or they may fax 
records. We based our cost methodology on previous experience 
collecting medical records as well as the standard cost for a flat rate 
envelope for an average size medical record. As noted earlier, this 
final rule does not create new documentation requirements. We expect 
that any entity requesting CMS payment have on hand any required 
medical records to support their request for Medicare payment. Appeal 
rights are not affected by this final rule. Therefore, the cost of the 
appeal process is outside the scope of this final rule.
    Comment: Several commenters sought clarification on who was going 
to be reviewing the prior authorization requests and recommended we use 
an independent contractor for reviews. A commenter expressed concerns 
that there is no mention of resources which will be employed to make a 
prior authorization decision.
    Response: The MACs as well as other Medicare medical review 
contractors currently engage in review of beneficiary's medical records 
to support claims. The difference is that these activities are 
completed after the service/item/drug is delivered and after the claim 
is submitted for payment. Consequently, we can estimate required 
resources. With prior authorization, as in traditional medical review, 
clinicians will review the records. Reviewing clinicians include 
physicians, nurses, and therapists.
    In response to public comments, we have re-evaluated the provided 
information, collection data, and explanation. We believe that the 
requirements expressed in this final rule meet the utility and clarity 
standards. We are finalizing the provisions in the Collection of 
Information Requirement section, as proposed.

IV. Regulatory Impact Analysis

A. Statement of Need

    This final rule codifies section 1834(a)(15)(A) and (C) of the Act 
to monitor payments for certain DMEPOS items by creating a requirement 
for advance decision as a condition of payment. This new requirement 
aims to reduce the unnecessary utilization and the resulting 
overpayment for certain DMEPOS items.

B. Overall Impact

    We have examined the impact of this final 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

[[Page 81702]]

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 final rule may redistribute more than $100 million in 
years 8 through 10 if the high estimates are realized, it is considered 
economically significant.
    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 final 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 $7.5 million to $38.5 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.
    The RFA requires that we analyze regulatory options for small 
businesses and other entities. We prepare a regulatory flexibility 
analysis unless we certify that a rule would not have a significant 
economic impact on a substantial number of small entities. The analysis 
must include a justification concerning the reason action is being 
taken, the kinds and number of small entities that the rule affects, 
and an explanation of any meaningful options that achieve the 
objectives with less significant adverse economic impact on the small 
entities.
    For purposes of the RFA, physicians, non-physician practitioners 
(NPPs), and suppliers, including independent diagnostic treatment 
facilities (IDTFs), are considered small businesses if they generate 
revenues of $11 million or less based on the SBA size standards. 
Approximately 95 percent of physicians are considered to be small 
entities. There are over 1 million physicians, other practitioners, and 
medical suppliers that receive Medicare payment under the physician fee 
schedule (PFS). Because we acknowledge that many of the affected 
entities are small entities, the analysis discussed throughout the 
preamble of this final rule constitutes our regulatory flexibility 
analysis for the remaining provisions and addresses comments received 
on these issues.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area for Medicare payment regulations and has fewer than 
100 beds. We are not preparing an analysis for section 1102(b) of the 
Act because we have determined, and the Secretary certifies, that this 
final rule would not have a significant impact on the operations of a 
substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits on state, 
local, or tribal governments or on the private sector before issuing 
any rule whose mandates require spending in any 1 year of $100 million 
in 1995 dollars, updated annually for inflation. In 2015, that 
threshold is approximately $144 million. This final rule would not 
impose a mandate that will result in the expenditure by state, local, 
and tribal governments, in the aggregate, or by the private sector, of 
more than $144 million in any one year.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it announces a final rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has federalism implications. Since 
this final rule does not impose any costs on state or local 
governments, the requirements of Executive Order 13132 are not 
applicable.
    We have prepared the following analysis, which together with the 
information provided in the rest of this preamble, meets all assessment 
requirements. The analysis explains the rationale for and purposes of 
this final rule, details the costs and benefits of the rule, and 
presents the measures we would use to minimize the burden on small 
entities. We are unaware of any relevant federal rules that duplicate, 
overlap, or conflict with this final rule. The relevant sections of 
this final rule contain a description of significant alternatives if 
applicable.
    Methodology: A number of factors affect this analysis. For 
instance, the number of Master List items selected to be subject to the 
prior authorization requirement is dependent on multiple factors. 
Consequently, we are proposing a range of estimates to illustrate 
various implementation scenarios, as described in section III. of this 
final rule.
    In addition, as the DMEPOS community acclimates to using prior 
authorization as part of their billing practice, there may be greater 
systemic or other processing efficiencies to allow more extensive 
implementation.
    Lastly, the overall economic impact of this provision on the health 
care sector is dependent on the number of claims affected. For the 
purpose of this narrative analysis, we use the ``primary'' estimate to 
project costs. However, Table 7 lists both the low and high estimated 
cost projections, as well as the primary cost estimate.
    The values populating Table 10 were obtained from Table 9, Range 
Estimate of PRA Burden in Dollars (see section III. of this final rule) 
and Table 11, Medicare Cost, which can be found in following pages. 
Together, Tables 9 and 11 combine to convey the overall economic impact 
to the health sector, which is illustrated in Table 10 titled, Overall 
Economic Impact to the Health Sector.
    Based on the estimate, the overall economic cost of this final rule 
is approximately $1.3 million in the first year. The 5 year cost is 
approximately $57 million and the 10 year cost is approximately $212 
million, mostly driven by the assumed increased number of items 
subjected to prior authorization after the first year. 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 as described in Table 12. 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 FFS payments 
(note that not all improper payments are fraudulent).
    We have provided the following budgetary cash impact possibilities 
based on the President's 2016 Budget baseline with an assumed January 
1, 2016 effective date.

