[Federal Register Volume 83, Number 92 (Friday, May 11, 2018)]
[Rules and Regulations]
[Pages 21912-21925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10084]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 414

[CMS-1687-IFC]
RIN 0938-AT21


Medicare Program; Durable Medical Equipment Fee Schedule 
Adjustments To Resume the Transitional 50/50 Blended Rates To Provide 
Relief in Rural Areas and Non-Contiguous Areas

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

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period makes technical 
amendments to the regulation to reflect the extension of the transition 
period from June 30, 2016 to December 31, 2016 that was mandated by the 
21st Century Cures Act for phasing in fee schedule adjustments for 
certain durable medical equipment (DME) and enteral nutrition paid in 
areas not subject to the Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP). In 
addition, this interim final rule with comment period amends the 
regulation to resume the transition period's blended fee schedule rates 
for items furnished in rural areas and non-contiguous areas (Alaska, 
Hawaii, and United States territories) not subject to the CBP from June 
1, 2018 through December 31, 2018. This interim final rule with comment 
period also makes technical amendments to existing regulations for 
DMEPOS items and services to reflect the exclusion of infusion drugs 
used with DME from the DMEPOS CBP.

DATES: 
    Effective date: The provisions of this interim final rule with 
comment period are effective on June 1, 2018.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on July 9, 2018.

ADDRESSES: In commenting, please refer to file code CMS-1687-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1687-IFC, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1687-IFC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Laurence Wilson, 410-786-4602 and 
[email protected].

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: http://regulations.gov. Follow the search instructions on 
that website to view public comments.

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    C. Summary of Costs and Benefits
II. Durable Medical Equipment, Prosthetics, Orthotics Supplies 
(DMEPOS) Fee Schedule and Competitive Bidding Program (CBP)
    A. Background for Payment Revisions for Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)
    1. Fee Schedule Payment Basis for Certain DMEPOS
    2. DMEPOS CBP
    a. Payment Basis
    b. Geographic Areas Designated Under the DMEPOS CBPs
    B. Background on the Methodology for Adjusting Payment Amounts 
for Certain DMEPOS Using Information From DMEPOS CBPs
    C. Transition Period for Phase-In of Fee Schedule Adjustments
    1. Statutory Mandate To Reconsider Fee Schedule Adjustments
    2. Fee Schedule Adjustment Impact Monitoring Data
    3. Restoring Transitional Blended Fee Schedule Rates in Rural 
Areas and Non-Contiguous Areas
    D. Fee Schedule Amounts for Accessories Used With Group 3 
Complex Rehabilitative Power Wheelchairs
    E. Technical Changes To Conform the Regulation to Section 
5004(b) of the 21st Century Cures Act (the Cures Act): Exclusion of 
DME Infusion Drugs Under CBPs
III. Provisions of the Interim Final Rule With Comment Period
    A. Transition Period for Phase-In of Fee Schedule Adjustments
    B. Technical Changes To Conform the Regulation to Section 
5004(b) of the Cures Act: Exclusion of DME Infusion Drugs Under CBPs
IV. Waiver of Proposed Rulemaking
V. Collection of Information Requirements
VI. Response to Comments
VII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    B. Detailed Economic Analysis
    a. Effects on the Medicare Program and Beneficiaries

[[Page 21913]]

    b. Impact on Beneficiaries and Other Payers
    c. Alternatives Considered
    d. Regulatory Familiarization Costs
    C. Accounting Statement
VIII. Regulatory Flexibility Act Analysis
IX. Unfunded Mandates Reform Act Analysis
X. Federalism Analysis
XI. Reducing Regulation and Controlling Regulatory Costs
XII. Congressional Review Act

I. Executive Summary

A. Purpose

    This interim final rule with comment period amends the regulation 
at 42 CFR 414.210(g)(9) to reflect the extension of the transition 
period for phasing in fee schedule adjustments for certain durable 
medical equipment (DME) and enteral nutrition paid in areas not subject 
to the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Competitive Bidding Program (CBP) through December 31, 2016, 
mandated by section 16007(a) of the 21st Century Cures Act (the Cures 
Act) (Pub. L. 114-255). In addition, in light of information, the 
Centers for Medicare & Medicaid Services (CMS) has gathered in 
accordance with section 16008 of the Cures Act, this interim final rule 
with comment period resumes the transition period for phasing in 
adjusted fee schedule rates for DME items and services furnished in 
rural areas and non-contiguous areas (Alaska, Hawaii, and United States 
(U.S.) territories) not subject to the CBP from June 1, 2018 through 
December 31, 2018. It also makes technical amendments to existing 
regulations for DMEPOS items and services to reflect the exclusion of 
infusion drugs used with DME from the DMEPOS CBP, as required by 
section 5004(b) of the Cures Act.

B. Summary of the Major Provisions

     Transition Period for Phase in of Adjustments to Fee 
Schedule Amounts: We are amending Sec.  414.210(g)(9)(i) to reflect the 
extension of the transition period to December 31, 2016 for phasing in 
adjustments to the fee schedule amounts for certain items based on 
information from the DMEPOS CBP that was required by section 16007(a) 
of the Cures Act. In addition, we are adding Sec.  414.210(g)(9)(iii) 
to resume the fee schedule adjustment transition period in rural areas 
and non-contiguous areas effective June 1, 2018, in light of concerns 
regarding the impact of the full fee schedule adjustments in rural and 
non-contiguous areas, so that the 50/50 blended fee schedule rates will 
apply for certain items and services furnished in rural and non-
contiguous areas from June 1, 2018 through December 31, 2018. We are 
also amending Sec.  414.210(g)(9)(ii) to reflect that for items and 
services furnished with dates of service from January 1, 2017 to May 
31, 2018, and on or after January 1, 2019, the fee schedule amount for 
the area is equal to 100 percent of the adjusted payment amount. We are 
soliciting comments on the resumption of the transition period for the 
phase in of fee schedule adjustments.
     Technical Change Excluding DME Infusion Drugs From the 
DMEPOS CBP: Section 5004(b) of the Cures Act amends section 
1847(a)(2)(A) of the Social Security Act (the Act) to exclude drugs and 
biologicals described in section 1842(o)(1)(D) of the Act from the 
DMEPOS CBP. We are making conforming changes to the regulation to 
reflect the exclusion of infusion drugs, described in section 
1842(o)(1)(D) of Act, from items subject to the DMEPOS CBP.

C. Summary of Costs and Benefits

    This interim final rule with comment period resumes the blended 
adjusted Medicare fee schedule amounts during the transition period for 
certain items and services that are furnished in rural and non-
contiguous areas not subject to the CBP beginning June 1, 2018. It is 
estimated that these adjustments will cost $290 million in Medicare 
benefit payments and $70 million in Medicare beneficiary cost sharing 
for the period beginning June 1, 2018 and ending December 31, 2018.
    We are unable to quantify the benefits of this interim final rule 
with comment period at this time; however, the goal of this interim 
final rule is to preserve beneficiary access to DME items and services 
in rural and non-contiguous areas not subject to the CBP during a 
transition period in which CMS will continue to study the impact of the 
change in payment rates on access to items and services in these areas. 
The alternative to this interim final rule with comment period would 
have been to allow the full phase in of fee schedule adjustments based 
on competitive bidding prices to continue in all non-competitive 
bidding areas (non-CBAs). We believe that resuming the fee schedule 
adjustment transition period in rural and non-contiguous areas promotes 
stability in the DMEPOS market in these areas, and enables CMS to work 
with stakeholders to preserve beneficiary access to DMEPOS.

II. Durable Medical Equipment, Prosthetics, Orthotics Supplies (DMEPOS) 
Fee Schedule and Competitive Bidding Program (CBP)

A. Background for Payment Revisions for Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS)

1. Fee Schedule Payment Basis for Certain DMEPOS
    Section 1834(a) of the Act governs payment for DME covered under 
Part B and under Part A for a home health agency and provides for the 
implementation of a fee schedule payment methodology for DME furnished 
on or after January 1, 1989. Sections 1834(a)(2) through (a)(7) of the 
Act set forth separate payment categories of DME and describe how the 
fee schedule for each of the following categories are established:
     Inexpensive or other routinely purchased items.
     Items requiring frequent and substantial servicing.
     Customized items.
     Oxygen and oxygen equipment.
     Other covered items (other than DME).
     Other items of DME (capped rental items).
    Section 1834(h) of the Act governs payment for prosthetic devices, 
prosthetics, and orthotics (P&O) and sets forth fee schedule payment 
rules for P&O. Effective for items furnished on or after January 1, 
2002, payment is also made on a national fee schedule basis for 
parenteral and enteral nutrition (PEN) in accordance with the authority 
under section 1842(s) of the Act. The term ``enteral nutrition'' will 
be used throughout this document to describe enteral nutrients, 
supplies and equipment covered under the Part B benefit for prosthetic 
devices defined at section 1861(s)(8) of the Act. The Medicare allowed 
amount for DMEPOS items and services paid on a fee schedule basis is 
equal to the lower of the supplier's actual charge or the fee schedule 
amount. We refer readers to the November 6, 2014 calendar year (CY) 
2015 ESRD PPS final rule entitled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Quality Incentive Program, and 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies'' (79 
FR 66223 through 66233) for additional background discussion about 
DMEPOS items subject to section 1834 of the Act, rules for calculating 
reasonable charges, and fee schedule payment methodologies for PEN and 
for DME prosthetic devices, prosthetics, orthotics, and surgical 
dressings.

