[Federal Register Volume 85, Number 170 (Tuesday, September 1, 2020)]
[Proposed Rules]
[Pages 54327-54339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19289]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 405

[CMS-3372-P]
RIN 0938-AT88


Medicare Program; Medicare Coverage of Innovative Technology 
(MCIT) and Definition of ``Reasonable and Necessary''

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish a Medicare coverage pathway 
to provide Medicare beneficiaries nationwide with faster access to new, 
innovative medical devices designated as breakthrough by the Food and 
Drug Administration (FDA). After the final rule is effective, the 
Medicare Coverage of Innovative Technology (MCIT) pathway would begin 
national Medicare coverage on the date of FDA market authorization and 
would continue for 4 years. We are also proposing regulatory standards 
to be used in making reasonable and necessary determinations under 
section

[[Page 54328]]

1862(a)(1)(A) of the Social Security Act (the Act) for items and 
services that are furnished under Part A and Part B.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on November 2, 2020.

ADDRESSES: In commenting, please refer to file code CMS-3372-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of 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-3372-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.

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-3372-P, 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: Linda Gousis or JoAnna Baldwin, (410) 
786-2281 or [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://www.regulations.gov. Follow the search instructions on 
that website to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

    The Administration is committed to ensuring Medicare beneficiaries 
have access to new cures and technologies that improve health outcomes. 
Section 6 of the October 3, 2019 Executive Order 13890 (E.O. 13890) 
``Executive Order on Protecting and Improving Medicare for Our Nation's 
Seniors,'' \1\ directs the Secretary to ``propose regulatory and sub-
regulatory changes to the Medicare program to encourage innovation for 
patients'' including by ``streamlining the approval, coverage, and 
coding process''.\2\ The E.O. 13890 explicitly includes making coverage 
of breakthrough medical devices ``widely available, consistent with the 
principles of patient safety, market-based policies, and value for 
patients.'' \3\ The E.O. also directs the Secretary to ``clarify the 
application of coverage standards.'' \4\
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    \1\ Executive Order on Protecting and Improving Medicare for Our 
Nation's Seniors, available at https://www.whitehouse.gov/presidential-actions/executive-order-protecting-improving-medicare-nations-seniors/.
    \2\ Id.
    \3\ Id.
    \4\ Id.
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    We are responding directly to these directives by proposing a 
definition of the term ``reasonable and necessary'' to clarify coverage 
standards and proposing the Medicare Coverage of Innovative Technology 
(MCIT) pathway to accelerate the coverage of new, innovative 
breakthrough devices to Medicare beneficiaries. To date, the factors 
used in making ``reasonable and necessary'' determinations based on 
section 1862(a)(1)(A) of the Act have not been established in 
regulations for Medicare coverage purposes. The Secretary has authority 
to determine whether a particular medical item or service is 
``reasonable and necessary'' under section 1862(a)(1)(A) of the Act. 
(See Heckler v. Ringer, 466 U.S. 602, 617 (1984).) When making coverage 
determinations, our policies have long considered whether the item or 
service is safe and effective, not experimental or investigational, and 
appropriate. (For more information see the January 30, 1989 notice of 
proposed rulemaking (54 FR 4307)). These factors are found in Chapter 
13 of the Medicare Program Integrity Manual (PIM) at section 13.5.4--
Reasonable and Necessary Provisions in LCDs as instructions for 
Medicare contractors. We are proposing to codify in regulations the 
Program Integrity Manual definition of ``reasonable and necessary'' 
with modifications, including to add a reference to Medicare patients 
and a reference to commercial health insurer coverage policies. We 
propose that an item or service would be considered ``reasonable and 
necessary'' if it is--(1) safe and effective; (2) not experimental or 
investigational; and (3) appropriate for Medicare patients, including 
the duration and frequency that is considered appropriate for the item 
or service, in terms of whether it is--
     Furnished in accordance with accepted standards of medical 
practice for the diagnosis or treatment of the patient's condition or 
to improve the function of a malformed body member;
     Furnished in a setting appropriate to the patient's 
medical needs and condition;
     Ordered and furnished by qualified personnel;
     One that meets, but does not exceed, the patient's medical 
need; and
     At least as beneficial as an existing and available 
medically appropriate alternative.
    We also propose that an item or service would be ``appropriate for 
Medicare patients'' under (3) if it is covered in the commercial 
insurance market, except where evidence supports that there are 
clinically relevant differences between Medicare beneficiaries and 
commercially insured individuals. An item or service deemed appropriate 
for Medicare coverage based on commercial coverage would be covered on 
that basis without also having to satisfy the bullets listed above. We 
believe this definition is a significant step in meeting the E.O.'s 
directive to bring clarity to coverage standards. Stakeholders have 
expressed interest in codifying a definition of ``reasonable and 
necessary'' for many years. This proposed definition is familiar and 
functional, can satisfy that interest and meet the E.O.'s ask, while 
also aligning with the goals of MCIT by providing clarity and 
predictability for innovation, including for beneficiaries and 
innovators.
    The proposed MCIT coverage pathway is specifically for Medicare 
coverage of devices that are designated as part of the Food and Drug 
Administration's (FDA) Breakthrough Devices Program (hereafter referred 
to as ``breakthrough devices'') and are FDA market authorized. The MCIT 
pathway would be voluntary and device manufacturers would notify CMS if 
they want to utilize this coverage option.
    We propose that national Medicare coverage under the MCIT pathway 
would begin immediately upon the date of FDA market authorization (that 
is, the

[[Page 54329]]

date the medical device receives Premarket Approval (PMA); 510(k) 
clearance; or the granting of a De Novo classification request) for the 
breakthrough device. This coverage would occur unless the device does 
not have a Medicare benefit category or is otherwise excluded from 
coverage by statute (that is, the Medicare statute does not allow for 
coverage of the particular device.) This coverage pathway delivers on 
the Administration's commitment to give Medicare beneficiaries access 
to the newest innovations on the market, consistent with the statutory 
definitions of Medicare benefits. Because Medicare is a defined benefit 
program, devices that do not fit within the statutory definitions may 
not be considered for MCIT. As an example, medical equipment for home 
use by the beneficiary must be durable (that is, withstand repeated 
use) for it to be coverable by Medicare (as defined in statutes and 
regulations by the Secretary). At this time, we are limiting MCIT to 
medical devices because that is a category of products explicitly 
identified in E.O. 13890, and we have identified that breakthrough 
devices can experience variable coverage across the nation shortly 
after market authorization.
    We propose this MCIT pathway because the prescribed statutory 
timeframes for the National Coverage Determination (NCD) process limit 
CMS' ability to institute immediate national coverage policies for new, 
innovative medical devices. NCDs and Local Coverage Determinations 
(LCD) take, on average, 9 to 12 months to finalize. Because of this 
length of time, there may be coverage uncertainty between the period of 
FDA market authorization and CMS finalization of an NCD or a Medicare 
Administrative Contractor's (MACs) finalization of an LCD. During this 
time period shortly after market authorization, MACs make coverage 
determinations on a case-by-case (individual beneficiary) basis, but 
those decisions do not usually establish agency policies for future 
claims because a case-by-case decision is for a particular beneficiary 
and their health circumstances.
    Over the past few years, CMS has heard concerns from stakeholders 
that breakthrough devices are not automatically covered nationally by 
Medicare once they are FDA market authorized. Variation in coverage 
from one jurisdiction to another is also a concern. To date, 16 
breakthrough devices have also been market authorized. The majority of 
these breakthrough devices (10 devices) experience variability in 
coverage for two reasons. One reason is because the breakthrough 
devices are coverable at MAC discretion, like many other item and 
services, on a case-by-case basis (that is, the breakthrough device may 
be covered for one patient, but not for another within the same 
jurisdiction). The other reason is because breakthrough devices are 
used by a hospital or other provider that operates under a bundled 
payment system (such as a diagnosis related group (DRG) system), so 
there may be no separate coverage policy for each item or service that 
may be included in the bundled payment. Another example of variable 
coverage is for one breakthrough device that is non-covered by a local 
policy in Florida, but coverable at MAC discretion on a case-by-case 
basis in other jurisdictions. One breakthrough device has national 
coverage through an NCD. One breakthrough device has uniform coverage 
because the same LCD has been adopted in all jurisdictions. There are 
three breakthrough devices that do not have a Medicare benefit category 
(for example, certain wearable devices); therefore, those breakthrough 
devices cannot be covered by the Medicare program.
    In contrast to varied local coverage, the proposed MCIT would 
create a pathway for immediate national Medicare coverage of any FDA-
market authorized breakthrough device if the device meets criteria 
outlined in this proposal.