[[Page 81703]]



                                     Table 10--Overall Cost to Health Sector
                                                  [In dollars]
----------------------------------------------------------------------------------------------------------------
                                                                      Year 1          5 Years        10 Years
----------------------------------------------------------------------------------------------------------------
Private Sector Cost...................  Low Claim Estimation....         298,350       1,491,750       2,938,500
                                        Primary Claim Estimation         348,075      14,867,775      55,393,650
                                        High Estimation.........         397,800      28,243,800     107,803,800
Medicare Cost.........................  Low Claim Estimation....         843,750       4,218,750       8,437,500
                                        Primary Claim Estimation         984,375      42,046,875     156,656,250
                                        High Claim Estimation...       1,125,000      79,875,000     304,875,000
Total Cost to Health Sector...........  Low Claim Estimation....       1,142,100       5,710,500      11,376,000
                                        Primary Claim Estimation       1,332,450      56,914,650     212,049,900
                                        High Claim Estimation...       1,522,800     108,118,800     412,678,800
----------------------------------------------------------------------------------------------------------------

    The definition of small entity in the RFA includes non-profit 
organizations. Per the RFA's use of the term, most suppliers and 
providers are small entities. Likewise, the vast majority of physician 
and nurse practitioner (NP) practices are considered small businesses 
according to the SBA's size standards, which define a small business as 
having total revenues of $11 million or less in any 1 year. While the 
economic costs and benefits of this final rule are substantial in the 
aggregate, the economic impact on individual entities would be 
relatively small. We estimate that 90 to 95 percent of DMEPOS suppliers 
and practitioners who order DMEPOS are small entities under the RFA 
definition. The rationale behind requiring prior authorization of 
covered DMEPOS items is to make sure the beneficiary's medical 
condition warrants the item of DMEPOS before the item is delivered.
    The impact on DMEPOS suppliers could be significant, as the final 
rule changes their billing practices. We believe that the purpose of 
the statute and this final rule is to avoid unnecessary utilization of 
DMEPOS items, thus we do not view decreased revenues from items 
frequently subject to unnecessary utilization by DMEPOS suppliers to be 
a condition that we must mitigate. We believe that the effect on 
legitimate suppliers and practitioners would be minimal. Additionally, 
this final rule offers an additional protection to a supplier's cash 
flow as the supplier would know in advance if the Medicare requirements 
are met.