[[Page 21914]]

2. DMEPOS CBP
a. Payment Basis
    The DMEPOS CBP is mandated by section 1847(a) of the Act and 
requires the Secretary of the Department of Health and Human Services 
(the Secretary) to establish and implement CBPs in competitive bidding 
areas (CBAs) throughout the U.S for contract award purposes for the 
furnishing of certain competitively priced DMEPOS items and services. 
Section 1847(a)(2) of the Act describes the items and services subject 
to the DMEPOS CBP:
     Off-the-shelf (OTS) orthotics for which payment would 
otherwise be made under section 1834(h) of the Act.
     Enteral nutrients, equipment and supplies described in 
section 1842(s)(2)(D) of the Act.
     Certain DME and medical supplies, which are covered items 
(as defined in section 1834(a)(13) of the Act) for which payment would 
otherwise be made under section 1834(a) of the Act.
    The DME and medical supplies category includes items used in 
infusion and drugs (other than inhalation drugs) and supplies used in 
conjunction with DME, but excludes devices that have been classified in 
class III under the Federal Food, Drug, and Cosmetic Act and Group 3 or 
higher complex rehabilitative power wheelchairs and related accessories 
when furnished in connection with such wheelchairs. Although initially 
identified in section 1847(a)(2) of the Act, infusion drugs were 
excluded from the DMEPOS CBP by section 5004(b) of the Cures Act. 
Sections 1847(a) and (b) of the Act specify certain requirements and 
conditions for implementation of the Medicare DMEPOS CBP.
    Under the DMEPOS CBP, Medicare sets single payment amounts (SPAs) 
for selected DMEPOS items and services furnished to beneficiaries in 
CBAs based on the median of bids submitted by winning suppliers and 
accepted by Medicare for each individual item and service. For 
competitively bid items and services furnished in a CBA, the SPAs 
replace the Medicare allowed amounts established using the lower of the 
supplier's actual charge or the payment amount recognized under 
sections 1834(a)(2) through (7) of the Act. Section 1847(b)(5) of the 
Act provides that Medicare payment for competitively bid items and 
services is made on an assignment-related basis, and is equal to 80 
percent of the applicable SPA, less any unmet Part B deductible 
described in section 1833(b) of the Act.

B. Background on the Methodology for Adjusting Payment Amounts for 
Certain DMEPOS Using Information From DMEPOS CBPs

    For DME furnished on or after January 1, 2016, section 
1834(a)(1)(F)(ii) of the Act requires the Secretary to use information 
on the payment determined under the DMEPOS CBP to adjust the fee 
schedule amounts for DME items and services furnished in all non-CBAs. 
Section 1834(a)(1)(F)(iii) of the Act requires the Secretary to 
continue to make these adjustments as additional covered items are 
phased in or information is updated as new CBP contracts are awarded. 
Similarly, sections 1842(s)(3)(B) and 1834(h)(1)(H)(ii) of the Act 
authorize the Secretary to use payment information from the DMEPOS CBP 
to adjust the fee schedule amounts for enteral nutrition and OTS 
orthotics, respectively, furnished in all non-CBAs. Section 
1834(a)(1)(G) of the Act requires that in promulgating the methodology 
used in making these adjustments to the fee schedule amounts, the 
Secretary consider the costs of items and services in areas in which 
the adjustments would be applied compared to the payment rates for such 
items and services in the CBAs.
    On February 26, 2014, we published an Advance Notice of Proposed 
Rulemaking (ANPRM) in the Federal Register entitled, ``Medicare 
Program; Methodology for Adjusting Payment Amounts for Certain Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Using 
Information from Competitive Bidding Programs'' (79 FR 10754). In that 
ANPRM, we solicited stakeholder input on several factors including 
whether the costs of furnishing various DMEPOS items and services vary 
based on the geographic area in which they are furnished in relation to 
developing a payment methodology to adjust DMEPOS fee schedule amounts 
or other payment amounts in non-CBAs based on DMEPOS competitive 
bidding payment information.
    We received approximately 185 comments from suppliers, 
manufacturers, professional, state and national trade associations, 
physicians, physical therapists, beneficiaries and their caregivers, 
and one state government office. Commenters generally stated that costs 
do vary by geographic region and that costs in rural and non-contiguous 
areas of the U.S. (Alaska, Hawaii, Puerto Rico, etc.) are significantly 
higher than costs in urban areas and contiguous areas of the U.S. One 
commenter representing many manufacturers and suppliers listed several 
key variables or factors that influence the cost of furnishing items 
and services in different areas that should be considered. This 
commenter stated that information on all bids submitted under the CBP 
should be considered and not just the bids of winning suppliers. Some 
commenters expressed concern that the SPAs assume a significant 
increase in volume to offset lower payment amounts. Commenters also 
recommended phasing in the adjusted fee schedule amounts, allowing for 
adjustments in fees if access issues arise, and annual inflation 
updates to adjusted fee schedule amounts.
    On July 11, 2014, we published the CY 2015 ESRD PPS proposed rule 
in the Federal Register entitled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Quality Incentive Program, and 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies;'' (79 
FR 40208) as required by section 1834(a)(1)(G) of the Act, to establish 
methodologies for using information from the CBP to adjust the fee 
schedule amounts for items and services furnished in non-CBAs in 
accordance with sections 1834(a)(1)(F)(ii) and 1834(h)(1)(H)(ii) of the 
Act. We also proposed making adjustments to the payment amounts for 
enteral nutrition as authorized by section 1842(s)(3)(B) of the Act.
    We received 89 public comments on the proposed rule, including 
comments from patient organizations, patients, manufacturers, health 
care systems, and DME suppliers. We made changes to the proposed 
methodologies based on these comments and finalized a method for paying 
higher amounts for certain items furnished in areas defined as rural 
areas. In addition, we provided a 6-month fee schedule adjustment phase 
in period from January through June of 2016, during which the fee 
schedule amounts would be based on 50 percent of the unadjusted fees 
and 50 percent of the adjusted fees to allow time for suppliers to 
adjust to the new payment rates and to monitor the impact of the change 
in payment rates on access to items and services. On November 6, 2014, 
we published the CY 2015 ESRD PPS final rule (79 FR 66223 through 
66265) to finalize the methodologies at Sec.  414.210(g) based on 
public comments received on the CY 2015 ESRD PPS proposed rule (79 FR 
40208). A summary of the methodologies are provided below.
    In order to delineate geographic areas to which adjusted fee 
schedule amounts for certain DMEPOS items are applied, we set forth a 
methodology to identify geographic areas using zip codes into 3

[[Page 21915]]

categories of rural, non-rural, and non-contiguous. We promulgated 
Sec.  414.202 to define a rural area to mean, for the purpose of 
implementing Sec.  414.210(g), a geographic area represented by a 
postal zip code if at least 50 percent of the total geographic area of 
the area included in the zip code is estimated to be outside any 
Metropolitan Statistical Area (MSA) (79 FR 66228). A rural area also 
includes a geographic area represented by a postal zip code that is a 
low population density area excluded from a CBA in accordance with 
section 1847(a)(3)(A) of the Act at the time the rules in Sec.  
414.210(g) are applied.
    In accordance with Sec.  414.210(g)(1)(i) through (v), CMS first 
determines regional adjustments to the fee schedule amounts using the 8 
regions of the Bureau of Economic Analysis. Also, the regional prices 
are determined and limited by a national ceiling (110 percent of the 
average of regional prices) and floor (90 percent of the average of 
regional prices). In addition, adjusted fee schedules for non-
contiguous areas are based on the higher of the average of the SPAs for 
CBAs in areas outside the contiguous U.S. or the national ceiling 
amount in accordance with our regulations at Sec.  414.210(g)(2)(i) 
through (ii). Also, Sec.  414.210(g)(3) specifies adjustments for low 
volume items (that is, bid in only 10 or fewer competitive bidding 
programs) are based on 110 percent of the average of the SPAs. In 
addition, adjustments for items and services included in CBPs no longer 
in effect is set forth at Sec.  414.210(g)(4). In cases where the SPAs 
from the DMEPOS CBP that are no longer in effect are used to adjust fee 
schedule amounts, Sec.  414.210(g)(4) provides that the SPAs be updated 
by an inflation adjustment factor for each year from the last year when 
the SPAs were in effect to the year in which the adjustment would go 
into effect (for example, 2016) and for each subsequent year (for 
example, 2017 and 2018). Furthermore, Sec.  414.210(g)(5) establishes 
adjustments for accessories used with different types of base equipment 
in situations where a Healthcare Common Procedure Coding System (HCPCS) 
code describing an item used with different types of base equipment is 
included in more than one product category in a CBA under the CBP; a 
weighted average of the SPAs for the code is computed for each CBA 
prior to applying the other payment adjustment methodologies in Sec.  
414.210(g). Finally, in accordance with Sec.  414.210(g)(6), 
adjustments are made to the SPAs for certain items due to price 
inversions under the DMEPOS CBP (for example, the SPA for a walker 
without wheels is higher than the SPA for a walker with wheels) before 
the SPAs are used to adjust fee schedule amounts. For groupings of 
similar items (for example, walkers) where price inversions have 
occurred, the SPAs for the items in the grouping are all adjusted to 
equal the weighted average of the SPAs for all of the items in the 
grouping. Price inversions are situations where the higher weighted and 
higher priced item at the time of competition becomes the lower priced 
item in the CBP following the competition. For a discussion regarding 
adjustments to SPAs to address price inversions, see the CY 2017 ESRD 
PPS proposed rule published in the Federal Register on June 30, 2016 
entitled ``Medicare Program; End-Stage Renal Disease Prospective 
Payment System, Coverage and Payment for Renal Dialysis Services 
Furnished to Individuals with Acute Kidney Injury, End-Stage Renal 
Disease Quality Incentive Program, Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies Competitive Bidding Program Bid 
Surety Bonds, State Licensure and Appeals Process for Breach of 
Contract Actions, Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies Competitive Bidding Program and Fee Schedule Adjustments, 
Access to Care Issues for Durable Medical Equipment, and the 
Comprehensive End-Stage Renal Disease Care Model'' (81 FR 42851).
    In order to update the adjusted fee schedule amounts based on new 
competitions and provide for a transitional phase-in period of the fee 
schedule adjustments, we established Sec.  414.210(g)(8) and (g)(9) in 
the CY 2015 ESRD PPS final rule (79 FR 66263). In Sec.  414.210(g)(8), 
the adjusted fee schedule amounts are updated when an SPA for an item 
or service is updated following one or more new DMEPOS CBP competitions 
and as other items are added to DMEPOS CBP. The fee schedule amounts 
that are adjusted using SPAs are not subject to the annual DMEPOS 
covered item update and are only updated when SPAs from the DMEPOS CBP 
are updated. Updates to the SPAs may occur as contracts are recompeted. 
Section 414.210(g)(9)(i), specifies that the fee schedule adjustments 
were phased in for items and services furnished with dates of service 
from January 1, 2016 through June 30, 2016, so that each fee schedule 
amount was adjusted based on a blend of 50 percent of the fee schedule 
amount if not adjusted based on information from the CBP, and 50 
percent of the adjusted fee schedule amount. Section 414.210(g)(9)(ii) 
specifies that for items and services furnished with dates of service 
on or after July 1, 2016, the fee schedule amounts would be equal to 
100 percent of the adjusted fee schedule amounts. Commenters 
recommended CMS phase in the fee schedule adjustments to give suppliers 
time to adjust to the change in payment amounts (79 FR 66228). Some 
commenters recommended a 4-year phase-in of the adjusted fees. CMS 
agreed that phasing in the adjustments to the fee schedule amounts 
would allow time for suppliers to adjust to the new payment rates and 
would allow time to monitor the impact of the change in payment rates 
on access to items and services. We decided 6 months was enough time to 
monitor access and health outcomes to determine if the fee schedule 
adjustments created a negative impact on access to items and services. 
Therefore, we finalized a 6-month phase-in period of the blended rates 
(79 FR 66228 through 66229).
    We finalized the 6-month transition period from January 1 through 
June 30, 2016 in the CY 2015 ESRD PPS final rule (79 FR 66223) that was 
published in the Federal Register on November 6, 2014. The Cures Act 
was enacted on December 13, 2016, and section 16007(a) of the Cures Act 
extended the transition period for the phase-in of fee schedule 
adjustments at Sec.  414.210(g)(9)(i) by 6 additional months so that 
fee schedule amounts were based on a blend of 50 percent of the 
adjusted fee schedule amount and 50 percent of the unadjusted fee 
schedule amount until December 31, 2016 (with full implementation of 
the fee schedule adjustments applying to items and services furnished 
with dates of service on or after January 1, 2017).

