[Federal Register Volume 86, Number 246 (Tuesday, December 28, 2021)]
[Rules and Regulations]
[Pages 73860-73911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27763]



[[Page 73859]]

Vol. 86

Tuesday,

No. 246

December 28, 2021

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 414





Medicare Program; Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies Policy Issues, and Level II of the Healthcare Common 
Procedure Coding System; DME Interim Pricing in the CARES Act; Durable 
Medical Equipment Fee Schedule Adjustments To Resume the Transitional 
50/50 Blended Rates To Provide Relief in Rural Areas and Non-Contiguous 
Areas; Final Rule

  Federal Register / Vol. 86 , No. 246 / Tuesday, December 28, 2021 / 
Rules and Regulations  

[[Page 73860]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 414

[CMS-1738-F, CMS-1687-F, and CMS-5531-F]
RINs 0938-AU17, 0938-AT21, and 0938-AU32


Medicare Program; Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Policy Issues, and Level II of the 
Healthcare Common Procedure Coding System (HCPCS); DME Interim Pricing 
in the CARES Act; 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), Health and 
Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule establishes methodologies for adjusting the 
Medicare durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS) fee schedule amounts using information from the 
Medicare DMEPOS competitive bidding program (CBP) for items furnished 
on or after the effective date specified in the DATES section of this 
final rule, or the date immediately following the duration of the 
emergency period described in the Social Security Act (the Act), 
whichever is later. This final rule also establishes procedures for 
making benefit category and payment determinations for new items and 
services that are durable medical equipment (DME), prosthetic devices, 
orthotics and prosthetics, therapeutic shoes and inserts, surgical 
dressings, or splints, casts, and other devices used for reductions of 
fractures and dislocations under Medicare Part B. In addition, this 
rule classifies continuous glucose monitors (CGMs) as DME under 
Medicare Part B. Lastly, this final rule finalizes certain DME fee 
schedule-related provisions that were included in two interim final 
rules with comment period (IFC) that CMS issued on May 11, 2018, and 
May 8, 2020.

DATES: These regulations are effective on February 28, 2022.

FOR FURTHER INFORMATION CONTACT: Alexander Ullman, 410-786-9671 or 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose

    This final rule makes changes related to: The Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule 
amounts to ensure access to items and services in rural areas; 
procedures for making benefit category and payment determinations for 
new items and services that are DME, prosthetic devices, orthotics and 
prosthetics, therapeutic shoes and inserts, surgical dressings, or 
splints, casts, and other devices used for reductions of fractures and 
dislocations to prevent delays in coverage of new items and services; 
and classification of CGMs under the Part B benefit for DME to 
establish the benefit category for these items. Finally, we are 
finalizing provisions included in two interim final rules with comment 
period (IFC) that CMS issued on May 11, 2018, and May 8, 2020.
1. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Fee Schedule Adjustments
    The purpose of this provision is to establish the methodologies for 
adjusting the fee schedule payment amounts for DMEPOS items and 
services furnished in non-competitive bidding areas (non-CBAs) on or 
after the effective date specified in the DATES section of this final 
rule, or the date immediately following the duration of the emergency 
period described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later. The emergency period we are referring 
to is the Public Health Emergency (PHE) for coronavirus disease 2019 
(COVID-19). We refer readers to section III.A.6. of this rule for 
details regarding the DMEPOS fee schedule changes CMS has already made 
as a result of the PHE for COVID-19.
2. DMEPOS Fee Schedule Adjustments for Items and Services Furnished in 
Rural Areas From June 2018 Through December 2018 and Exclusion of 
Infusion Drugs From the DMEPOS CBP
    The purpose of this section is to finalize and address comments 
received on the May 11, 2018 IFC (83 FR 21912) titled ``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'' (hereinafter referred to as the ``May 2018 
IFC'').
3. Benefit Category and Payment Determinations for DME, Prosthetic 
Devices, Orthotics and Prosthetics, Therapeutic Shoes and Inserts, 
Surgical Dressings, or Splints, Casts, and Other Devices Used for 
Reductions of Fractures and Dislocations
    The purpose of this section of the final rule is to establish 
procedures for making benefit category and payment determinations for 
new items and services that are DME, prosthetic devices, orthotics and 
prosthetics, therapeutic shoes and inserts, surgical dressings, or 
splints, casts, and other devices used for reductions of fractures and 
dislocations that permit public consultation through public meetings. 
Section 531(b) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) 
requires the Secretary to establish procedures for coding and payment 
determinations for new DME under Part B of title XVIII of the Act that 
permit public consultation in a manner consistent with the procedures 
established for implementing coding modifications for ICD-9-CM (which 
has since been replaced with ICD-10-CM as of October 1, 2015). We 
decided to expand these procedures to address all new external HCPCS 
level II code requests in 2005. We are finalizing procedures for making 
benefit category determinations and payment determinations for new 
items and services that are DME, prosthetic devices, orthotics and 
prosthetics, therapeutic shoes and inserts, surgical dressings, or 
splints, casts, and other devices used for reductions of fractures and 
dislocations. Consistent with our current practices, the procedures 
will incorporate public consultation on these determinations.
    The determination of whether or not an item or service falls under 
a Medicare benefit category, such as the Medicare Part B benefit 
category for DME, is a necessary step in determining whether an item 
may be covered under the Medicare program and, if applicable, what 
statutory and regulatory payment rules apply to the items and services. 
If the item is excluded from coverage by the Act or does not fall 
within the scope of a defined benefit category, the item cannot be 
covered under Medicare. On the other hand, if the item is not excluded 
from coverage by the Act and is found to fall within a benefit 
category, we need to determine what payment rules would apply to the 
item if other statutory criteria for coverage of the item are met, such 
as the reasonable and necessary criteria under section 1862(a)(1)(A) of 
the Act.