C. Anticipated Effects

1. Costs
a. Private Sector Costs
    We do not believe that this final rule would significantly affect 
the number of legitimate claims submitted for items on the required 
prior authorization list. However, we do expect a decrease in the 
overall amount paid for DMEPOS items resulting from a reduction in 
unnecessary utilization of DMEPOS items requiring prior authorization.
    In accordance with our explanation, we would select certain items 
from the Master List to require prior authorization by placing them on 
the Required List. As discussed previously, we have chosen a flexible 
approach that makes it difficult to specify the number of items on the 
Required List in advance. Similarly, it is not possible to specify the 
resulting numbers of affected claims and medical reviews in advance. 
Consequently, we are proposing a range of estimates to capture various 
possible scenarios.
    If funded for the high estimation of potentially affected claims, 
we could grow the program and affect as many as 500,000 claims by years 
8 through 10. This estimate accounts for initial prior authorization 
requests only.
    Resubmissions after a non-affirmation decision is rendered on an 
initial request are not included in the high estimation of potential 
claims affected. If the program grew to impact as many as 500,000 
claims, the potentially impacted cases (claims and resubmissions) total 
would be 1,125,000. This potential growth accounts for the large fiscal 
increase shown in the program impact analysis.
    We estimate that the private sector's costs are associated with the 
per-case time burden attributed to submitting documentation and 
associated clerical activities in support of a prior authorization 
request. These costs are discussed in detail in section III. of this 
final rule (see Table 9). As noted in Table 9, we estimate that the 
private sector's average costs for years 1 through 3 would total $2.8 
million.
b. Medicare Costs
    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 7 and multiply it by $50, the 
estimated cost to review each request. The Medicare Administrative 
Contractors (MACs) have experience conducting reviews and we based our 
time and cost estimates on their previous experience. We understand 
some reviews take longer than others; consequently, our estimates are 
averages. Table 11 lists the cost range estimates.

                                                                                     Table 11--Medicare Cost
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Cost (in dollars)
                           Estimate                            ---------------------------------------------------------------------------------------------------------------------------------
                                                                  CY 2016      CY 2017      CY 2018      CY 2019      CY 2020      CY 2021      CY 2022      CY 2023      CY 2024      CY 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Low...........................................................      843,750      843,750      843,750      843,750      843,750      843,750      843,750      843,750      843,750      843,750
Primary.......................................................      984,375    6,046,875    6,046,875   14,484,375   14,484,375   14,484,375   14,484,375   28,546,875   28,546,875   28,546,875
High..........................................................    1,125,000   11,250,000   11,250,000   28,125,000   28,125,000   28,125,000   28,125,000   56,250,000   56,250,000   56,250,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

c. Beneficiary Costs
    As discussed in the next section, we expect a reduction in the 
utilization of Medicare DMEPOS items when such utilization does not 
comply with one or more of Medicare's coverage, coding, and payment 
rules. Although these rules are designed to permit utilization that is 
medically necessary, DMEPOS items

[[Page 81704]]