C. Transition Period for Phase-In of Fee Schedule Adjustments

    We have determined that the transitional period for the phase-in of 
adjustments to fee schedule amounts should be resumed in non-CBA rural 
and non-contiguous areas in order to ensure access to necessary items 
and services in these areas. This interim final rule with comment 
period amends Sec.  414.210(g)(9) to change the end date for the 
initial transition period for the phase-in of adjustments to fee 
schedule amounts for certain items based on information from the DMEPOS 
CBP from June 30, 2016 to December 31, 2016, to reflect the extension 
that was mandated by section 16007(a) of the Cures Act. This interim 
final rule with comment period also amends Sec.  414.210(g)(9) to 
resume the transition period for the phase-in of adjustments to

[[Page 21916]]

fee schedule amounts for certain items furnished in non-CBA rural and 
non-contiguous areas from June 1, 2018 through December 31, 2018, for 
the reasons discussed in this preamble.
1. Statutory Mandate To Reconsider Fee Schedule Adjustments
    After we established the fee schedule adjustment methodology under 
Sec.  414.210(g), Congress amended section 1834(a)(1)(G) of the Act to 
require that CMS take certain steps and factors into consideration 
regarding the fee schedule adjustments for items and services furnished 
on or after January 1, 2019, to ensure that the rates take into account 
certain aspects of providing services in non-CBAs. Specifically, 
section 16008 of the Cures Act amended section 1834(a)(1)(G) of the Act 
to require in the case of items and services furnished on or after 
January 1, 2019, that in making any adjustments to the fee schedule 
amounts in accordance with sections 1834(a)(1)(F)(ii) and (iii) of the 
Act, the Secretary shall: (1) Solicit and take into account stakeholder 
input; and (2) take into account the highest bid by a winning supplier 
in a CBA and a comparison of each of the following factors with respect 
to non-CBAs and CBAs:
     The average travel distance and cost associated with 
furnishing items and services in the area.
     The average volume of items and services furnished by 
suppliers in the area.
     The number of suppliers in the area.
    On March 23, 2017, CMS hosted a national provider call to solicit 
stakeholder input regarding adjustments to fee schedule amounts using 
information from the DMEPOS CBP. The national provider call was 
announced on March 3, 2017, and we requested written comments by April 
6, 2017. We received 125 written comments from stakeholders. More than 
330 participants called into our national provider call, with 23 
participants providing oral comments during the call. In general, the 
commenters were mostly suppliers, but also included manufacturers, 
trade organizations, and healthcare providers such as physical and 
occupational therapists. These stakeholders expressed concerns that the 
level of the adjusted payment amounts constrains suppliers from 
furnishing items and services to rural areas. Stakeholders requested an 
increase to the adjusted payment amounts for these areas. The written 
comments generally echoed the oral comments from the call held on March 
23, 2017, whereby stakeholders claimed that the adjusted fees are not 
sufficient to cover the costs of furnishing items and services in rural 
and non-contiguous areas and that this is having an impact on access to 
items and services in these areas.
    The oral and written comments are organized into the following 
categories:
    Inadequacy of Adjusted Fee Schedule Amounts: Commenters claim the 
adjusted fee schedule amounts do not cover the cost of furnishing the 
items and are not sustainable. Many commenters opposed the current 
adjusted payment amounts as insufficient to sustain the current cost of 
doing business. Some commenters stated that current reimbursement 
levels are below the cost of doing business. Many commenters stated 
they were billing non-assigned for items, or were considering billing 
non-assigned in the future.
    Travel Distance: Commenters claim the average travel distance and 
cost for suppliers serving rural areas are greater than the average 
travel distance and cost for suppliers serving CBAs. Many commenters 
described farther travel distances in rural areas than in non-rural 
areas. For the purpose of implementing the fee schedule adjustment 
methodologies at Sec.  414.210(g), the term ``rural area'' is defined 
at Sec.  414.202 and essentially includes any areas outside an MSA or 
excluded from a CBA.
    Volume of Services: Many commenters asserted that the average 
volume of services furnished by suppliers, when serving non-CBAs, are 
lower than the average volume of services furnished by suppliers, when 
serving CBAs. Many commenters stated that they do not get the same 
increase in volume that suppliers who obtain competitive bidding 
contracts get, which does not allow them to have economies of scale and 
obtain products at lower costs. Claims data for 2016 and 2017 indicates 
that the average volume of allowed services for suppliers serving CBAs 
is significantly higher than the average volume of allowed services for 
suppliers serving non-CBAs, particularly rural and non-contiguous 
areas.
    Beneficiary Access: Many commenters stated that the adjusted fees 
have reduced the number of suppliers in the area, and that this has 
caused or will cause beneficiary access issues. Some commenters 
explained that they were the only supplier in the area. Claims data 
indicates that the number of supplier locations furnishing items and 
services subject to the fee schedule adjustments changed from 13,535 in 
2015 to 12,617 in 2016.
    Adverse Beneficiary Health Outcomes: Commenters stated that 
beneficiaries are going without items and this is causing adverse 
health outcomes. Commenters stated that hospital readmissions and 
lengths of stay, falls, and fractures are increasing as a result of the 
fee schedule reductions.
    Delivery Expenses: A few commenters provided an estimate of how 
much their delivery expenses cost, their estimated service radius, and 
the average distance traveled. Several commenters stated that they have 
reduced the size of their service area due to the level of 
reimbursement that they are receiving.
    Costs in Rural and Non-Contiguous Areas: Many commenters stated 
rural areas have unique costs, costs that are higher than non-rural 
areas. Similar to comments received on our CY 2015 ESRD PPS proposed 
rule (79 FR 40275 through 40315) and discussed in the CY 2015 ESRD PPS 
final rule (79 FR 66223 through 66265), some commenters stated that a 
10 percent payment increase in rural areas is not enough to cover costs 
in rural areas. One commenter stated that non-contiguous areas, such as 
Alaska and Hawaii, face unique and greater costs due to higher shipping 
costs, a smaller amount of suppliers, and more logistical challenges 
related to delivery. Some commenters stated specific costs, as well as 
data sources, that CMS should take into account when adjusting fees in 
non-CBAs. These included the following: Geographic wage index factors, 
gas, taxes, employee wages and benefits, wear and tear of vehicle, 
average per capita income, training, delivery, set up, historical 
Medicare home placement volume, proximity to nearby CBAs, employing a 
respiratory therapist, electricity charges, freight charges, 24/7 
service, documentation requirements, average per patient cost, 
licensing accreditation, surety bonds, audits, population density, 
miles and time between points of service, regulatory costs, vehicle 
insurance, and liability insurance.
    Two commenters pointed to the Ambulance Fee Schedule and one 
commenter pointed to the Bureau of Labor Statistic Consumer Expenditure 
Survey as evidence that health care costs in rural areas are higher 
than in urban areas. Another commenter mentioned the Internal Revenue 
Service Mileage Rate, the minimum wage, AAA Gallon of Gasoline prices, 
and the price of a loaf of white bread, to highlight how the prices of 
such items have increased over the years, while reimbursement for DME 
has not.