A. Statutory Authority

    We are also proposing to establish in regulations the factors we 
have historically used in making ``reasonable and necessary'' 
determinations under section 1862(a)(1)(A) of the Act, with some 
modification. To summarize, this section explains that Medicare payment 
may be made under part A or part B for any expenses incurred for items 
or services that are reasonable and necessary for the diagnosis or 
treatment of illness or injury or to improve the functioning of a 
malformed body member. Thus, with some exceptions, section 
1862(a)(1)(A) of the Act requires that an item or service be 
``reasonable and necessary'' to be covered by Medicare. The courts have 
recognized that the Secretary has significant authority to determine 
whether a particular item or service is ``reasonable and necessary.'' 
(Heckler v. Ringer, 466 U.S. 602, 617 (1984). See also, Yale-New Haven 
Hospital v. Leavitt, 470 F.3d 71, 84 (2d Cir. 2006); Kort v. Burwell, 
209 F. Supp. 3d 98, 110 (D.C. 2016) (The statute vests substantial 
authority in the Secretary.)) So even though section 1862(a)(1)(A) of 
the Act limits the scope of Medicare coverage, the Secretary has 
discretion to revise his/her interpretation of the statute in order to 
ensure adequate coverage for items and services under Part A and Part 
B.
    This proposal would provide national Medicare coverage for 
breakthrough devices that are FDA market-authorized and used consistent 
with the FDA approved or cleared indication for use (also referred to 
as the ``FDA-required labeling'').\5\ This device coverage under the 
MCIT pathway is reasonable and necessary under section 1862(a)(1)(A) of 
the Act because the device has met the unique criteria of the FDA 
Breakthrough Devices Program.
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    \5\ FDA Guidance for Industry, ``Medical Product Communications 
That Are Consistent With the FDA-Required Labeling--Questions and 
Answers,'' available at https://www.fda.gov/media/133619/download.
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B. FDA Breakthrough Devices Program

    Under the proposed MCIT coverage pathway, CMS would coordinate with 
FDA and manufacturers as medical devices move through the FDA 
regulatory process for Breakthrough Devices to ensure seamless Medicare 
coverage on the date of FDA market authorization unless CMS determines 
those devices do not have a Medicare benefit category. The Breakthrough 
Devices Program is an evolution of the Expedited Access Pathway Program 
and the Priority Review Program (section 515B of the Federal Food, 
Drug, and Cosmetic Act (FD&C Act)), 21 U.S.C. 360e-3; see also final 
guidance for industry entitled, ``Breakthrough Devices Program,'' 
https://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM581664.pdf).
    The FDA's Breakthrough Devices Program is not for all new medical 
devices; rather, it is only for those that the FDA determines meet the 
standards for breakthrough device designation. In accordance with 
section 3051 of the 21st Century Cures Act (21 U.S.C. 360e-3),\6\ the 
Breakthrough Devices Program is for medical devices and device-led 
combination products that meet two criteria. The first criterion is 
that the device provide for more effective treatment or diagnosis of 
life-threatening or irreversibly debilitating human disease or 
conditions. The second criterion is that the device must satisfy one of 
the following elements: It

[[Page 54330]]

represents a breakthrough technology; no approved or cleared 
alternatives exist; it offers significant advantages over existing 
approved or cleared alternatives, including additional considerations 
outlined in the statute; or device availability is in the best interest 
of patients (for more information see 21 U.S.C. 360e-3(b)(2)). These 
criteria make breakthrough designated devices unique among all other 
medical devices.\7\ The parameters of the breakthrough devices program 
focus on innovations for patients, in turn, MCIT, focuses on these 
breakthrough devices consistent with E.O. 13890 and in order to 
streamline coverage of innovative medical devices.
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    \6\ 21st Century Cures Act, available at https://www.congress.gov/114/plaws/publ255/PLAW-114publ255.pdf; see FDA 
Guidance for Industry and Food and Drug Administration Staff, 
Breakthrough Devices Program available at https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
    \7\ FDA does not publish a list of breakthrough designated or 
breakthrough designated and subsequently market authorized devices. 
However if a breakthrough device gains market authorization through 
a PMA only, then the summary of safety and effectiveness data (SSED) 
will contain a reference for the breakthrough designation. This is 
not true for De Novos which have been granted or cleared 510(k)'s. 
In consideration of that approach, this notice of public rulemaking 
does not contain such lists.
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C. Current Medicare Coverage Pathways

    Currently, we utilize several coverage pathways for items and 
services, which includes medical devices. None of the coverage pathways 
described in this section offer immediate, predictable coverage 
concurrently with FDA market authorization like the proposed MCIT 
pathway would do. We summarize the other coverage pathways here to 
provide context for MCIT.
     National Coverage Determinations (NCDs): Section 
1862(l)(6)(A) of the Act defines the term national coverage 
determination as ``a determination by the Secretary with respect to 
whether or not a particular item or service is covered nationally under 
this title.'' In general, NCDs are national policy statements published 
to identify the circumstances under which particular items and services 
will be considered covered by Medicare. Traditionally, CMS relies 
heavily on health outcomes data to make NCDs. Most NCDs have involved 
determinations under section 1862(a)(1)(A) of the Act, but NCDs can be 
made based on other provisions of the Act, and includes a determination 
that the item or service under consideration has a Medicare benefit 
category. The NCD pathway, which has statutorily prescribed timeframes, 
generally takes 9 to 12 months to complete.\8\
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    \8\ Section 1869(f)(4) of the Act.
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     Local Coverage Determinations (LCDs): Medicare contractors 
develop LCDs based on section 1862(a)(1)(A) of the Act that apply only 
within their geographic jurisdictions. (Sections 1862(l)(6)(B) and 
1869(f)(2)(B) of the Act.) MACs will not need to develop LCDs for 
breakthrough devices when they are nationally covered through MCIT.
    The MACs follow specific guidance for developing LCDs for Medicare 
coverage in the CMS Program Integrity Manual, and in some instances, an 
LCD can also take 9 to12 months to develop (MACs must finalize proposed 
LCDs within 365 days from opening per Chapter 13--Local Coverage 
Determinations of the (PIM) 13.5.1). We note that the MCIT pathway will 
not alter the existing coverage standards in Chapter 13--Local Coverage 
Determinations of the PIM.\9\ That chapter will continue to be used in 
making determinations under section 1862(a)(1)(A) of the Act for other 
items and services at the local level.
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    \9\ CMS Program Integrity Manual, Chapter 13 Local Coverage 
Determinations, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/pim83c13.pdf
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     Claim-by-claim Adjudication: In the absence of 
an NCD or LCD, MACs would make coverage decisions under section 
1862(a)(1)(A) of the Act and may cover or not cover items and services 
on a claim-by-claim basis. The majority of claims are handled through 
the claim adjudication process.
     Clinical Trial Policy (CTP) NCD 310.1: The CTP 
pathway can be used for coverage of routine care items and services 
(but generally not the technology under investigation) in a clinical 
study that is supported by certain Federal agencies. The CTP coverage 
pathway was developed in 2000.\10\ This coverage pathway has not 
generally been utilized by device manufacturers because they usually 
seek coverage of the device, which is not included in this pathway.
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    \10\ CMS, National Coverage Determination for Routine Costs in 
Clinical Trials available at https://www.cms.gov/medicare-coverage-database/details/ncd-details.aspx?NCDId=1&fromdb=true.
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     Parallel Review: Parallel Review is a mechanism 
for FDA and CMS to simultaneously review the submitted clinical data to 
help decrease the time between FDA's approval of a premarket 
application or granting of a de novo classification and the subsequent 
CMS NCD. Parallel Review has two stages: (1) FDA and CMS meet with the 
manufacturer to provide feedback on the proposed pivotal clinical trial 
within the FDA pre-submission process; and (2) FDA and CMS concurrently 
review (``in parallel'') the clinical trial results submitted in the 
PMA, or De Novo request. FDA and CMS independently review the data to 
determine whether it meets their respective Agency's standards and 
communicate with the manufacturer during their respective reviews. This 
program is most successful for devices that have a significant amount 
of clinical evidence. (Candidates for parallel review would not be 
appropriate for simultaneous MCIT consideration.)
    Even though CMS has multiple coverage pathways, at this time none 
are readily available to provide immediate national coverage for new 
breakthrough devices with a Medicare benefit category at the same time 
as FDA market authorization. Further, some of these new breakthrough 
devices are likely to have limited or developing bodies of clinical 
evidence because of the newness of the device; therefore, the MCIT 
pathway can support manufacturers that are interested in combining 
coverage with their own clinical study to augment clinical evidence of 
improved health outcomes, particularly for Medicare patients.
    Given this summary of existing coverage pathways, we seek comment 
from the public regarding if any of these existing pathways should be 
modified to achieve the goals set out by E.O. 13890.