[[Page 73861]]

    Therefore, the procedures that we are finalizing for use in 
determining if items and services fall under the Medicare Part B 
benefit categories for DME, prosthetic devices, orthotics, and 
prosthetics, surgical dressings, splints, casts and other devices for 
the reduction of fractures or dislocations, or therapeutic shoes and 
inserts continue our longstanding practice of establishing coverage and 
payment for new items and services soon after they are identified 
through the HCPCS code application process, promote transparency, and 
prevent delays in access to new technologies.
4. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B
    The purpose of this section of this final rule is to address 
classification and payment for CGMs under the Medicare Part B benefit 
for DME.
5. DME Interim Pricing in the CARES Act
    The purpose of this section is to finalize and address comments 
received on the ``DME Interim Pricing in the CARES Act'' section of the 
May 8, 2020 IFC (85 FR 27550) titled ``Medicare and Medicaid Programs, 
Basic Health Program, and Exchanges; Additional Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency and Delay 
of Certain Reporting Requirements for the Skilled Nursing Facility 
Quality Reporting Program'' (hereinafter referred to as the ``May 2020 
COVID-19 IFC''). This provision revised Sec.  414.210 to provide 
temporarily increased DME fee schedule amounts in certain areas, as 
required by section 3712 of the Coronavirus Aid, Relief, and Economic 
Security Act (CARES Act) (Pub. L. 116-136, March 27, 2020).