[[Page 21917]]

    Using the Highest Winning Bids for the Adjusted Fee Schedule 
Methodology: Five commenters suggested that the adjusted fee schedule 
amounts be based on maximum winning bids in CBAs rather than the median 
of winning bids in CBAs. One commenter suggested that the maximum 
winning bids should be the starting point for the adjustments and that 
additional payment should be added on to these amounts to pay for the 
higher costs of furnishing items and services in non-CBAs.
    One of the factors CMS must consider when making fee schedule 
adjustments for items and services furnished on or after January 1, 
2019, in accordance with section 16008 of the Cures Act, is the average 
volume of items and services furnished by suppliers in an area. A 
supplier recoups costs through the payments made for the items they 
furnish. In the case of overhead costs such as rent, utilities, 
salaries, and employee benefits, the more items a supplier furnishes, 
the more the supplier is able to recoup these overhead costs. Data for 
items furnished in 2016 and 2017 shows that the average volume of items 
furnished by suppliers in CBAs exceeds the average volume of items 
furnished by suppliers in rural and non-contiguous areas. The fact that 
the volume of items furnished per supplier in rural and non-contiguous 
areas is less than the volume furnished in CBAs indicates that the cost 
per item in rural and non-contiguous areas may be higher than the cost 
per item in CBAs. Because there are fewer suppliers in CBAs furnishing 
a higher volume of items and services, these suppliers likely have 
lower costs per item because they can make up their overhead costs over 
more items. In addition, the higher the volume of items a supplier 
furnishes, the larger the volume purchasing discount is likely to be 
when purchasing equipment from a manufacturer. This supports 
stakeholder input that the suppliers in rural and non-contiguous areas 
have an average volume of business less than that of their counterparts 
in CBAs, and that this difference may make it more difficult for 
suppliers in rural and non-contiguous areas to meet their expenses.
    In addition, the adjusted fee schedule amounts for stationary 
oxygen equipment in non-contiguous, non-CBAs are lower than the SPA for 
stationary oxygen equipment in the Honolulu, Hawaii, CBA and the 
adjusted fee schedule amounts for stationary oxygen equipment in some 
rural areas are lower than the SPAs in CBAs within the same state. This 
is due to the combination of the fee schedule adjustments and the 
budget neutrality offset that CMS applies to stationary oxygen 
equipment and contents due to the separate oxygen class for oxygen 
generating portable equipment (OGPE). In 2006, CMS established a 
separate payment class for OGPE (which are portable concentrators with 
transfilling equipment), through notice and comment rulemaking (71 FR 
65884). The authority to add this payment class, located at section 
1834(a)(9)(D) of the Act, only allows CMS to establish new classes of 
oxygen and oxygen equipment if such classes are budget neutral, which 
means that the establishment of new oxygen payment classes does not 
result in oxygen and oxygen equipment expenditures for any year that 
are more or less than the expenditures that would have been made had 
the new classes not been established. In accordance with Sec.  
414.226(c)(6), CMS reduces the fee schedule amounts for stationary 
oxygen equipment in non-CBAs in order to make the payment classes for 
oxygen and oxygen equipment budget neutral as required by section 
1834(a)(9)(D) of the Act. Due to the combination of the fee schedule 
adjustment and the budget neutrality offset, the adjusted fee schedule 
amounts for stationary oxygen equipment in non-contiguous non-CBAs and 
some rural areas are lower than the SPAs in Honolulu, Hawaii, and CBAs 
within the same state, respectively. This is significant because the 
current methodology at 42 CFR 414.210(g) attempts to ensure that the 
adjusted fee schedule amounts for items and services furnished in rural 
areas within a state are no lower than the adjusted fee schedule 
amounts for non-rural areas within the same state. CBAs are areas where 
payment for certain DME items and services is based on SPAs established 
under the CBP rather than adjusted fee schedule amounts. It is worth 
noting that CBAs tend to have higher population densities and typically 
correspond with urban census tracts.
    The establishment of the payment class for OGPE resulted in an 
increase in Medicare payments for these items and services. Therefore, 
each year, a budget neutrality offset is applied to the monthly payment 
amount for stationary oxygen equipment to ensure that the OGPE payment 
class does not result in oxygen and oxygen equipment expenditures that 
would be more or less than the expenditures that would have been made 
without the OGPE class. As more beneficiaries shift to using OGPE, the 
budget neutrality offset that is applied to the stationary oxygen 
equipment payment rate increases. The budget neutrality requirement 
does not apply under the DMEPOS CBP because under section 1847(a) of 
the Act, the payment amounts for oxygen and oxygen equipment are 
established based on bids submitted and accepted by winning suppliers 
under the program, and not based on the payment rules under section 
1834(a) of the Act. The budget neutrality offset has resulted in 
payment amounts for stationary oxygen equipment in CBAs being higher 
than the adjusted fee schedule amounts in some cases. Restoring the 
blended fee schedule rates paid in rural and non-contiguous non-CBAs 
during the transition period would result in fee schedule amounts for 
oxygen and oxygen equipment in these areas being higher than the SPAs 
paid in all of the CBAs. Therefore, payment at the blended rates would 
avoid situations where payment for furnishing oxygen in a rural or non-
contiguous, non-CBA is lower than payment for furnishing oxygen in a 
CBA.
2. Fee Schedule Adjustment Impact Monitoring Data
    Regarding adverse health beneficiary outcomes, we have been 
monitoring claims data from non-CBAs, some of which pre-dates the 
implementation of the fully adjusted fee schedule amounts. To the 
extent that this data pre-dates the implementation of the fully 
adjusted fees, it is less likely to demonstrate any adverse impacts. 
The data does not show any observable trends indicating an increase in 
adverse health outcomes such as mortality, hospital and nursing home 
admission rates, monthly hospital and nursing home days, physician 
visit rates, or emergency room visits in 2016 or 2017 compared to 2015 
in the non-CBAs, overall. In addition, we have been monitoring data on 
the rate of assignment in non-CBAs, which reflects when suppliers are 
accepting Medicare payment as payment in full and not balance billing 
beneficiaries for the cost of the DME. More importantly, the monitoring 
data does not indicate the extent to which suppliers that have not 
already exited the Medicare program are struggling to maintain current 
service levels or individual cases where access or health outcomes may 
have been affected. We are soliciting comments on ways to improve our 
fee schedule adjustment impact monitoring data.
3. Resuming Transitional Blended Fee Schedule Rates in Rural and Non-
Contiguous Areas
    The monitoring data described in section II.C.2 of this interim 
final rule with comment is retrospective claims data for payment of 
items already

[[Page 21918]]

furnished. Stakeholders state that this data is of limited utility in 
assessing the development of adverse trends in access to items and 
services, or that the health of beneficiaries is being negatively 
affected by the fully adjusted fee schedule amounts. Claims data does 
not capture all of the challenges experienced by beneficiaries and 
suppliers, such as suppliers going out of business or timely delivery 
of items. Further, this claims data is also limited to a retrospective 
view to address potential future problems. In other words, it does not 
serve as a tool that can guard against the negative outcomes raised by 
stakeholders, as discussed elsewhere in the preamble. In fact, the 
Government Accountability Office (GAO) acknowledged challenges 
associated with the monitoring of DMEPOS and the CBP in its review of 
the first year of the DMEPOS CBP Round 1 Rebid, stating that the 
monitoring methods used by CMS in assessing the impact of competitive 
bidding did not directly show whether beneficiaries received the DME 
they needed on time.\1\ We do note, however, that the Office of 
Inspector General (OIG) has found that the implementation of Round 2 
Competitive Bidding did not appear to disrupt beneficiary access to 
CPAP/RAD equipment.\2\
---------------------------------------------------------------------------

    \1\ U.S. Government Accountability Office. Medicare: Review of 
the First Year of CMS's Durable Medical Equipment Competitive 
Bidding Program's Round 1 Rebid, May 2012 (GAO-12-693), http://www.gao.gov/assets/600/590712.pdf (accessed 4 November 2015), page 
42.
    \2\ Office of Inspector General. U.S. Department of Health & 
Human Services. Round 2 Competitive Bidding for CPAP/RAD: Disrupted 
Access Unlikely for Devices, Inconclusive for Supplies, June 2017 
(OEI-01-15-00040).
---------------------------------------------------------------------------

    Approximately 85 percent of the DME industry are considered small 
businesses according to the Small Business Administration's size 
standards. According to Medicare claims data, the number of supplier 
locations furnishing DME items and services subject to the fee schedule 
adjustments decreased by 22 percent from 2013 to 2016. In 2016 alone 
there was a 7 percent decline from the previous year in the number of 
DME supplier locations furnishing items and services subject to the fee 
schedule adjustments. The magnitude of this decline in DME supplier 
locations, from 13,535 (2015) to 12,617 (2016),\3\ indicates that the 
number of DME supplier locations serving these areas continues to 
decline. Based on partial year data, there was a further reduction in 
supplier locations of 9 percent in 2017.\4\
---------------------------------------------------------------------------

    \3\ Medicare claims process through November 3, 2017
    \4\ There were 12,537 supplier locations furnishing items 
subject to the fee reductions in 2016, based on claims processed 
through April 6, 2017, and 11,384 supplier locations furnishing 
items subject to the fee reductions in 2017, based on claims 
processed through April 7, 2018.
---------------------------------------------------------------------------