D. MCIT Pathway

    We propose that the MCIT pathway would provide immediate national 
coverage for breakthrough devices beginning on the date of FDA market 
authorization and continue for up to 4 years, unless we determine the 
device does not have a Medicare benefit category as determined by us as 
part of the MCIT pathway process. The MCIT pathway is voluntary (that 
is, manufacturers would affirmatively opt-in), and would be initiated 
when a manufacturer notifies CMS of its intention to utilize the MCIT 
pathway. (This notification process is described further in section 
III. of this proposed rule.) We would subsequently coordinate with the 
manufacturer regarding steps that need to be taken for MCIT 
implementation purposes. The frequency of subsequent engagement will be 
largely driven by whether the manufacturer has questions for CMS, or 
CMS and FDA. The timing of coverage will depend upon the timing of the 
FDA's market authorization decision. Engagements can take place in the 
form of in-person meetings, phone calls, emails, etc. We intend to put 
devices that are covered through the MCIT pathway on the CMS website so 
that all stakeholders will be aware of what is covered through the MCIT 
pathway. Manufacturers of breakthrough devices will not be obligated or 
mandated by CMS to conduct clinical studies during

[[Page 54331]]

coverage under the proposed MCIT pathway. However, we seek comment as 
to whether CMS should require or incentivize manufacturers to provide 
data about outcomes or should be obligated to enter into a clinical 
study similar to CMS's Coverage with Evidence Development (CED) 
paradigm.\11\ We are aware some manufacturers may be required by the 
FDA to conduct post market data collection as a condition of market 
authorization, and nothing in this proposed rule would alter that FDA 
requirement. Manufacturers are encouraged to develop the clinical 
evidence base needed for one of the other coverage pathways after the 
MCIT pathway ends. This evidence is encouraged not only for CMS and 
private commercial health insurer coverage policies but also to better 
inform the clinical community and the public generally about the risks 
and benefits of treatment. CMS encourages early manufacturer 
engagement, both before and after FDA market authorization, for 
manufacturers to receive feedback from CMS on potential clinical study 
designs and clinical endpoints that may produce the evidence needed for 
a definitive coverage determination after MCIT. This feedback would not 
involve CMS predicting specific coverage or non-coverage.
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    \11\ CMS, Guidance for the Public, Industry, and CMS Staff 
Coverage with Evidence Development, available at https://www.cms.gov/medicare-coverage-database/details/medicare-coverage-document-details.aspx?MCDId=27.
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    In order to further the goals of E.O. 13890, CMS proposes to rely 
on FDA's breakthrough device designation and market authorization of 
those devices to define the universe of devices eligible for MCIT, 
except for those particular devices CMS determines do not have a 
Medicare benefit category or are statutorily excluded from coverage 
under Part A or Part B. In order to provide immediate national coverage 
to innovative medical devices, we propose to establish a time limit on 
how long a breakthrough device can be eligible for MCIT (that is, 
considered a breakthrough device for coverage purposes). MCIT has a 
time limit on newness similar to our New Technology Add-on Payment 
(NTAP) policy. Eligibility for the NTAP is also time limited and this 
time limit applies to all new technologies, including breakthrough 
devices, for which an application for additional payment is submitted. 
Additionally, the time-limited characteristic of MCIT will drive some 
manufacturers to leverage this period of coverage to demonstrate the 
value of their device in the competitive marketplace. The 4-year 
coverage period is particularly important for manufacturers of 
breakthrough devices that choose to further develop the clinical 
evidence basis on which the FDA granted marketing authorization. From 
our experience with clinical studies conducted as part of an NCD, 4 
years is approximately the amount of time it takes to complete a study.
    At the end of the 4-year MCIT pathway, coverage of the breakthrough 
device would be subject to one of these possible outcomes: (1) NCD 
(affirmative coverage, which may include facility or patient criteria); 
(2) NCD (non-coverage); or (3) MAC discretion (claim-by-claim 
adjudication or LCD). Manufacturers that are interested in a NCD are 
encouraged to submit a NCD request during the third year of MCIT to 
allow for sufficient time for NCD development. We seek public comment 
on whether CMS should open a national coverage analysis if a MAC has 
not issued an LCD for a breakthrough device within 6 months of the 
expiration date of the 4-year MCIT period.
    In our analysis of the current coverage landscape to determine 
opportunities for innovation and efficiencies, we also considered 
modifying the coverage process for non-breakthrough devices (for 
example, PMAs because they are also new to the market), but ultimately 
determined that it was the unique characteristics of FDA designated 
breakthrough devices and their ability to serve unmet needs that 
resonated most with the E.O.'s direction to encourage innovation for 
patients. We also considered expedited coverage of newly market 
authorized and breakthrough devices when used in a clinical study.
    We seek public comment on the proposed MCIT pathway, the 
considerations described, whether any of the existing coverage pathways 
should be modified to achieve the goals set out by the E.O., and 
alternatives to these proposals. We specifically seek public comment on 
whether the MCIT pathway should also include diagnostics, drugs and/or 
biologics that utilize breakthrough or expedited approaches at the FDA 
(for example, Breakthrough Therapy, Fast Track, Priority Review, 
Accelerated Approval) \12\ or all diagnostics, drugs and/or biologics. 
We seek data to support including these additional item categories in 
the MCIT pathway. Also, we specifically seek manufacturer input on 
whether an opt-in or opt-out approach would work best for utilizing the 
MCIT pathway. We believe manufactures will welcome this new coverage 
pathway. We want to preserve manufacturers' business judgment and not 
assume which Medicare coverage pathway a given manufacturer of a 
breakthrough device would prefer (if any). Therefore, we have proposed 
an opt-in approach with an email to CMS to indicate affirmative 
interest in coverage. We are interested in whether an opt-out approach 
would be less burdensome for stakeholders. If so, we encourage public 
comment on a process for stakeholders to opt-out of MCIT that would not 
be burdensome. Also, we seek public comment on whether, once a 
manufacturer has opted-out of coverage, it can subsequently opt-in to 
MCIT.
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    \12\ Fast Track, Breakthrough Therapy, Accelerated Approval, 
Priority Review, available at https://www.fda.gov/patients/learn-about-drug-and-device-approvals/fast-track-breakthrough-therapy-accelerated-approval-priority-review.
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II. Provision of Proposed Regulations

A. Defining ``Reasonable and Necessary''

    As described in section I. of this proposed rule, the Secretary has 
authority to determine the meaning of ``reasonable and necessary'' 
under section 1862(a)(1)(A) of the Act. We are proposing to codify the 
longstanding Program Integrity Manual definition of ``reasonable and 
necessary'' into our regulations at 42 CFR 405.201(b), with 
modification. Under the current definition, an item or service is 
considered ``reasonable and necessary'' if it is (1) safe and 
effective; (2) not experimental or investigational; and (3) 
appropriate, including the duration and frequency that is considered 
appropriate for the item or service, in terms of whether it is--
     Furnished in accordance with accepted standards of medical 
practice for the diagnosis or treatment of the patient's condition or 
to improve the function of a malformed body member;
     Furnished in a setting appropriate to the patient's 
medical needs and condition;
     Ordered and furnished by qualified personnel;
     One that meets, but does not exceed, the patient's medical 
need; and
     At least as beneficial as an existing and available 
medically appropriate alternative.