that are not medically necessary may still provide convenience or 
usefulness for beneficiaries; any rule-induced loss of such convenience 
or usefulness constitutes a cost of the rule that we lack data to 
quantify.
2. Benefits and Transfers
    We can anticipate benefits because we expect a reduction in the 
unnecessary utilization of those Medicare DMEPOS items subject to prior 
authorization. We will be closely monitoring utilization and billing 
practices. The benefits include a changed billing practice that also 
enhances the coordination of care for the beneficiary. For example, 
requiring prior authorization for certain items requires that the 
primary care provider and the supplier collaborate more frequently to 
order and deliver the most appropriate DMEPOS item meeting the needs of 
the beneficiary. Improper payments made because the practitioner did 
not order the DMEPOS, or because the practitioner did not evaluate the 
patient, would likely be reduced by the requirement that a supplier 
submit clinical documentation created by the practitioner as part of 
its prior authorization request.
    We believe it is more reasonable to require practitioners and 
suppliers to adopt new practices for fewer items at a time, rather than 
institute large scale change all at once. In addition, during the ramp 
up of the program in year 1, we will be doing education and outreach. 
Consequently, we estimate a smaller volume of items in year 1.
    Our Office of the Actuary has provided the following budgetary cash 
impact possibilities based on the President's 2016 Budget baseline with 
an assumed January 1, 2016 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 
6).

                                         Table 12--CY Budgetary Impact (With Managed Care) Estimate in Millions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Calendar year
                               -------------------------------------------------------------------------------------------------------------------------
       Type of scenario                                                                                                             2016-2020  2016-2025
                                  2016      2017      2018      2019      2020      2021      2022      2023      2024      2025      (5-year   (10-year
                                                                                                                                     impact)    impact)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Scenario 1: Assume Low Number
 of Claims
    Number of Part B Claims...     7,500     7,500     7,500     7,500     7,500     7,500     7,500     7,500     7,500     7,500  .........  .........
    Part B Impacts:
        Direct Medicare              -10       -10       -10       -10       -10       -10       -10       -10       -10       -10        -50       -100
         Budgetary Savings (in
         millions)............
        Premium (Offset* (in           0         0         0         0         0         0         0         0         0         0          0          0
         millions)............
        Total Part B (in             -10       -10       -10       -10       -10       -10       -10       -10       -10       -10        -50       -100
         millions)............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Scenario 2: Assume Primary
 Number of Claims
    Number of Part B Claims...     8,750    53,750    53,750   128,750   128,750   128,750   128,750   253,750   253,750   253,750  .........  .........
    Part B Impacts:
        Direct Medicare              -10       -40       -60       -70       -80       -80       -80      -110      -120      -120       -260       -770
         Budgetary Savings ($
         in millions).........
        Premium Offset ($ in           0        10        10        20        20        20        20        30        30        30         60        190
         millions)............
        Total Part B ($ in           -10       -30       -50       -50       -60       -60       -60       -80       -90       -90       -200       -580
         millions)............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Scenario 3: Assume High Number
 of Claims
    Number of Part B Claims...    10,000   100,000   100,000   250,000   250,000   250,000   250,000   500,000   500,000   500,000  .........  .........
    Part B Impacts:
        Direct Medicare              -10       -50       -80      -100      -120      -120      -120      -150      -160      -160       -360      -1070
         Budgetary Savings ($
         in millions).........
        Premium Offset ($ in           0        10        20        20        30        30        30        40        40        40         80        260
         millions)............
        Total Part B ($ in           -10       -40       -60       -80       -90       -90       -90      -110      -120      -120       -280       -810
         millions)............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Premium offset is an expected change in premium resulting from the proposed rule.

D. Alternatives Considered

1. No Regulatory Action
    As previously discussed, each item on the Master List is high cost 
and frequently subject to unnecessary utilization. In addition, each 
item has been either the subject of a previous OIG or GAO report or has 
appeared on a CERT DME and/or DMEPOS Service Specific Report(s) (2011 
or later) of DMEPOS items with high improper payment rates. Together, 
utilization of items on the Master List accounted for $1.6 billion. The 
status quo is not a desirable alternative to this final rule because 
current payment practices have not affected unnecessary utilization 
appreciably. Accordingly, the economic impact of no regulatory action 
would result in the lack of recoupment of some or all associated 
projected improper payments. Evidence of this is found in the CERT 
improper payment rates and the associated projected improper payment 
amount for all DMEPOS, which despite trending downward, have remained 
high for the last several years (53.1 percent in 2014). By exercising 
our statutory authority to establish a prior authorization process that 
creates a Master List of DMEPOS high cost items known to be the subject 
of GAO/OIG reports and/or high improper payment rates, we hope to 
positively affect unnecessary utilization and improper payments for 
DMEPOS in general.