    There are additional factors that section 16008 of the Cures Act 
requires us to take into account in making adjustments to the fee 
schedule amounts for items and services furnished beginning in 2019. We 
know that the average volume of items and services furnished per 
supplier in non-CBAs is significantly less than the average volume of 
items and services furnished per supplier in CBAs. Additionally, the 
number of suppliers in general has been steadily decreasing over time 
and this trend is not abating. As the number of suppliers serving non-
CBAs continues to decline, the volume of items and services furnished 
by the remaining suppliers is increasing. However, we do not know if 
the suppliers that remain will have the financial ability to continue 
expanding their businesses to continue to satisfy market demand. We 
also do not know if large suppliers serving both urban and rural areas 
will continue to serve the rural areas representing a much smaller 
percentage of their business than urban areas. We specifically address 
the stakeholder comments and concerns below.
    Based on the stakeholder comments and decrease in the number of 
supplier locations, there is an immediate need to resume the 
transitional, blended fee schedule amounts in rural and non-contiguous 
areas. Resuming these transitional blended rates will preserve 
beneficiary access to needed DME items and services in a contracting 
supplier marketplace, while allowing CMS to address the adequacy of the 
fee schedule adjustment methodology, as required by section 16008 of 
the Cures Act. We recognize that reduced access to DME may put 
beneficiaries at risk of poor health outcomes or increase the length of 
hospital stays.
    Suppliers have noted that they have struggled under the fully 
adjusted fee schedule and that they do not believe they can continue to 
furnish the items and services at the current rates. Stakeholders 
overwhelmingly have stated that the fully adjusted fee schedule amounts 
are not sufficient to cover supplier costs for furnishing items and 
services in rural and non-contiguous areas and the number of suppliers 
furnishing items in these areas continues to decline. Further, section 
16008 of the Cures Act mandates that we consider stakeholder input and 
additional information in making fee schedule adjustments based on 
information from the DMEPOS CBP for items and services furnished 
beginning in 2019. The information we have collected, however, includes 
input from many stakeholders indicating that the fully adjusted fee 
schedule amounts are too low and that this is having an adverse impact 
on beneficiary access to items and services, particularly in rural and 
non-contiguous areas. Given the strong stakeholder concern about the 
continued viability of many DMEPOS suppliers, coupled with the Cures 
Act mandate to consider additional information material to setting fee 
schedule adjustments, it would be unwise to continue with the fully 
adjusted fee schedule rates in the vulnerable rural and non-contiguous 
areas for 7 months. Any adverse impacts on beneficiary health outcomes, 
or on small businesses exiting the market, could be irreversible. It is 
in the best interest of the beneficiaries living in these areas to 
maintain a blend of the historic unadjusted fee schedule amounts and 
fee schedule amounts adjusted using SPAs established under the DMEPOS 
CBP to prevent suppliers that might be on the verge of closing from 
closing, as they may be the only option for beneficiaries in these 
areas. While our systematic monitoring in these areas has not shown 
problematic trends to this point, that monitoring by its nature looks 
backward and reflects other limitations, as discussed in section II.C.2 
of this interim final rule with comment. Given the rapid changes in 
health care delivery that may disproportionately impact rural and more 
isolated geographic areas, there is concern that the continued decline 
of the fees and the number of suppliers in such areas may impact 
beneficiary access to items and services. These adjustments would 
maintain a balance between the higher historic rates and rates adjusted 
based on bidding in larger metropolitan areas where suppliers furnish a 
much larger volume of DMEPOS items and services and support continued 
access to services. In order to safeguard beneficiaries' access to 
necessary items and services, we should immediately resume the 
transition period for the phase-in of fee schedule adjustments in these 
areas that was in place during CY 2016. Therefore, we are revising 
Sec.  414.210(g)(9) to resume the fee schedule adjustment transition 
rates for items and services furnished in rural and non-contiguous 
areas from June 1, 2018 through December 31, 2018, while we further 
analyze this issue. During this extended

[[Page 21919]]

transition period, CMS will take into account the information required 
by section 16008 of the Cures Act in determining whether changes to the 
methodology for adjusting fee schedule amounts for items furnished on 
or after January 1, 2019, are necessary.

D. Fee Schedule Amounts for Accessories Used With Group 3 Complex 
Rehabilitative Power Wheelchairs

    In the CY 2010 final rule (75 FR 73390) published in the Federal 
Register on November 29, 2010, entitled ``Medicare Program; Payment 
Policies Under the Physician Fee Schedule and Other Revisions to Part B 
for CY 2011,'' we reviewed the HCPCS coding for power wheelchairs that 
were updated in 2006 in response to the release of the Power Mobility 
Device Coding Guidelines published by the DME Medicare Administrative 
Contractors. Codes were added to the HCPCS for various types of power 
wheelchair bases, differentiated based on level of performance, with 
group 1 being the lowest and group 3 being the highest level covered by 
Medicare, and the ability to accommodate complex rehabilitative power 
options such as power seating systems or a specialty interface, such as 
sip and puff controls. Codes were established at both the group 2 and 3 
performance level for ``complex rehabilitative'' power wheelchair 
bases.
    Section 154(a)(1)(B) of the Medicare Improvements for Patients and 
Providers Act (MIPPA) of 2008 (Pub. L. 110-275), amended section 
1847(a)(2)(A) of the Act to exclude group 3 or higher complex 
rehabilitative power wheelchairs and related accessories when furnished 
in connection with such wheelchairs from competitive bidding. At the 
same time, section 154(a)(1)(A) of MIPPA amended section 1847(a)(1) of 
the Act to add paragraph (D) which terminated Round 1 and required 
rebidding Round 1 for the same items and services and the same areas 
with some changes. Since we included group 2 complex rehabilitative 
power wheelchairs and related accessories (including seating systems) 
and seat and back cushions, under Round 1 of the DMEPOS CBP, we were 
required to include those wheelchairs and accessories in the Round 1 
Rebid of the DMEPOS CBP. The accessories (including seating systems) 
and cushions furnished in connection with group 2 complex 
rehabilitative power wheelchairs (HCPCS codes K0835 through K0843) are 
the same items furnished in connection with group 3 complex 
rehabilitative power wheelchairs (HCPCS codes K0848 through K0864).
    Single payment amounts were implemented on January 1, 2011, in the 
nine Round 1 Rebid areas, for group 1 and 2 standard power wheelchair 
bases, group 2 complex rehabilitative power wheelchair bases, and the 
interchangeable accessories used with the different bases (for example, 
batteries used with all power wheelchairs and power seating systems 
used with both group 2 and 3 complex rehabilitative power wheelchairs). 
As noted above, these items are competitively bid under section 1847 of 
the Act, and we did not competitively bid group 3 wheelchairs or use 
competitively bid prices for related accessories when used with a group 
3 wheelchair in the Round 1 Rebid of the DMEPOS CBP.
    Section 1834(a)(1)(F)(ii) of the Act mandates the adjustment of fee 
schedule amounts for items that are furnished in non-CBAs based on 
information from the CBPs beginning on January 1, 2016. We established 
a policy under Sec.  414.210(g)(5) for adjusting the fee schedule 
amounts for accessories used with different types of base equipment 
that are included in one or more product categories under competitive 
bidding in the CY 2015 ESRD PPS final rule (79 FR 66223 through 66233). 
In that rulemaking, we stated the Agency's belief that it would be 
unnecessarily burdensome to have different fee schedule amounts for the 
same item (HCPCS code) when it is used with similar, but different 
types of base equipment, and that the costs of furnishing the accessory 
should not vary significantly based on the type of base equipment it is 
used with (79 FR 66230). We finalized Sec.  414.210(g)(5) to adjust the 
fee schedule amount for a HCPCS code for an accessory for use with all 
types of base equipment using pricing information for the item when it 
is included in one or more product categories under competitive 
bidding. The adjusted fee schedule amounts for these common accessories 
became effective on January 1, 2016.
    Section 2 of the Patient Access and Medicare Protection Act of 2015 
(Pub. L. 114-115) delayed the adjustments to the fee schedule amounts 
for accessories (including seating systems) and seat and back cushions 
when furnished in connection with group 3 complex rehabilitative power 
wheelchairs until January 1, 2017. Subsequently, section 16005 of the 
Cures Act extended this delay in the DME fee schedule adjustments based 
on competitive bidding information for certain wheelchair accessories 
used with group 3 complex rehabilitative power wheelchairs from January 
1, 2017 until July 1, 2017. Since the Congress has acted twice to 
address the issue, these legislative actions highlight a general 
concern regarding access to this specialized equipment by the 
vulnerable patient population that depends on this equipment and 
technology.
    Complex rehabilitative power wheelchairs are used by patients 
needing functionality, such as head or sip and puff controls, power 
tilt or recline seating, or ventilators mounted to the wheelchair, 
which are not available on standard power wheelchairs. The ability and 
performance of the wheelchair in meeting the patients' specialized 
needs is critical, and most patients use wheelchair bases with group 3 
level performance to meet these needs. Far fewer use group 2 wheelchair 
bases, which are the bases that the accessories were included with 
under Round 1 of the DMEPOS CBP.
    Section 1847(a)(2)(A) of the Act provides the categories of items 
that are subject to the CBP and excludes certain complex rehabilitative 
power wheelchairs recognized by the Secretary as classified within 
group 3 or higher (and related accessories when furnished in connection 
with such wheelchairs). This statutory exclusion should inform our 
implementation of section 1834(a)(1)(F) of the Act such that the fee 
schedule amounts for wheelchair accessories and back and seat cushions 
used in conjunction with group 3 complex rehabilitative power 
wheelchairs should not be adjusted based on the methodologies set forth 
in Sec.  414.210(g)(5). Therefore, as we have announced in guidance 
available on the CMS website in June (located at: https://www.cms.gov/Center/Provider-Type/Durable-Medical-Equipment-DME-Center.html) the fee 
schedule amounts for wheelchair accessories and back and seat cushions 
used in conjunction with group 3 power wheelchairs continue to be based 
on the unadjusted fee schedule amounts updated by the covered item 
update specified in section 1834(a)(14) of the Act. The fee schedule 
amounts for all other accessories used with different types of base 
equipment continue to be calculated in accordance with the adjustment 
methodology set forth in Sec.  414.210(g)(5) of our regulations.