In addition to codifying the above criteria, we propose to include a 
separate basis under which an item or service would be appropriate 
under (3) above that is based on commercial health insurers' coverage 
policies (that is, non-governmental entities that sponsor health 
insurance plans). The

[[Page 54332]]

commercial market analysis would be initiated if an item/service fails 
to fulfill the existing factor (3) criteria defining appropriate for 
Medicare patients but fulfills (1) safe and effective and (2) not 
experimental or investigational. By considering commercial health 
insurer coverage policies, CMS would bring together the expertise of 
private payers and CMS. For example, in a recent NCD on acupuncture for 
chronic low back pain, CMS considered the technology assessments and 
coverage criteria among commercial health insurer coverage 
policies.\13\ We believe that this approach would be in line with E.O. 
13890 that directs us to make technologies ``widely available, 
consistent with the principles of patient safety, market-based 
policies, and value for patients.'' Under this separate basis, we 
propose that an item or service would satisfy factor (3) if it is 
covered under a plan(s) coverage policy if offered in the commercial 
insurance market, unless evidence supports that differences between 
Medicare beneficiaries and commercially insured individuals are 
clinically relevant. Under our proposal, we would exclude Medicaid 
managed care, Medicare Advantage, and other government administered 
healthcare coverage programs from the types of coverage CMS would 
consider, as these enrollees are not in the commercial market. In the 
following paragraphs, we seek comment on this proposal and on how best 
to implement this mechanism.
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    \13\CMS, Decision Memorandum for Acupuncture for Chronic Low 
Back Pain, available at https://www.cms.gov/medicare-coverage-
database/details/nca-decision-
memo.aspx?NCAId=295#:~:text=Decision,of%20the%20Social%20Security%20A
ct.
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    We solicit comments on sources of data that could be used to 
implement this policy, and whether CMS should make this information 
public and transparent. We seek public comment on the most appropriate 
source(s) for these coverage policies and the best way to determine 
which commercial plan(s) we would rely on for Medicare coverage.
    We seek comment on whether beneficiaries, providers, innovators, or 
others wishing to gain coverage for an item or service demonstrate that 
the item or service is covered by at least one commercial insurance 
plan policy. If they can provide CMS with evidence of commercial 
coverage or if CMS or its MACs identify such coverage from its review 
of compilations of health insurance offerings or data from other 
sources, CMS would consider factor (3) to be satisfied.
    We solicit comment on whether we should limit our consideration of 
commercial plan offerings or covered lives to a subset of the 
commercial market in the interest of simplicity, including looking at 
geographic subsets, subsets based on number of enrollees, subsets based 
on plan type (HMO, PPO, etc.), or other subsets of plans--including 
utilizing a singular plan. We also seek comment on whether, given 
considerations such the variation and distribution of coverage policies 
and access to innovations, we should only cover an item or service if 
it is covered for a majority, or a different proportion such as a 
plurality, of covered lives amongst plans or a majority, plurality, or 
some other proportion of plan offerings in the commercial market. (A 
plan offering is a contract an insurer offers to its enrollees, and a 
single insurance company may provide many different offerings.)
    We also recognize that plan offerings may impose certain coverage 
restrictions on an item or service, e.g. related to clinical criteria, 
disease stage, or number and frequency of treatment. As greater access 
to innovative treatments provides beneficiaries with more opportunity 
to improve health and drive decisions, we would, when coverage is 
afforded on the basis of commercial coverage, adopt the least 
restrictive coverage policy for the item or service amongst the 
offerings we examine. However, given potential unreasonable or 
unnecessary utilization, we also solicit comment on whether we should 
instead adopt the most restrictive coverage policy. We are further 
considering, as another variation, that if coverage restrictions are 
largely similar and present across the majority of offerings, CMS would 
adopt these in its coverage policies. We note that such coverage 
restrictions include the basic requirement for medical necessity at the 
level of individual patients. Medicare will still only pay for an item 
or service received by a beneficiary if it is medically necessary for 
the beneficiary. We seek comment on whether, if we were to take this 
approach, we should instead use a proportion other than a majority, as 
low as any offering and as high as all offerings, as a sufficient 
threshold. As a final variation, we could defer, in the absence of an 
NCD or national policy, to the MACs to tailor the restrictions on 
coverage based on what they observe in the commercial market, just as 
we rely on MACs with regards to the current definition.
    We further solicit comment on whether to grant coverage for an item 
or service to the extent it meets the first and second factors and the 
commercial coverage basis for the third factor. Under this approach, we 
would only use the current definition of ``appropriate'' from the 
current PIM when the exception for clinically relevant differences 
between Medicare beneficiaries and commercially insured individuals 
applies (or if the commercial coverage basis is determined by a 
proportion like a majority and there is insufficient commercial 
coverage information available). We note that referring to commercial 
coverage in this way may expand or narrow the circumstances under which 
we will cover a particular item or service and therefore solicit 
comment on whether, under such an approach, we should grandfather our 
current coverage policies for items and services. We also emphasize 
that the MACs will continue to make judgements in evaluating individual 
claims for reimbursement, such that a decision by CMS that an item or 
service is reasonable and necessary in general does not mean that it is 
reasonable and necessary in all circumstances with respect to 
individual claims for reimbursement.
    We seek public comment on the most appropriate source(s) for these 
coverage policies. Further, under our proposal, each MAC would be 
responsible for reviewing commercial offerings to inform their LCDs or 
claim by claim decisions, which would include individual medical 
necessity decisions. We may also allow the MACs to develop approaches 
to address any or all of the considerations outlined above, parallel to 
their current practice of making coverage decisions in the absence of 
an NCD or national policy. We solicit comment on the best role of the 
MACs, along these lines or otherwise. We also solicit comment on 
whether the discretion to use the current criteria in the PIM when 
there is evidence to believe Medicare beneficiaries have different 
clinical needs should be exercised through the NCD process or in other 
ways, as well as what quantum of evidence should be sufficient.
    In sum, we are proposing to define the term ``reasonable and 
necessary'' based on the factors currently found in the PIM, plus an 
alternative basis for meeting factor (3) based on any coverage in the 
commercial market. We are also soliciting comment on an alternative 
under whether an item or service satisfies the commercial coverage 
basis for factor (3) is determined by how it is treated across a 
majority of covered lives amongst commercial plan offerings, as well as 
an alternative whereby an item or service would be appropriate for 
Medicare patients to the extent it is covered in the commercial market.

[[Page 54333]]

When evidence supports that differences between Medicare beneficiaries 
and commercially insured individuals are clinically relevant, we would 
rely on the criteria in the current PIM. We would continue relying on 
local administration of the program by MACs (including coverage on a 
claim by claim basis and LCDs) and maintain our discretion to issue 
NCDs based on the final rule.
    We solicit comment on this proposed definition of reasonable and 
necessary, and alternatives outlined above, as well as other mechanisms 
or definitions we could establish for the term ``reasonable and 
necessary'', and the merits and drawbacks associated with each, 
including the potential impact on Medicare program expenses or 
complexity. We may finalize any variation or outgrowth of the policies 
described in this proposal, or some combination of these options in 
lieu of or in conjunction with our proposed definition.