[[Page 81705]]

2. Defer to Medicare Administrative Contractors (MACs)
    Another alternative we considered was to allow MACs processing 
Medicare claims to design safeguards that positively affect improper 
payment rates and unnecessary utilization. However, in recent years we 
have required MACs to create strategies aimed at reducing improper 
payment and over utilization. While MACs have complied with this 
requirement, we have not seen sufficient effect on the improper payment 
rate and over utilization. The reason is that MACs are limited in their 
resources and authority. Often unforeseen issues or statutory 
requirements cause the MACs to reprioritize their work and respond to 
CMS direction to focus on an issue not previously on their strategy. In 
addition, their current practices of pre-payment or post-payment manual 
medical reviews are costly, and thus are used on a very small 
percentage of claims. Both create burdens for the claim submitter. For 
example, in a pre-payment medical review, the claim submitter has 
already furnished the item or service. Payment is held until the claim 
submitter supplies the MAC with requested documentation supporting 
their request for payment. Submitters may be confused about the type of 
documents being requested and, as a result, submit incomplete 
documentation. The submitter has only one opportunity to submit the 
appropriate documentation, which if insufficient, will result in the 
submitter not receiving his or her payment. In post-payment reviews, 
the submitter has furnished the item or service and has received 
payment. Similar to pre-payment reviews, the submitter may be confused 
about the documents needed to support the payment. If the payment is 
denied, the MAC is obligated to recover the payment. Claim submitters 
have told us that returning payment, or requesting an appeal to defend 
the payment, is burdensome and costly.
    By requiring documentation before the claim is submitted and before 
the item or service is furnished, the submitter and contractor are 
afforded unlimited opportunities to clarify requirements to receive a 
provisional affirmation decision. By addressing this process in advance 
of furnishing the item or service or submitting the claim, we believe 
there will be less items and/or services paid improperly and 
unnecessarily utilized, as well as less burden on providers.
3. Alternate Prior Authorization Program Strategies
    Another alternative we considered in response to public comments 
was to subject 100 percent of the 135 items on the Master List to prior 
authorization at the same time rather than establishing a prior 
authorization program for a certain Master List item for a particular 
state or MAC jurisdiction.
    Using 2013 data, as cited in footnote 4, this approach would impact 
11 million beneficiaries and potentially 91,000 DME suppliers. If we 
looked at 2014 data per footnote 5, the impact of implementing prior 
authorization for 135 items on the Master List would affect 10 million 
beneficiaries and potentially 90,000 suppliers. We recognize that an 
impact of this magnitude would allow the DMEPOS community little time 
to alter current business practices and adjust to the collection and 
submission requirements of the prior authorization process. 
Furthermore, we believe that subjecting all of the 135 items on the 
Master List to prior authorization would maximize both administrative 
and provider burden alike due to the sheer volume of items and 
suppliers affected.
    In addition to maximizing supplier and administrative burden, we 
believe this approach could potentially create beneficiary access to 
care issues. By utilizing prior authorization for all 135 items on the 
Master List at the same time, we believe that our ability to suspend, 
cease or make adjustments to the prior authorization process would be 
hampered by the volume of items and affected suppliers. This could lead 
to a delay in processing prior authorization requests and result in 
beneficiaries waiting for reasonable and medically necessary DMEPOS 
items they would otherwise receive. In addition, we believe that 
establishing prior authorization for select items on the Master List 
rather than all 135 items on the Master List allows us to monitor and 
balance programmatic activity with return on investment while 
safeguarding program integrity and beneficiary access to care.
    We recognize that DMEPOS suppliers may have some difficulty 
tracking what items are on the Required Prior authorization List versus 
what items are on the Master List, given that changes could happen 
frequently. However, we believe two separate lists will maximize 
flexibility and allow us to be as responsive as possible to suppliers' 
and beneficiaries' concerns.