E. Technical Changes To Conform the Regulations to Section 5004(b) of 
the Cures Act: Exclusion of DME Infusion Drugs Under CBPs

    Section 5004(b) of the Cures Act amends section 1847(a)(2)(A) of 
the Act to exclude drugs and biologicals

[[Page 21920]]

described in section 1842(o)(1)(D) of the Act from the CBP. We are 
making conforming technical changes to the regulations text consistent 
with statutory requirements to exclude drugs and biologicals from the 
CBP. We are amending 42 CFR 414.402 to reflect that infusion drugs are 
not included in the CBP by revising the definition of ``Item'' in 
paragraph (2) to add the words ``and infusion'' after the words ``other 
than inhalation''. The sentence will read as follows: ``Supplies 
necessary for the effective use of DME other than inhalation and 
infusion drugs.'' We are also removing a reference to drugs being 
included in the CBP by deleting the phrase ``or subpart I'' in Sec.  
414.412(b)(2). The sentence will read as follows: ``The bids submitted 
for each item in a product category cannot exceed the payment amount 
that would otherwise apply to the item under subpart C of this part, 
without the application of Sec.  414.210(g), or subpart D of this part, 
without the application of Sec.  414.105. The bids submitted for items 
in accordance with paragraph (d)(2) of this section cannot exceed the 
weighted average, weighted by total nationwide allowed services, as 
defined in Sec.  414.202, of the payment amounts that would otherwise 
apply to the grouping of similar items under subpart C of this part, 
without the application of Sec.  414.210(g), or subpart D of this part, 
without the application of Sec.  414.105.'' Similarly, we are making a 
conforming technical change to Sec.  414.414(f) in the discussion of 
``expected savings'' so that infusion drugs are not taken into account 
by deleting the words ``or drug'' and the phrase ``or the same drug 
under subpart I'' from Sec.  414.414(f). The ``expected savings'' text 
will read as follows: ``A contract is not awarded under this subpart 
unless CMS determines that the amounts to be paid to contract suppliers 
for an item under a competitive bidding program are expected to be less 
than the amounts that would otherwise be paid for the same item under 
subpart C or subpart D.''

III. Provisions of the Interim Final Rule With Comment Period

A. Transition Period for Phase-In of Fee Schedule Adjustments

    We are amending Sec.  414.210(g)(9)(i) to change the end date for 
the initial transition period for the phase in of adjustments to fee 
schedule amounts for certain items based on information from the DMEPOS 
CBP from June 30, 2016 to December 31, 2016, as mandated by section 
16007(a) of the Cures Act. We are also amending Sec.  414.210(g)(9)(ii) 
to reflect that fully adjusted fee schedule amounts apply from January 
1, 2017 through May 31, 2018, and then on or after January 1, 2019. We 
are also adding Sec.  414.210(g)(9)(iii) to resume the transition 
period for the phase in of adjustments to fee schedule amounts for 
certain items furnished in rural and non-contiguous areas from June 1, 
2018 through December 31, 2018. Finally, we are adding Sec.  
414.210(g)(9)(iv) to reflect that fully adjusted fee schedule amounts 
apply for certain items furnished in non-CBA areas other than rural and 
non-contiguous areas from June 1, 2018 through December 31, 2018.
    As previously stated in section II.C.1 of this interim final rule 
with comment, stakeholders overwhelmingly have stated that the fully 
adjusted fee schedule amounts are not sufficient to cover supplier 
costs for furnishing items and services in rural and non-contiguous 
areas and are impacting beneficiary health outcomes. Section 16008 of 
the Cures Act requires CMS to consider certain factors in making fee 
schedule adjustments using information from the CBP for items and 
services furnished in non-CBAs on or after January 1, 2019. Given the 
limitations associated with our retrospective claims data prevent us 
from detecting rapidly developing beneficiary access issues, we believe 
we should immediately resume the blended fee schedule rates in rural 
and non-contiguous areas that were in place during CY 2016, while we 
further analyze this issue in order to safeguard beneficiaries' access 
to necessary items and services in rural and non-contiguous areas. 
Given that additional information and factors will be considered when 
addressing the fee schedule adjustments for items and services 
furnished on or after January 1, 2019, and that these factors include 
differences in costs (yet to be quantified) associated with furnishing 
items in heavier populated CBAs versus less populated or remote rural 
and non-contiguous areas, we have concluded that we should adjust fee 
schedule amounts based on competitive bidding information prior to 
2019. The volume of items furnished per supplier in rural and non-
contiguous areas is far less than the volume of items furnished per 
supplier in CBAs, indicating that the cost per item in these areas may 
be higher than the cost per item in CBAs. Also, as noted earlier, our 
systematic claims monitoring only looks backward in time and may not 
detect rapidly emerging trends, particularly in isolated or rural 
areas. We also referenced the GAO's acknowledgement that there are 
challenges associated with the monitoring CBP. In its report regarding 
the first year of the DMEPOS CBP Round 1 Rebid, the GAO stated that the 
monitoring methods used by CMS in assessing the impact of competitive 
bidding did not directly show whether beneficiaries received the DME 
needed on time or whether adverse health outcomes were caused by 
problems accessing DMEPOS. As the fee schedule amounts and the number 
of suppliers continue to decline, we are concerned that DME access in 
remote areas of the country may be negatively affected by significant 
payment reductions put in place prior to a full analysis of the factors 
affecting the cost of furnishing items and services in distinctly 
different market areas. We are also concerned that national chain 
suppliers may close locations in more remote areas if the rate they are 
paid for furnishing items in a market where the volume of services is 
low does not justify the overhead expenses of retaining the locations.
    Finally, because this IFC will result in a change to the 2018 fee 
schedule amounts for the various classes of oxygen and oxygen 
equipment, the annual budget neutrality adjustment for 2018, mandated 
by regulations at Sec.  414.226(c)(6), will need to be recomputed. This 
annual adjustment to the monthly payment amount for stationary oxygen 
equipment and oxygen contents is mandated by section 1834(a)(9)(D)(ii) 
of the Act as a condition for maintaining the higher portable oxygen 
equipment add-on payment for portable concentrators and transfilling 
equipment.

B. Technical Changes To Conform the Regulations to Section 5004(b) of 
the Cures Act: Exclusion of DME Infusion Drugs Under CBPs

    We are making conforming technical changes to the regulations text 
consistent with statutory requirements to exclude drugs and biologicals 
from the CBP. Specifically, we are amending Sec.  414.402 to reflect 
that infusion drugs are not included in the CBP by revising the 
definition of ``Item'' in paragraph (2) to add the words ``and 
infusion'' after the words ``other than inhalation''. We are also 
removing a reference to drugs being included in the CBP by deleting the 
phrase ``or subpart I'' in Sec.  414.412(b)(2). Similarly, we are 
making a conforming technical change to the regulations text on 
``expected savings'' so that infusion drugs are not taken into account 
in Sec.  414.414(f) by deleting the words ``or drug'' and the phrase 
``or the same drug under subpart I''.

[[Page 21921]]

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule before 
the provisions of the rule take effect in accordance with 5 U.S.C. 
553(b) of the Administrative Procedure Act (APA) and section 1871 of 
the Act. Specifically, section 553(b) of the APA requires the agency to 
publish a notice of the proposed rule in the Federal Register that 
includes a reference to the legal authority under which the rule is 
proposed, and the terms and substances of the proposed rule or a 
description of the subjects and issues involved. Section 553(c) of the 
APA further requires the agency to give interested parties the 
opportunity to participate in the rulemaking through public comment 
before the provisions of the rule take effect. Similarly, section 
1871(b)(1) of the Act requires the Secretary to provide for notice of 
the proposed rule in the Federal Register and provide a period of not 
less than 60 days for public comment. Section 553(b)(3)(B) of the APA 
and section 1871(b)(2)(C) of the Act authorize an agency to waive these 
procedures, however, if an agency finds good cause that a notice-and-
comment procedure is impracticable, unnecessary, or contrary to the 
public interest and incorporates a statement of the finding and its 
reasons in the rule issued. Section 553(d) of the APA ordinarily 
requires a 30-day delay in the effective date of a final rule from the 
date of its publication in the Federal Register. This 30-day delay in 
effective date can be waived, however, if an agency finds good cause to 
support an earlier effective date. Section 1871(e)(1)(B)(i) of the Act 
also prohibits a rule from taking effect before the end of the 30-day 
period that begins the date that the rule is issued or published. 
However, section 1871(e)(1)(B)(ii) of the Act permits a substantive 
rule to take effect before 30 days if the Secretary finds that a waiver 
of the 30-day period is necessary to comply with statutory requirements 
or that the 30-day delay would be contrary to the public interest. In 
addition, the Congressional Review Act (5 U.S.C. 801(a)(3)), requires a 
60-day delayed effective date for major rules. However, we can waive 
the delay in effective date of the rule if the Secretary finds, for 
good cause, that notice and public procedure is impracticable, 
unnecessary, or contrary to the public interest, and incorporates a 
statement of the finding and the reasons in the rule issued (5 U.S.C. 
808(2)).
    As discussed below, and for reasons cited throughout this interim 
final rule with comment period, we find good cause to waive notice-and-
comment rulemaking and issue this interim final rule with comment 
period to address fee schedule adjustments based on information from 
the CBP in rural and non-contiguous areas because we believe it is 
contrary to the public interest to go through notice-and-comment 
rulemaking for this provision. We also find good cause to waive the 30-
day delay in effective date of this interim final rule with comment 
period as a delay in effective date would also be contrary to the 
public interest. The full fee schedule adjustments took effect on 
January 1, 2017, and we understand from stakeholders that some DMEPOS 
suppliers cannot exist at the current fully adjusted fee levels and 
have already had to drop out of Medicare, and even close down. Delaying 
the effective date of this interim final rule with comment period by 30 
days could result in a further decline in the number of DMEPOS 
suppliers, and would pose an unnecessary risk of harm to beneficiaries 
in certain areas of the country that rely on one or a few suppliers to 
access to items and services and these suppliers are no longer able to 
furnish the items and services at the fully adjusted fee schedule 
amounts. We also note that in this interim final rule with comment 
period, CMS is reverting to a prior transitional payment policy that 
was in place from January 1, 2016 through December 31, 2016, to allow 
time for further engagement with stakeholders, through future notice 
and comment rulemaking, in the development of a long-term, more 
sustainable fee schedule adjustment methodology for items and services 
furnished in rural and non-contiguous areas.
    We also find it unnecessary to undertake notice-and-comment 
rulemaking to make technical changes to conform the regulations to the 
statutory requirement under section 5004(b) of the Cures Act that 
infusion drugs used with DME be excluded from the DMEPOS CBP. We also 
find good cause to waive the delay in the effective date for this 
interim final rule with comment period because it would be contrary to 
the public interest to further delay updating the regulations to be 
consistent with the statute and avoid possible confusion that infusion 
drugs are still subject to competitive bidding, particularly given that 
the statutory exclusion is self-implementing and already effective.
    Although we did not formally publish a notice of proposed 
rulemaking in the Federal Register, we have solicited stakeholder input 
regarding the impact of the fee schedule adjustments as required by 
section 16008 of the Cures Act, through a national provider call on 
March 23, 2017, as well as through an accompanying written comment 
period. We sought feedback on section 16008 of the Cures Act, which 
mandates stakeholder input on the methodology for using information 
from the DMEPOS CBP for adjusting Medicare fee schedule amounts paid in 
non-CBAs.
    We received numerous comments from stakeholders, such as comments 
that expressed how the current adjusted fee schedule is not enough to 
cover a DME supplier's costs of running a business and that many 
suppliers are not able to sustain reductions in payment of up to 60 
percent on average that resulted from the full fee schedule 
adjustments, resulting in a number of suppliers leaving the business 
and many more considering leaving the business in the near future. Such 
a result would negatively impact beneficiaries' access to critical 
items and services necessary for their care. Some stakeholders 
commented that some of the more remote, high cost areas are served by 
only one or a few suppliers. In 2016, there was a 7 percent decline in 
the number of supplier locations furnishing items and services subject 
to the fee schedule adjustments in non-CBAs. The magnitude of this 
decline in supplier locations from 13,535 to 12,617 indicates that the 
number of supplier locations serving these areas continues to decline 
at the same time that stakeholders are indicating their expectations of 
additional supplier exits. In situations where there may only be one 
supplier serving an area, if the supplier were to stop furnishing items 
(for example oxygen), the beneficiaries in this area could be harmed 
significantly if there are no suppliers left to deliver replacement of 
necessary oxygen. We are concerned that national chain suppliers of 
oxygen may close locations in more remote areas if the rate they are 
paid for furnishing items in a market where the volume of services is 
low does not justify the overhead expenses of retaining the locations. 
Due to the inherent limitation associated with using retrospective 
claims data, our systematic monitoring in these areas has not been able 
to reflect problematic trends identified by numerous stakeholders. As 
noted, the GAO has also acknowledged challenges associated with the 
monitoring of DMEPOS and the CBP, stating that the monitoring methods 
used by CMS in