B. Application of the ``Reasonable and Necessary'' Standard to the MCIT 
Pathway

    We are proposing that, under the proposed MCIT pathway, an item or 
service that receives a breakthrough device designation from the FDA 
would be considered ``reasonable and necessary'' under section 
1862(a)(1)(A) of the Act because breakthrough devices have met the 
FDA's unique breakthrough devices criteria, and they are innovations 
that serve unmet needs. While other devices are still considered new to 
the market, for example, PMAs and even some 510(k)s, the devices 
designated by the FDA as breakthrough are representative of true 
innovations in the marketplace. This application of the ``reasonable 
and necessary'' standard in this way would ensure that the MCIT pathway 
can provide a fast-track to Medicare coverage of innovative devices 
that may more effectively treat or diagnose life-threatening or 
irreversibly debilitating human disease or conditions.
    MCIT would improve healthcare for Medicare beneficiaries by 
providing national Medicare coverage for devices receiving the FDA 
breakthrough device designation, which are FDA market-authorized and 
used consistent with the FDA approved or cleared indication for use 
(also referred to as the ``FDA required labeling''),\14\ so long as the 
breakthrough device is described in an appropriate Medicare benefit 
category under Part A or Part B and is not specifically excluded by 
statute. We believe the criteria for qualification as a breakthrough 
device, as defined in section 515B(b) of the Food, Drug and Cosmetic 
Act (21 U.S.C. 360e-3(b)) is sufficient to satisfy the elements of the 
``reasonable and necessary'' standard. The first breakthrough device 
designation criterion is that a device must ``provide for more 
effective treatment or diagnosis of life-threatening or irreversibly 
debilitating human disease or conditions'' (21 U.S.C. 360e-3(b)(1)). 
The second criterion is that the device must satisfy one of the 
following elements: It represents a breakthrough technology; there are 
no approved or cleared alternatives; it offers significant advantages 
over existing approved or cleared alternatives, including additional 
considerations outlined in the statute; or availability of the device 
is in the best interest of patients (21 U.S.C. 360e-3(b)(2)). Thus, 
breakthrough devices are those that HHS has determined may provide 
better health outcomes for patients facing life-threatening or 
irreversibly debilitating human disease or conditions. We believe that 
a device meeting these criteria, once also FDA market authorized, is 
``reasonable and necessary'' for purposes of Medicare coverage.
---------------------------------------------------------------------------

    \14\ FDA Guidance for Industry, ``Medical Product Communications 
That Are Consistent with the FDA--Required Labeling--Questions and 
Answers'', available at https://www.fda.gov/media/133619/download.
---------------------------------------------------------------------------

    This proposed rule recognizes that the FDA market authorization of 
breakthrough devices warrants immediate coverage under the ``reasonable 
and necessary'' clause in section 1862(a)(1)(A) of the Act. We 
previously stated that FDA determinations were not controlling 
determinations for Medicare coverage purposes under section 
1862(a)(1)(A) of the Act. (For more information see the January 30, 
1989 Federal Register (54 FR 4307) (``FDA approval for the marketing of 
a medical device will not necessarily lead to a favorable coverage 
recommendation . . . '') and the August 7, 2013 Federal Register (78 FR 
48165) (``However, FDA approval or clearance alone does not entitle 
that technology to Medicare coverage.'') Under the Secretary's broad 
authority to interpret section 1862(a)(1)(A) of the Act (supra section 
I.A.), we are revising our interpretation of the statute because of the 
practical concerns that our current standards have delayed access to a 
unique set of innovative devices that FDA has found to be safe and 
effective, and we believe are ``reasonable and necessary'' for purposes 
of Medicare coverage.
    In light of E.O. 13890, the Secretary has determined that 
application of the current standards for making ``reasonable and 
necessary'' determinations may take too long following FDA market 
authorization of breakthrough devices. More importantly, the existing 
standard has not always provided Medicare beneficiaries adequate access 
to certain breakthrough medical devices when needed to improve health 
outcomes. We are proposing that breakthrough devices per se meet the 
reasonable and necessary standard in order to increase access and to 
reduce the delay from FDA market authorization to Medicare coverage.

C. MCIT Pathway

    We are proposing the MCIT pathway to deliver on the 
Administration's commitment to provide access to breakthrough devices 
to Medicare beneficiaries. The MCIT pathway provides up to 4 years of 
national coverage to newly FDA market authorized breakthrough devices. 
We are aware that this coverage may also facilitate evidence 
development on devices for the Medicare population because 
manufacturers can gather additional data on utilization of the device 
during the MCIT coverage period.
1. Definitions
    In Sec.  405.601(a) we are proposing that the MCIT pathway is 
voluntary. Operationally, we propose that manufacturers of breakthrough 
devices notify CMS of their intention to elect MCIT shortly after 
receiving notice from the FDA of being granted the breakthrough device 
designation. Ideally, this notification would be sent to CMS within 2 
weeks of receiving breakthrough designation. However, entities would 
not be penalized for notifying CMS after that time. Alternatively, 
submitting a notification to CMS shortly before or concurrently with 
the date of the FDA marketing submission should also afford CMS 
sufficient time to operationalize MCIT for the device. The CMS Coverage 
and Analysis Group would establish an email box for these inquires. 
This notification alerts CMS to offer guidance to manufacturers about 
the MCIT pathway and point to resources for coding and payment, which 
are key conversations to effectuate coverage upon FDA market 
authorization. We intend to utilize the existing coverage 
implementation processes to be prepared to offer coverage immediately 
upon the FDA market authorization.
    In Sec.  405.601(b), we propose the following definitions for the 
purposes of 42 CFR part 405. We propose to define

[[Page 54334]]

``breakthrough device'' as a medical device that receives such 
designation by the FDA (section 515B(d)(1) of the FD&C Act (21 U.S.C. 
360e-3(d)(1))). We also propose to define, for the sake of clarity in 
the rule, that the acronym MCIT stands for Medicare Coverage of 
Innovative Technology.
2. MCIT Pathway Device Eligibility
    In Sec.  405.603(a) we propose that the pathway is available to 
devices that meet the definitions proposed in Sec.  405.601. Based on 
the explicit mention of devices in E.O. 13890 and our interaction and 
feedback from stakeholders who expressed their concern that there is 
more uncertainty of coverage for devices than for other items and 
services (for example, diagnostics, drugs and biologics), this proposed 
policy is for devices only.
    We propose in Sec.  405.603(b) that the breakthrough devices that 
received FDA market authorization no more than 2 calendar years prior 
to the effective date of this subpart (the date the final rule is 
finalized) and thereafter will be eligible for coverage for claims 
submitted on or after the effective date of this rule. Claims for 
breakthrough devices with dates of service that occurred before the 
effective date of this rule would not be covered through MCIT. For 
example, a hypothetical breakthrough device that was FDA market 
authorized on October 1, 2018, and utilized on January 1, 2020 would 
not be eligible for coverage under MCIT because on January 1, 2020, the 
date of service, the final MCIT rule was not yet legally in effect. In 
contrast, a claim for utilization of the same hypothetical breakthrough 
device with a date of service on January 1, 2021 might be eligible for 
coverage if the claim occurred after the effective date of the rule 
(assuming that the effective date of the rule was prior to January 1, 
2021). Breakthrough devices market authorized prior to the effective 
date of this rule will not be eligible for all 4 years of coverage. The 
4-year period starts on the date of FDA market authorization. For 
example, a breakthrough device market authorized on October 1, 2018 
would have claims covered through MCIT from the effective date of the 
final rule until October 1, 2022. If a manufacturer initially chooses 
to not utilize the MCIT pathway, and then chooses to do so some time 
after the breakthrough device's market authorization, coverage still 
only lasts 4 years from the date of FDA market authorization. We seek 
comment on this eligibility criterion for devices and specifically the 
2 year lookback.
    We propose in Sec.  405.603(c) that to be part of the MCIT pathway, 
the device must be used according to its FDA approved or cleared 
indication for use. We propose that the device is only covered for use 
consistent with its FDA approved or cleared indication for use because 
that is the indication and conditions for use that were reviewed by the 
FDA and authorized for marketing. Data are unlikely to be available to 
support extending beyond the FDA required labeling for breakthrough 
devices on the date of marketing authorization. Use of the device for a 
condition or population that is not labeled (``off-label'') will not be 
covered as that use would not be FDA authorized. We specifically seek 
comment on whether off-label use of breakthrough devices should be 
covered and, if so, under what specific circumstances and/or 
evidentiary support.
    In Sec.  405.603(d) and (e), we additionally propose limitations to 
what is coverable under the Act. In Sec.  405.603(e), we are proposing 
that if CMS has issued an NCD on a particular breakthrough device, that 
breakthrough device is not eligible for MCIT. We are proposing this 
because, once the device has been reviewed by CMS for the FDA required 
approved or cleared indication for use; CMS has made a coverage 
determination based on the available evidence for that technology. We 
believe this would happen rarely because breakthrough devices are new 
technologies that are not likely to have been previously reviewed 
through the NCD process. In Sec.  405.603(f), we acknowledge that 
devices in the MCIT pathway may be excluded due to statute or 
regulation (for example, 42 CFR 411.15, Particular services excluded 
from coverage) and, like other items and services coverable by 
Medicare, the device must fall within the scope of a Medicare benefit 
category under section 1861 of the Act and the implementing 
regulations. If the device does not fall within a Medicare benefit 
category as outlined in the statute and implementing regulations, the 
device is not eligible for Medicare coverage; therefore, the device 
would not be eligible for the MCIT pathway.
3. General Coverage of Items and Services under the MCIT Pathway
    We propose in Sec.  405.605 that devices covered under the MCIT 
pathway are covered no differently from devices that are covered 
outside of MCIT. In other words, provided the items and services are 
otherwise coverable (that is, not specifically excluded and not found 
by CMS to be outside the scope of a Medicare benefit category), covered 
items and services could include the device, reasonable and necessary 
surgery to implant the device, if implantable, related care and 
services costs of the device (for example, replacing reasonable and 
necessary parts of the device such as a battery), and coverage of any 
reasonable and necessary treatments due to complications arising from 
use of the device. What the MCIT pathway offers compared to other 
pathways is predictable national coverage simultaneous with FDA market 
authorization that will generally last for a set time period.
    The proposed MCIT pathway would support and accelerate beneficiary 
access to certain innovative devices. CMS encourages manufacturers that 
have breakthrough devices covered under MCIT to develop additional data 
for the healthcare community.
4. MCIT Pathway for Breakthrough Devices: 4 Years of Coverage
    In Sec.  405.607(a), we propose that the MCIT pathway for coverage 
would begin on the same date the device receives FDA market 
authorization. We propose this point in time to ensure there is no gap 
between Medicare coverage and FDA market authorization. This supports 
the MCIT pathway's focus of ensuring beneficiaries have a predictable 
access to new devices.
    We propose in Sec.  405.607(b)(1) that the MCIT pathway for 
breakthrough devices ends 4 years from the date the device received FDA 
market authorization. We propose this 4 year time period because it 
could allow manufacturers to develop clinical evidence and data 
regarding the benefit of the use of their device in a real world 
setting. For example, we believe 4 years would allow most manufacturers 
sufficient time to complete FDA required post-approval or other real-
world data collection studies that may have been a condition of FDA 
market authorization. This assumption is based upon our historical 
experience with studies conducted through coverage with evidence 
development (CED). Further, this time period allows Medicare to support 
manufacturers that, whether required by the FDA or not, have an 
interest in better understanding the health outcomes of their device in 
the Medicare population, including impacts on patient-reported and 
longer-term outcomes.
    Further, Sec.  405.607(b) proposes reasons that the MCIT pathway 
may end prior to 4 years. This includes circumstances whereby the 
device becomes subject to an NCD, regulation, statute, or if the device 
can no longer be lawfully marketed.