E. Accounting Statement and Table

    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 final rule.

                               Table 13--Accounting Statement: Classification of Estimated Transfers, Benefits, and Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               Units
                                                              Primary                                    -----------------------------------------------
                        Category                             estimate      Low estimate    High estimate                                      Period
                                                                                                           Year dollars    Discount rate      covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized ($million/year)....................            53.5            10.0            74.7            2015              7%       2016-2025
                                                                    56.0            10.0            78.3            2015              3%       2015-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Savings to the Medicare program due to the reduced unnecessary utilization, fraud, waste, and
                                                                                                      abuse.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized * ($million/year)..................             4.9             0.3             8.9            2015              7%       2016-2025
                                                                     5.3             0.3             9.6            2015              3%       2016-2025
Annualized Monetized ** ($million/year).................            13.9             0.8            27.0            2015              7%       2016-2025
                                                                    14.9             0.8            29.0            2015              3%       2016-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes
* These costs are associated with the private sector paperwork.
** These costs are associated with the processing the prior authorization requests for Medicare.


[[Page 81706]]

F. Conclusion

    The analysis in the previous sections, together with the remainder 
of this preamble, provides our Regulatory Flexibility Analysis. In 
accordance with the provisions of Executive Order 12866, this final 
rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements.

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

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority:  Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 
1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).


0
2. Section 405.926 is amended by adding paragraph (t) to read as 
follows:


Sec.  405.926  Actions that are not initial determinations.

* * * * *
    (t) A contractor's prior authorization determination related to 
coverage of durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS).

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

0
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)).


0
2. Section 414.234 is added to subpart D to read as follows:


Sec.  414.234  Prior authorization for items frequently subject to 
unnecessary utilization.