[[Page 21922]]

assessing the impact of competitive bidding did not directly show 
whether beneficiaries received the DME they needed on time or whether 
adverse health outcomes were caused by problems accessing DMEPOS. Given 
the rapid changes in health care delivery that may disproportionately 
impact rural and more isolated geographic areas, we are concerned that 
the continued decline of the fees and the number of suppliers in such 
areas may exacerbate the already emergent access concerns faced by 
beneficiaries. In general, we are concerned that beneficiaries in 
certain areas of the country could lose access to items and services if 
they rely on one or a few suppliers to furnish these items and services 
and these suppliers are no longer able to furnish the items and 
services at the fully adjusted fee schedule amounts.
    Our monitoring data, by its very nature, would not alert us to the 
present and imminent threats to beneficiary access that stakeholders 
have raised in recent months. If CMS continues to pay the fully 
adjusted payment rates in rural and non-contiguous areas, it could 
further jeopardize the infrastructure of suppliers that beneficiaries 
rely on for access to necessary items and services in remote areas of 
the country. Smaller suppliers that serve remote areas may not be able 
to sustain larger reductions in payment because they have a limited 
number of ways to reduce costs. If they only have one location and a 
few employees to begin with, they cannot close locations or lay off 
employees to reduce costs. Larger suppliers that serve both remote, 
rural areas and urban areas may elect to close locations in the remote 
areas where volume of services are significantly lower because the 
overhead expense of maintaining the location may no longer justify 
retaining these locations. Therefore, we believe it is necessary to 
prevent future, potential access problems and adverse health outcomes 
for beneficiaries by resuming the fee schedule adjustment transition 
period in rural and non-contiguous areas. Immediately restoring the 
blended rates in rural and non-contiguous areas, which will cut the 
magnitude of the full adjustments in half, can prevent potential 
erosion of the supplier infrastructure that could potentially be on the 
verge of impacting access and health outcomes in rural and non-
contiguous areas. By restoring the transition period in rural and non-
contiguous areas effective June 1, 2018, this in essence extends the 
fee schedule adjustment phase in period by an additional 7 months and 
leaves a gap of 17 months from January 1, 2017 through May 31, 2018, 
during which suppliers have been subject to the full fee schedule 
adjustments in rural and non-contiguous areas. This extended phase-in 
period would end on December 31, 2018, since section 16008 of the Cures 
Act mandates that CMS consider certain factors and information in 
making fee schedule adjustments for items and services furnished on or 
after January 1, 2019. This gives suppliers serving rural and non-
contiguous areas more time to adjust their businesses and may prevent 
the imminent closure of some supplier locations, thereby safeguarding 
beneficiary access to necessary items and services in rural and non-
contiguous areas. It also prevents irreparable harm to businesses in 
rural and non-contiguous areas that would not be able to adjust to the 
full payment reductions, but might be able to adjust to smaller 
reductions in payments during an interim period until additional cost 
information is examined more closely by CMS to provide a more accurate 
reflection of the unique costs of furnishing items and services in 
market areas that are distinctly different from CBAs. This also allows 
time for CMS to receive supplier feedback and analyze the costs of 
furnishing DME items in rural and non-contiguous areas and other 
factors identified in section 16008 of the Cures Act. Resuming the fee 
schedule adjustment transition period for an additional 7 months in 
rural and non-contiguous areas seems reasonable during this interim 
period to allow for the more in depth analysis of the factors and 
information to be considered in accordance with section 16008 of the 
Cures Act.
    In light of these concerns, while we consider broader changes to 
the fee schedule adjustment methodology as required by section 16008 of 
the Cures Act, we believe there is good cause to issue this interim 
final rule with comment period to revise Sec.  414.210(g)(9) to 
immediately restore the fee schedule adjustment transition period in 
rural and non-contiguous areas. Resuming the transition period and 
blended rates based on adjusted and unadjusted fee schedule amounts for 
items and services furnished in rural and non-contiguous areas from 
June 1, 2018 through December 31, 2018, will allow additional time for 
suppliers serving rural and non-contiguous areas to adjust their 
businesses, prevent suppliers that beneficiaries may rely on for access 
to items and services in rural and non-contiguous areas from exiting 
the business, and allow additional time for CMS to monitor the impact 
of the blended rates. We believe it is contrary to the public interest 
to go through notice and comment rulemaking because of the stakeholder 
input we have already solicited that supports this change and because 
any further delay in implementation risks impeding beneficiary access 
to DME in rural and non-contiguous areas. To further delay restoring 
the transitional fee schedule rates in rural and non-contiguous areas 
for additional months raises the access concerns described earlier in 
the preamble. As such, in Sec.  414.210(g)(9)(iii), for items and 
services furnished in rural and non-contiguous areas on or after June 
1, 2018, the payment adjustments will be based on a blend of 50 percent 
of the unadjusted fee schedule amount and 50 percent of the adjusted 
payment amount established in accordance with the methodologies in 
Sec.  414.210(g)(1) through (8). We are also amending Sec.  
414.210(g)(9)(ii) to reflect that for items and services furnished with 
dates of service from January 1, 2017 to May 31, 2018, the fee schedule 
amount for the area is equal to 100 percent of the adjusted payment 
amount.
    We note that this rule is urgent to preserve beneficiary access to 
DME items and services in rural and non-contiguous areas during this 
transition period, that CMS is continuing to study the impact of the 
change in payment rates on access to items and services in these areas, 
and that we intend to undertake subsequent notice-and-comment 
rulemaking for CY 2019.
    Section 5004(b) of the Cures Act further amends section 
1847(a)(2)(A) of the Act to exclude drugs and biologicals described in 
section 1842(o)(1)(D) of the Act. We are finalizing conforming 
regulatory changes to reflect our interpretation of these statutory 
requirements to exclude infusion drugs, described in section 
1842(o)(1)(D) of the Act, as a covered item that could be subject to 
the DMEPOS CBPs. Because this is just a minor technical change to 
conform the language in the regulations to the statute, we believe that 
a notice and comment period for this change is unnecessary.
    Therefore, as noted above, we find good cause to waive the notice 
of proposed rulemaking to address fee schedule adjustments in rural and 
non-contiguous areas based on information from the CBP, and to make 
technical changes to the regulations so they conform to the statutory 
requirement under section 5004(b) of the Cures Act that infusion drugs 
used with DME be excluded from the DMEPOS CBP. We also find good cause 
to waive the delay in effective date and issue this interim

[[Page 21923]]

final rule with comment period with an effective date of June 1, 2018. 
We are providing a 60-day public comment period.

V. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).

VI. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this interim final rule with 
comment period as required by Executive Order 12866 on Regulatory 
Planning and Review (September 30, 1993), Executive Order 13563 on 
Improving Regulation and Regulatory Review (January 18, 2011), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive 
Order 13132 on Federalism (August 4, 1999), the Congressional Review 
Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing Regulation 
and Controlling Regulatory Costs (January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). We estimate that this rulemaking is ``economically significant'' 
as measured by the $100 million threshold, and hence also a major rule 
under the Congressional Review Act. In addition, the Office of 
Management and Budget (OMB) has determined that the actions are 
significant within the meaning of section 3(f)(4) of the Executive 
Order. Accordingly, we have prepared a Regulatory Impact Analysis that 
to the best of our ability presents the costs and benefits of the 
rulemaking. Therefore, OMB has reviewed this interim final rule with 
comment period, and the Departments have provided the following 
assessment of their impact. We solicit comments on the regulatory 
impact analysis provided.
2. Statement of Need
    This interim final rule with comment period amends the regulation 
to revise the date that the initial fee schedule adjustment transition 
period ended and resumes the fee schedule adjustment transition period 
for certain DME items and services and enteral nutrition furnished in 
rural and non-contiguous areas not subject to the DMEPOS CBP from June 
1, 2018 through December 31, 2018. This interim final rule with comment 
period also makes technical amendments to existing regulations for 
DMEPOS items and services to note the exclusion of infusion drugs used 
with DME from the DMEPOS CBP.
3. Overall Impact
    The interim final rule with comment period resumes the transitional 
adjusted Medicare fee schedule amounts for certain items and services 
that are furnished in rural and non-contiguous areas beginning June 1, 
2018 until December 31, 2018. It is estimated that these fee schedule 
adjustments will cost over $290 million in Medicare Part B benefit 
payments and $70 million in Medicare beneficiary cost sharing. For dual 
eligible beneficiaries Medicaid pays the cost sharing. The Medicaid 
payment is split between a Federal portion and the states' portion, 
which for this rule is $10 million and $10 million, respectively.