[[Page 54335]]

D. Summary

    In summary, the MCIT pathway would provide immediate Medicare 
coverage of newly FDA market authorized breakthrough devices for 4 
years. We seek public comment on all of our proposals. In particular, 
we seek feedback on whether the proposed 4 year coverage period is 
sufficient. We also look to stakeholders and the public to determine 
the level of interest and expected use of the proposed MCIT pathway so 
the agency can begin to estimate the level of needed resources to 
support successful implementation. We are also seeking public comments 
on our proposal to codify in regulations the standards we have 
historically used in making reasonable and necessary decisions under 
Part A and Part B under section 1862(a)(1)(A) of the Act. After 
considering public comments we would prepare a final rule that we 
expect would be effective 60 days after publication of the final rule.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of the section 
3506(c)(2)(A)-required issues for the following sections of this 
document that contain information collection requirements (ICRs).
    To derive average costs, we used data from the U.S. Bureau of Labor 
Statistics' May 2018 National Occupational Employment and Wage 
Estimates for all salary estimates (https://www.bls.gov/oes/current/oes131041.htm, released May 2019). In this regard, the table that 
follows presents the mean hourly wage, the cost of fringe benefits 
(calculated at 100 percent of salary), and the adjusted hourly wage.

                      Table 1--National Occupational Employment and Wage Estimates for MCIT
----------------------------------------------------------------------------------------------------------------
                                                                 Mean hourly     Fringe benefit  Adjusted hourly
              Occupation title                Occupation code    wage ($/hr)         ($/hr)        wage ($/hr)
----------------------------------------------------------------------------------------------------------------
Compliance Officer..........................         13-1041            34.86            34.86            69.72
----------------------------------------------------------------------------------------------------------------

    As indicated, we are adjusting our employee hourly wage estimates 
by a factor of 100 percent. This is necessarily a rough adjustment, 
both because fringe benefits and overhead costs vary significantly from 
employer to employer. Nonetheless, there is no practical alternative 
and we believe that doubling the hourly wage to estimate total cost is 
a reasonably accurate estimation method.
    This proposed coverage pathway allows for a voluntary participation 
and therefore necessitates that manufacturers of breakthrough devices 
notify CMS of their intent to enter the MCIT pathway. Therefore, the 
burden associated with notifying CMS is the time and effort it would 
take for each of the organizations to send CMS an email or letter. We 
anticipate two MCIT pathway participants in the first year based upon 
the number of medical devices that received FY2020 NTAP and were non-
covered in at least one MAC jurisdiction by LCDs and related articles.
    We estimate notifying CMS of intent to participate in MCIT would 
involve 15 minutes at $69.72 per hour by a compliance officer. In this 
regard, we estimate 15 mins per notification at a cost of $17.43 per 
organization (0.25 hours x $69.72). In aggregate, we estimate 0.5 hours 
(0.25 hours x 2 submissions) at $34.86 ($17.43 x 2 submissions).
    After the anticipated initial 2 submitters, over the next 3 years 
we expect 3 submitters in year 2, 4 submitters in year 3, and 5 
submitters in year 4 to notify CMS of interested in the MCIT pathway. 
We expect this increase in submitters each year to level off at this 
point. In this regard, we estimate the same 0.25 hours per submission 
at a cost of $17.43 per organization. Similarly, in aggregate, we 
estimate, for year 2 (0.75 hours at $52.29 an hour), for year 3 (1.0 
hour at $69.72 an hour), and for year 4 (1.25 hours at $87.15 an hour).
    The proposed requirements and burden will be submitted to OMB under 
control number 0938-NEW.
    We are requesting public comments on these information collection 
and recordkeeping requirements.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget,
    Attention: CMS Desk Officer, CMS-3372-P, Fax: (202) 395-6974; or 
Email: [email protected].
    Comments must be received on/by November 2, 2020.

IV. Regulatory Impact Statement

    This proposed rule makes Medicare coverage policy updates pursuant 
to the authority at section 1862(a)(1)(A) of the Act. We are using 
regulatory action per the October 3, 2019 ``Executive Order on 
Protecting and Improving Medicare for Our Nation's Seniors'' to address 
the increasing need for a swift Medicare coverage mechanism to allow 
beneficiaries across the nation to access breakthrough devices faster 
after FDA market authorization. This proposed rule addresses that need 
by establishing a coverage pathway that will allow immediate 
beneficiary access to FDA market authorized breakthrough devices.
    We have examined the impact of this proposed rule 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),

[[Page 54336]]