    (a) Definitions. For the purpose of this section, the following 
definitions apply:
    Prior authorization is a process through which a request for 
provisional affirmation of coverage is submitted to CMS or its 
contractors for review before the item is furnished to the beneficiary 
and before the claim is submitted for processing.
    Provisional affirmation is a preliminary finding that a future 
claim meets Medicare's coverage, coding, and payment rules.
    Unnecessary utilization means the furnishing of items that do not 
comply with one or more of Medicare's coverage, coding, and payment 
rules.
    (b) Master list of items frequently subject to unnecessary 
utilization. (1) The Master List of Items Frequently Subject to 
Unnecessary Utilization includes items listed on the Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies fee schedule with an 
average purchase fee of $1,000 (adjusted annually for inflation using 
consumer price index for all urban consumers (CPI-U)) or greater or an 
average rental fee schedule of $100 (adjusted annually for inflation 
using CPI-U) or greater that also meet one of the following two 
criteria:
    (i) The item has been identified as having a high rate of fraud or 
unnecessary utilization in a report that is national in scope from 2007 
or later published by any of the following:
    (A) The Office of Inspector General (OIG).
    (B) The General Accountability Office (GAO).
    (ii) The item is listed in the 2011 or later Comprehensive Error 
Rate Testing (CERT) program's Annual Medicare Fee-For-Service (FFS) 
Improper Payment Rate Report DME and/or DMEPOS Service Specific 
Report(s).
    (2) The Master List of DMEPOS Items Frequently Subject to 
Unnecessary Utilization is self-updating annually and is published in 
the Federal Register.
    (3) DMEPOS items identified as having a high rate of fraud or 
unnecessary utilization in any of the following reports that are 
national in scope and meeting the payment threshold criteria set forth 
in paragraph (b)(1) of this section are added to the Master List:
    (i) OIG reports published after 2015.
    (ii) GAO reports published after 2015.
    (iii) CERT program's Annual Medicare FFS Improper Payment Rate 
Report DME and/or DMEPOS Service Specific Report(s) published after 
2015, also referred to as the Comprehensive Error Rate Testing (CERT) 
program's Annual Medicare FFS Improper Payment Rate Report DME Service 
Specific Report(s).
    (4) Items remain on the Master List for 10 years from the date the 
item was added to the Master List.
    (5) Items that are discontinued or are no longer covered by 
Medicare are removed from the Master List.
    (6) An item is removed from the list if the purchase amount drops 
below the payment threshold (an average purchase fee of $1,000 or 
greater or an average monthly rental fee schedule of $100 or greater).
    (7) An item is removed from the Master List and replaced by its 
equivalent when the Healthcare Common Procedure Coding System (HCPCS) 
code representing the item has been discontinued and cross-walked to an 
equivalent item.
    (c) Condition of payment--(1) Items requiring prior authorization. 
CMS publishes in the Federal Register and posts on the CMS Prior 
Authorization Web site a list of items, the Required Prior 
Authorization List, that require prior authorization as a condition of 
payment.
    (i) The Required Prior Authorization List specified in paragraph 
(c)(1) of this section is selected from the Master List of Items 
Frequently Subject to Unnecessary Utilization (as described in 
paragraph (b) of this section). CMS may consider factors such as 
geographic location, item utilization or cost, system capabilities, 
administrative burden, emerging trends, vulnerabilities identified in 
official agency reports, or other data analysis.
    (ii) CMS may elect to limit the prior authorization requirement to 
a particular region of the country if claims data analysis shows that 
unnecessary utilization of the selected item(s) is concentrated in a 
particular region.
    (iii) The Required Prior Authorization List is effective no less 
than 60 days after publication and posting.
    (2) Denial of claims. (i) CMS or its contractors denies a claim for 
an item that requires prior authorization if the claim has not received 
a provisional affirmation.
    (ii) Claims receiving a provisional affirmation may be denied based 
on either of the following:
    (A) Technical requirements that can only be evaluated after the 
claim has been submitted for formal processing.
    (B) Information not available at the time of a prior authorization 
request.
    (d) Submission of prior authorization requests. A prior 
authorization request must do the following:
    (1) Include all relevant documentation necessary to show that the 
item meets

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applicable Medicare coverage, coding, and payment rules, including all 
of the following:
    (i) Order.
    (ii) Relevant information from the beneficiary's medical record.
    (iii) Relevant supplier produced documentation.
    (2) Be submitted before the item is furnished to the beneficiary 
and before the claim is submitted for processing.
    (e) Review of prior authorization requests. (1) After receipt of a 
prior authorization request, CMS or its contractor reviews the prior 
authorization request for compliance with applicable Medicare coverage, 
coding, and payment rules.
    (2) If applicable Medicare coverage, coding, and payment rules are 
met, CMS or its contractor issues a provisional affirmation to the 
requester.
    (3)(i) If applicable Medicare coverage, coding, and payment rules 
are not met, CMS or its contractor issues a non-affirmation decision to 
the requester.
    (ii) If the requester receives a non-affirmation decision, the 
requester may resubmit a prior authorization request before the item is 
furnished to the beneficiary and before the claim is submitted for 
processing.
    (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.
    (ii) If CMS or its contractor agrees 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, then CMS or its 
contractor expedites the review of the prior authorization request and 
communicates the decision following the receipt of all applicable 
Medicare required documentation.
    (f) Suspension of prior authorization requests. (1) CMS may suspend 
prior authorization requirements generally or for a particular item or 
items at any time and without undertaking rulemaking.
    (2) CMS provides notification of the suspension of the prior 
authorization requirements via--
    (i) Federal Register notice; and
    (ii) Posting on the CMS prior authorization Web site.

    Dated: November 2, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 20, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-32506 Filed 12-29-15; 8:45 am]
 BILLING CODE 4120-01-P