B. Detailed Economic Analysis

a. Effects on the Medicare Program and Beneficiaries
    This interim final rule with comment period resumes transitional 
adjusted Medicare fee schedule amounts for certain items and services 
furnished in rural and non-contiguous areas beginning June 1, 2018 
until December 31, 2018. It is estimated that these adjustments will 
cost over $290 million in Medicare Part B benefit payments and $70 
million in beneficiary cost sharing. The suppliers will get increased 
revenue from the increased fee schedule amounts. See Table 1.

                                          Table 1--Cash Impact of Resuming the Adjusted Fee Schedule Transition
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Impact on the benefit payments      Impact on beneficiary cost
                       FY                           in dollars (to the nearer 10       sharing in dollars (to the     Federal share of  States' share of
                                                            million) \1\                 nearer 10 million) \2\         Medicaid \3\      Medicaid \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2018............................................                              170                                40                 5                 5
2019............................................                              120                                30                 5                 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Does not include premium offset.
\2\ Includes Medicaid payments.
\3\ Copayments made for dual eligible Medicare beneficiaries.


[[Page 21924]]

b. Impact on Beneficiaries and Other Payers
    In order to preserve beneficiary access to DME items and services, 
this rule, as indicated above, will result in a $70 million dollar 
Medicare cost sharing increase to the beneficiaries. For those 
beneficiaries who have supplemental insurance, this increase may be 
covered by supplemental insurance programs (for example, Medigap). This 
is a temporary time-limited extension of the fee schedule adjustment 
transition period.
    For dual eligible beneficiaries, Medicaid pays the cost sharing. 
The Medicaid payment is split between a Federal portion and the states' 
portion, which for this rule is $10 million and $10 million, 
respectively.
    Beneficiaries who do not have supplemental insurance or who are not 
dual eligible will have increased cost sharing as a result of this 
interim final rule with comment period.
c. Alternatives Considered
    One alternative considered to address concerns about access to 
items and services in non-CBAs would be to apply the 50/50 blended 
rates in all non-CBAs, since stakeholders commented regarding problems 
related to access to necessary items and services in all non-CBAs. This 
would cost $570 million in Medicare Part B benefit payments and $140 
million in beneficiary cost sharing. Of the $140 million in beneficiary 
cost sharing, $45 million is the Medicaid impact for dual eligibles, of 
which $25 million is the Federal portion, and $20 million is the state 
portion. A second alternative would be to apply the blended rates in 
all non-CBAs, but change the blend from 50 percent unadjusted fee and 
50 percent adjusted fee to 25 percent unadjusted fee and 75 percent 
adjusted fee. This would cost $290 million in Medicare Part B benefit 
payments and $70 million in beneficiary cost sharing. Of the $70 
million in beneficiary cost sharing, $20 million is the Medicaid impact 
for dual eligibles, of which $10 million is the Federal portion, and 
$10 million is the state portion. Table 2 compared the annual costs of 
these alternative rules to the annual costs of the interim final rule 
with comment period.

      Table 2--Comparison of the Costs of Alternative Rules With the Interim Final Rule With Comment Period
----------------------------------------------------------------------------------------------------------------
                                                                          50/50 Blend in all  25/75 Blend in all
                         FY                           Interim final rule       non-CBAs            non-CBAs
----------------------------------------------------------------------------------------------------------------
2018................................................                170                 330                 170
2019................................................                120                 240                 120
----------------------------------------------------------------------------------------------------------------

    We did not elect either of these alternatives and chose to apply 
the 50/50 blended rates in rural and non-contiguous areas only to 
ensure access to items and services for Medicare beneficiaries in these 
areas.
    Public comments are requested on these and any other related 
alternatives.
d. Regulatory Familiarization Costs
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this interim final rule 
with comment period, we should estimate the cost associated with 
regulatory review. Due to the uncertainty involved with accurately 
quantifying the number of entities that will review the rule, we assume 
that the number of reviewers of this final rule is about the same 
number of commenters on similar, past rules. We acknowledge that this 
assumption may understate or overstate the costs of reviewing this 
interim final rule with comment period. Using the wage information from 
the Bureau of Labor Statistics (BLS) for medical and health service 
managers (Code 11-9111), we estimate that the cost of reviewing this 
interim final rule with comment period is $105.16 per hour, including 
overhead and fringe benefits (https://www.bls.gov/oes/current/oes_nat.htm). Assuming an average reading speed, we estimate that it 
will take approximately 2 hours for the staff to review this interim 
final rule with comment period. For each entity that reviews this 
interim final rule with comment period, the estimated cost is $210.32 
(2 hours x $105.16). Therefore, we estimate that the total cost of 
reviewing this interim final rule with comment period is $21,320 
($210.32 x 100 reviewers).

C. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 3, we have 
prepared an accounting statement showing the classification of the 
transfers and costs associated with the various provisions of this 
interim final rule with comment period.

Table 3--Accounting Statement: Classification of Estimated Transfers and
           Costs/Savings, With Annualization Period 2018-2019
------------------------------------------------------------------------
                             DME provisions
-------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $146 million (7%) or $145
                                          million (3%).
From Whom to Whom......................  Federal government to Medicare
                                          providers.
Increased Beneficiary Co-insurance       $35 million (7%) or 35 million
 Payments.                                (3%).
From Whom to Whom......................  Beneficiaries to Medicare
                                          providers.
------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the Office of Management and Budget.

VIII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354) 
(RFA) requires agencies to analyze options for regulatory relief of 
small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions.

[[Page 21925]]

Approximately 85 percent of the DME industry are considered small 
businesses according to the Small Business Administration's size 
standards with total revenues of $6.5 million or less in any 1 year and 
a small percentage are nonprofit organizations. Individuals and states 
are not included in the definition of a small entity. We expect the 
interim final rule with comment period DME provisions will have a 
significant impact on small suppliers. A substantial number of small 
suppliers will benefit from the increased fee schedule amounts. 
Although not legally required, this interim final rule with comment 
period will increase payments to small suppliers such that the 
beneficiaries should have improved access to items.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. Our data indicates that 
only around 6.9 percent of small rural hospitals are organizationally 
linked to a DME supplier with paid claims in 2017. Thus, we do not 
believe this interim final rule with comment period will have a 
significant impact on operations of a substantial number of small rural 
hospitals.

IX. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2018, that 
threshold is approximately $150 million. The Secretary has determined 
that UMRA does not apply to this rule in that this rule does not 
contain mandates that impose spending costs on state, local, or tribal 
governments in the aggregate.

X. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. The Secretary has determined that this rule does not 
impose substantial direct requirement costs on state or local 
governments, preempt states, or otherwise have a Federalism 
implication.

XI. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017. This interim final 
rule with comment period is not subject to the requirements of 
Executive Order 13771 because it is estimated to result in no more than 
de minimis costs.

XII. Congressional Review Act

    This rule is subject to the Congressional Review Act provisions of 
the Small Business Regulatory Enforcement Fairness Act of 1996 (5 
U.S.C. 801 et seq.) and has been transmitted to the Congress and the 
Comptroller General for review.

List of Subjects in 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 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)(l) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).


0
2. Section 414.210 is amended by revising paragraph (g)(9) to read as 
follows.


Sec.  414.210  General payment rules.

* * * * *
    (g) * * *
    (9) Transition rules. The payment adjustments described above are 
phased in as follows:
    (i) For applicable items and services furnished with dates of 
service from January 1, 2016 through December 31, 2016, based on the 
fee schedule amount for the area is equal to 50 percent of the adjusted 
payment amount established under this section and 50 percent of the 
unadjusted fee schedule amount.
    (ii) For items and services furnished with dates of service from 
January 1, 2017, through May 31, 2018, and on or after January 1, 2019, 
the fee schedule amount for the area is equal to 100 percent of the 
adjusted payment amount established under this section.
    (iii) For items and services furnished in rural areas and non-
contiguous areas (Alaska, Hawaii, and U.S. territories) with dates of 
service from June 1, 2018 through December 31, 2018, based on the fee 
schedule amount for the area is equal to 50 percent of the adjusted 
payment amount established under this section and 50 percent of the 
unadjusted fee schedule amount.
    (iv) For items and services furnished in areas other than rural or 
non-contiguous areas with dates of service from June 1, 2018 through 
December 31, 2018, based on the fee schedule amount for the area is 
equal to 100 percent of the adjusted payment amount established under 
this section.


Sec.  414.402  [Amended]

0
3. Section 414.402 is amended in paragraph (2) of the definition of 
``Item'' by removing the words ``inhalation drugs'' and by adding in 
their place ``inhalation and infusion drugs''.


Sec.  414.412   [Amended]

0
4. Section 414.412(b)(2) is amended by removing the phrase ``, or 
subpart I of this part''.


Sec.  414.414  [Amended]

0
5. Section 414.414(f) is amended by removing the words ``or drug'' and 
the phrase ``or the same drug under subpart I''.

    Dated: May 7, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: May 7, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-10084 Filed 5-9-18; 4:15 pm]
 BILLING CODE 4120-01-P