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). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This proposed rule does reach the economic threshold and thus is 
considered a major rule.
    Regulatory alternatives to this proposed rule were to combine 
Medicare coverage with clinical evidence development under section 
1862(a)(1)(E) of the Act, to take no regulatory action at this time, or 
to adjust the duration of the MCIT pathway. Combining coverage with 
clinical evidence development would have met the E.O. 13890 overarching 
goal of beneficiary access to breakthrough devices. However, this 
alternative did not meet the other E.O. 13890 aims of minimizing time 
between FDA market authorization and Medicare coverage and wide 
availability. The timing of coverage would depend upon the manufacturer 
being able to initiate a clinical study and the wide availability of 
coverage could be an issue if providers did not have the infrastructure 
necessary to participate in the clinical study. CMS chose to not to 
pursue combining coverage with evidence development for breakthrough 
devices because we wanted to meet the timing and wide availability aims 
of E.O. 13890. CMS also considered taking no regulatory action and 
trying to leverage the existing Medicare coverage pathways or proposing 
sub-regulatory policies to achieve the streamlined coverage process 
described in E.O. 13890. Taking no action would not have resulted in 
the desired national coverage and access envisioned in E.O. 13890 
because, as described in this preamble, the existing coverage pathways 
do not consistently provide swift, national beneficiary access to 
innovative devices. As discussed elsewhere in the preamble, the nature 
of the problem being addressed by this proposed regulation is a 
potential delay between a milestone such as FDA market authorization 
and CMS coverage; as such, we request comment on a policy option of 
shortening of the duration of the MCIT pathway from the proposed 4 
years to 1 year.
    In addition to the alternatives just discussed, there are various 
possibilities regarding how to change the definition of ``reasonable 
and necessary''--for example, whether to include a new aspect of the 
proposed definition that focuses on commercial insurance coverage 
practices. As noted earlier in the preamble, the goal of this revision 
is to expand coverage. However, the nuances of the definition would 
affect the magnitude of the impact and we request comment that would 
facilitate quantification of effects and comparison of alternatives at 
the final rule stage.
    The impact of implementing the MCIT pathway is difficult to 
determine without knowing the specific technologies that would be 
covered. In addition, many of these technologies would be eligible for 
coverage in the absence of this rule, such as through a local or 
national coverage determination, so the impact for certain items may be 
the acceleration of coverage or adoption by just a few months. 
Furthermore, some of these devices would be covered immediately if the 
MACs decide to pay for them, which would result in no impact on 
Medicare spending for devices approved under this pathway. However, it 
is possible that some of these innovative technologies would not 
otherwise be eligible for coverage in the absence of this rule. Because 
it is not known how these new technologies would otherwise come to 
market and be reimbursed, it is not possible to develop a point 
estimate of the impact. In general, we believe the MCIT coverage 
pathway would range in impact from having no impact on Medicare 
spending, to a temporary cost for innovations that are adopted under an 
accelerated basis.
    The decision to enter the MCIT pathway is voluntary for the 
manufacturer. Because manufacturers typically join the Medicare 
coverage pathway that is most beneficial to them, this would result in 
selection against the existing program coverage pathways (to what 
degree is unknown at this point). In addition, the past trend of new 
technology costing more than existing technology could lead to a higher 
cost for Medicare if this trend continued for technologies enrolling in 
the MCIT pathway. Nevertheless, new technology may also mitigate 
ongoing chronic health issues or improve efficiency of services thereby 
reducing some costs for Medicare.
    In order to demonstrate the potential impact on Medicare spending, 
the CMS Office of the Actuary (OACT) developed three hypothetical 
scenarios that illustrate the impact of implementing the proposed MCIT 
pathway. Scenarios two and three assume that the device would not have 
been eligible for coverage in the absence of this proposed rule. (See 
Table 2) The illustration used the new devices that applied for a NTAP 
in FY 2020 as a proxy for the new devices that would utilize the MCIT 
pathway. The submitted cost and anticipated utilization for these 
devices was published in the Federal Register.\15\ In addition, we 
assumed that two manufacturers would elect to utilize the MCIT pathway 
in the first year, three manufacturers in the second year, four 
manufacturers in the third year, and five manufacturers in the fourth 
year each year for all three scenarios. This assumption is based on the 
number of medical devices that received FY 2020 NTAP and were non-
covered in at least one MAC jurisdiction by LCDs and related articles 
and our impression from the FDA that the number of devices granted 
breakthrough status is increasing. For the first scenario, the no-cost 
scenario, we assumed that all the devices would be eligible for 
coverage in the absence of the proposed rule. If the devices received 
payment nationally and at the same time then there would be no 
additional cost under this pathway. For the second scenario, the low-
cost scenario, we assumed that the new technologies would have the 
average costs ($2,044) and utilization (2,322 patients) of similar 
technologies included in the FY 2020 NTAP application cycle. Therefore, 
to estimate the first year of MCIT, we multiplied the add-on payment 
for a new device by the anticipated utilization for a new device by the 
number of anticipated devices in the pathway ($2,044 x 2,322 x 2 = $ 
9.5 million). For the third scenario, the high-cost scenario, we 
assumed the new technologies would receive the maximum add-on payment 
from the FY 2020 NTAP application cycle ($22,425) and the highest 
utilization of a device (6,500 patients). Therefore, to estimate for 
the first year of MCIT, we estimated similarly ($22,425 x 6,500 
patients x 2 = $ 291.5 million). For subsequent years, we increased the 
number of anticipated devices in the pathway by three, four, and five 
in the last two scenarios until 2024.\16\ In addition to

[[Page 54337]]

not taking into account inflation, the illustration does not reflect 
any offsets for the costs of these technologies that would be utilized 
through existing authorities nor the cost of other treatments (except 
as noted). It is not possible to explicitly quantify these offsetting 
costs but they could substantially reduce or eliminate the net program 
cost. However, by assuming that only two to five manufacturers will 
elect MCIT coverage, we have implicitly assumed that, while more 
manufacturers could potentially elect coverage under MCIT, the majority 
of devices would have been covered under a different coverage pathway. 
Therefore, a substantial portion of the offsetting costs are implicitly 
reflected.
---------------------------------------------------------------------------

    \15\ FY 2020 Hospital Inpatient Prospective Payment System 
(IPPS) Proposed Rule (84 FR 19640 and 19641) (May 3, 2019) available 
at https://www.govinfo.gov/content/pkg/FR-2019-05-03/pdf/2019-08330.pdf (accessed October 17, 2019).
    \16\ An indirect cost of the proposed rule would be increased 
distortions in the labor markets taxed to support the Medicare Trust 
Fund. Such distortions are sometimes referred to as marginal excess 
tax burden (METB), and Circular A-94--OMB's guidance on cost-benefit 
analysis of federal programs, available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A94/a094.pdf--suggests that METB may be valued at roughly 25 percent of 
the estimated transfer attributed to a policy change; the Circular 
goes on to direct the inclusion of estimated METB change in 
supplementary analyses. If secondary costs--such as increased 
marginal excess tax burden is, in the case of this proposed rule--
are included in regulatory impact analyses, then secondary benefits 
must be as well, in order to avoid inappropriately skewing the net 
benefits results, and including METB only in supplementary analyses 
provides some acknowledgement of this potential imbalance.
---------------------------------------------------------------------------

    Based on this analysis, there is a range of potential impacts of 
the proposed MCIT coverage pathway as shown in Table 2. The difference 
between the three estimates demonstrates how sensitive the impact is to 
the cost and utilization of these unknown devices.

              Table 2--Illustrated Impact on the Medicare Program by Proposed MCIT Coverage Pathway
----------------------------------------------------------------------------------------------------------------
                                                                        Costs (in millions)
                                                 ---------------------------------------------------------------
                                                      FY 2021         FY 2022         FY 2023         FY 2024
----------------------------------------------------------------------------------------------------------------
No-cost Scenario................................              $0              $0              $0              $0
Low-cost Scenario...............................             9.5            23.7            42.7            66.4
High-cost Scenario..............................           291.5           728.8         1,311.9         2,040.7
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    We believe the assumptions used in the three scenarios are 
reasonable to show the possible wide range of impacts for implementing 
this proposed pathway, in particular for a technology that would not 
have otherwise been eligible for coverage.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Some hospitals and other providers and suppliers are 
small entities, either by nonprofit status or by having revenues of 
less than $7.5 million to $38.5 million in any 1 year. Individuals and 
States are not included in the definition of a small entity. We 
reviewed the Small Business Administration's Table of Small Business 
Size Standards Matched to North American Industry Classification System 
(NAICS) Codes to determine the NAICS U.S. industry titles and size 
standards in millions of dollars and/or number of employees that apply 
to small businesses that could be impacted by this rule.\17\ We 
determined that small businesses potentially impacted may include 
surgical and medical instrument manufacturers (NAICS code 339112, 
dollars not provided/1,000 employees), Offices of Physicians (except 
Mental Health Specialists) (NAICS code 621111, $12 million/employees 
not provided), and Freestanding Ambulatory Surgical and Emergency 
Centers (NAICS code 621493, $16.5 million/employees not provided). 
During the first 4 years of MCIT, we anticipate approximately 14 
surgical and medical instrument manufacturers may participate, and 
based off of U.S. Census data, the majority of this businesses type are 
small businesses with less than 1,000 employees (968 out of 1,093 
businesses have less than 500 employees). \18\ As such, this proposed 
rule would impact less than 5 percent of these businesses, and the 
revenue impact, if any, would not be negative. Rather, it would be a 
positive impact because MCIT would provide Medicare coverage (and 
subsequent payment) to providers who purchase the devices from these 
manufacturers. For Offices of Physicians (except Mental Health 
Specialists) and Freestanding Ambulatory Surgical and Emergency Centers 
that may be providing the breakthrough devices, the majority are small 
businesses with less than 1,000 employees (4,060 out of 4,385 and 160, 
367 out of 161, 286 have less than 500 employees, respectively).\19\ 
Given that we estimate, at most in the high-cost scenario, that 6,500 
beneficiaries would utilize breakthrough devices through MCIT per year, 
and even if each beneficiary were to access services at only one of 
these small businesses (that is, no two beneficiaries used the same 
office or center), still less than 5 percent of these small businesses 
would be impacted by MCIT. As such, the revenue impact, if any, would 
not be negative, rather, it would be a positive impact because MCIT 
would provide Medicare coverage (and subsequent payment) to providers. 
Overall, this proposed rule results in a payment, not a reduction in 
revenue. We are not preparing a further analysis for the RFA because we 
have determined, and the Secretary certifies, that this proposed rule 
will not have a significant negative economic impact on a substantial 
number of small entities because small entities are not being asked to 
undertake additional effort or take on additional costs outside of the 
ordinary course of business through this proposed rule. Rather, for 
small entities that develop or provide breakthrough devices to 
patients, this proposed rule is a means for the device to be covered 
through the Medicare program, which does not detract from revenue and 
could be viewed as a positive economic impact. With the limited 
information we had to base this estimate, we solicit public comment on 
improvements to this estimate for the final rule.
---------------------------------------------------------------------------

    \17\ Small Business Administration, Table of Small Business Size 
Standards Matched to North American Industry Classification System 
(NAICS) Codes, available at https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf.
    \18\ 2017 County Business Patterns and 2017 Economic Census. 
Number of Firms, Number of Establishments, Employment, Annual 
Payroll, and Preliminary Receipts by Enterprise Employment Size for 
the United States, All Industries: 2017 (release date: May 6, 2020).
    \19\ Id.
---------------------------------------------------------------------------

    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital

[[Page 54338]]

as a hospital that is located outside of a Metropolitan Statistical 
Area for Medicare payment regulations and has fewer than 100 beds. We 
are not preparing an analysis for section 1102(b) of the Act because we 
have determined, and the Secretary certifies, that this proposed rule 
would not have a significant impact on the operations of a substantial 
number of small rural hospitals because small rural hospitals are not 
being asked to undertake additional effort or take on additional costs 
outside of the ordinary course of business through this proposed rule. 
Obtaining breakthrough devices for patients is at the discretion of 
providers. We are not requiring the purchase and use of breakthrough 
devices. Providers should continue to work with their patients to 
choose the best treatment. For small rural hospitals that provide 
breakthrough devices to their patients, this proposed rule is a means 
for the device to be covered through the Medicare program.
    Section 202 of the Unfunded Mandates Reform Act of 1995 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 2020, that 
threshold was approximately $156 million. This proposed rule would have 
no consequential effect on State, local, or tribal governments or on 
the private sector.
    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. Since this regulation does not impose any costs on State 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    Executive Order 13771 (E.O. 13771), titled Reducing Regulation and 
Controlling Regulatory Costs, was issued on January 30, 2017. This 
proposed rule, if finalized as proposed, is expected to impose no more 
than de minimis costs and thus be neither an E.O. 13771 regulatory 
action nor an E.O. 13771 deregulatory action.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

V. 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.

List of Subjects in 42 CFR Part 405

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

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

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

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

    Authority:  42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).

0
2. Section 405.201 is amended in paragraph (b) by adding the definition 
of ``Reasonable and necessary'' in alphabetical order to read as 
follows:


Sec.  405.201   Scope of subpart and definitions.

* * * * *
    (b) * * *
    Reasonable and necessary means that an item or service is 
considered--
    (1) Safe and effective;
    (2) Except as set forth in Sec.  411.15(o)) of this chapter, not 
experimental or investigational; and
    (3) Appropriate for Medicare patients, including the duration and 
frequency that is considered appropriate for the item or service, in 
terms of whether it (i) Meets all of the following criteria:
    (A) Furnished in accordance with accepted standards of medical 
practice for the diagnosis or treatment of the patient's condition or 
to improve the function of a malformed body member;
    (B) Furnished in a setting appropriate to the patient's medical 
needs and condition;
    (C) Ordered and furnished by qualified personnel;
    (D) One that meets, but does not exceed, the patient's medical 
need; and
    (E) At least as beneficial as an existing and available medically 
appropriate alternative; or
    (ii) Is covered by commercial insurers, unless evidence supports 
that differences between Medicare beneficiaries and commercially 
insured individuals are clinically relevant.
* * * * *
0
3. Subpart F, consisting of Sec. Sec.  405.601-405.607, is added to 
read as follows:
Subpart F--Medicare Coverage of Innovative Technology
Sec.
405.601 Medicare coverage of innovative technology.
405.603 Medical device eligibility.
405.605 Coverage of items and services.
405.607 Coverage period.

Subpart F--Medicare Coverage of Innovative Technology


Sec.  405.601   Medicare coverage of innovative technology.

    (a) Basis and scope. Medicare coverage of innovative technology 
(MCIT) is a program that provides national, time-limited coverage under 
section 1862(a)(1)(A) of the Act for certain breakthrough medical 
devices. Manufacturer participation in the pathway for breakthrough 
device coverage is voluntary.
    (b) Definitions. For the purposes of this subpart, the following 
definitions are applicable:
    Breakthrough device means a device that receives such designation 
by the Food and Drug Administration (FDA) (section 515B(d)(1) of the 
FD&C Act (21 U.S.C. 360e-3(d)(1)).
    MCIT stands for Medicare coverage of innovative technology.


Sec.  405.603   Medical device eligibility.

    The MCIT pathway is available only to medical devices that meet all 
of the following:
    (a) That are FDA-designated breakthrough devices.
    (b) That are FDA market authorized at most [date 2 years prior to 
effective date of final rule] and thereafter.
    (c) That are used according to their FDA approved or cleared 
indication for use.
    (d) That are within a Medicare benefit category.
    (e) That are not the subject of a Medicare national coverage 
determination.
    (f) That are not otherwise excluded from coverage through law or 
regulation.


Sec.  405.605   Coverage of items and services.

    Covered items and services furnished within the MCIT pathway may 
include any of the following, if not otherwise excluded from coverage:
    (a) The breakthrough device.
    (b) Any reasonable and necessary procedures to implant the 
breakthrough device.

[[Page 54339]]

    (c) Reasonable and necessary costs to maintain the breakthrough 
device.
    (d) Related care and services for the breakthrough device.
    (e) Reasonable and necessary services to treat complications 
arising from use of the breakthrough device.


Sec.  405.607   Coverage period.

    (a) Start of the period. The MCIT pathway begins on the date the 
breakthrough device receives FDA market authorization.
    (b) End of the period. The MCIT pathway for a breakthrough device 
ends as follows:
    (1) No later than 4 years from the date the breakthrough device 
received FDA market authorization.
    (2) Prior to 4 years if a manufacturer withdraws the breakthrough 
device from the MCIT pathway.
    (3) Prior to 4 years if the breakthrough device becomes the subject 
of a national coverage determination or otherwise becomes noncovered 
through law or regulation.

    Dated: May 4, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: June 11, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-19289 Filed 8-31-20; 8:45 am]
BILLING CODE 4120-01-P