B. Summary of the Major Provisions

1. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Fee Schedule Adjustments
    This rule revises Sec.  414.210(g)(2) and (9) to establish the fee 
schedule adjustment methodologies for items and services furnished on 
or after the effective date specified in the DATES section of this 
final rule, or the date immediately following the duration of the 
emergency period described in section 1135(g)(1)(B) of the Act (42 
U.S.C. 1320b-5(g)(1)(B)), whichever is later, in non-CBAs.
2. DMEPOS Fee Schedule Adjustments for Items and Services Furnished in 
Rural Areas From June 2018 Through December 2018 and Exclusion of 
Infusion Drugs From the DMEPOS CBP
    This rule finalizes the following provisions of the May 2018 IFC 
(83 FR 21912):
     Transition Period for Phase in of Adjustments to Fee 
Schedule Amounts: We are finalizing the amendments to 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 DME and enteral nutrition, as required by section 
16007(a) of the 21st Century Cures Act (Cures Act). In addition, we are 
finalizing the changes to Sec.  414.210(g)(9)(iii), which resumed the 
fee schedule adjustment transition period in rural areas and non-
contiguous areas effective June 1, 2018 so that the fee schedule 
amounts for certain items and services furnished in rural and non-
contiguous areas from June 1, 2018 through December 31, 2018 were based 
on a 50/50 blend of adjusted and unadjusted rates. We are also 
finalizing changes to Sec.  414.210(g)(9)(ii): 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 solicited 
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 Act to exclude drugs and biologicals described in 
section 1842(o)(1)(D) of the Act from the DMEPOS CBP. We are finalizing 
changes to 42 CFR 414.402 to reflect the exclusion of infusion drugs 
from the DMEPOS CBP.
3. Benefit Category and Payment Determinations for DME, Prosthetic 
Devices, Orthotics and Prosthetics, Therapeutic Shoes and Inserts, 
Surgical Dressings, or Splints, Casts, and Other Devices Used for 
Reductions of Fractures and Dislocations
    These provisions establish procedures for making benefit category 
and payment determinations for items and services that are DME, 
prosthetic devices, orthotics and prosthetics, therapeutic shoes and 
inserts, surgical dressings, or splints, casts, and other devices used 
for reductions of fractures and dislocations for which a HCPCS Level II 
code has been requested. Specifically, the purpose of the procedure 
would be to determine whether the product for which a HCPCS code has 
been requested meets the Medicare definition of DME, a prosthetic 
device, an orthotic or prosthetic, a surgical dressing, splint, cast, 
or other device used for reducing fractures or dislocations, or a 
therapeutic shoe or insert and is not otherwise excluded under Title 
XVIII of the Act, to determine how payment for the item of service 
would be made, and to obtain public consultation on these 
determinations.
4. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B
    This provision classifies adjunctive CGMs as DME, and addresses 
comments received in response to the proposed rule. Additional 
determinations regarding whether a CGM is covered in accordance with 
section 1862(a)(1)(A) of the Act will be made by DME MACs using the 
local coverage determination (LCD) process or during the Medicare 
claim-by-claim review process.
5. DME Interim Pricing in the CARES Act
    This section finalizes and addresses comments received on the May 
2020 COVID-19 IFC section titled ``DME Interim Pricing in the CARES 
Act''. Specifically, this section finalizes the following policies that 
were included in the May 2020 COVID-19 IFC:
     We made conforming changes to Sec.  414.210(g)(9), 
consistent with section 3712(a) and (b) of the CARES Act, omitting the 
language in section 3712(b) of the CARES Act that references an 
effective date that is 30 days after the date of enactment of the law.
     We revised Sec.  414.210(g)(9)(iii), which describes the 
50/50 fee schedule adjustment blend for items and services furnished in 
rural and non-contiguous areas, to address dates of service from June 
1, 2018 through December 31, 2020 or through the duration of the 
emergency period described in section 1135(g)(1)(B) of the Act (42 
U.S.C. 1320b-5(g)(1)(B)), whichever is later.
     We added Sec.  414.210(g)(9)(v) which states that, for 
items and services furnished in areas other than rural or noncontiguous 
areas with dates of service from March 6, 2020, through the remainder 
of the duration of the emergency period described in section 
1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)), based on the fee 
schedule amount for the area is equal to 75 percent of the adjusted 
payment amount established under ``this section'' (by which we mean 
Sec.  414.210(g)(1) through (8)), and 25 percent of the

[[Page 73862]]

unadjusted fee schedule amount. For items and services furnished in 
areas other than rural or noncontiguous areas with dates of service 
from the expiration date of the emergency period described in section 
1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)) through December 
31, 2020, based on the fee schedule amount for the area is equal to 100 
percent of the adjusted payment amount established under Sec.  
414.210(g)(1) through (8) (referred to as ``this section'' in the 
regulation text).
     In addition, we revised Sec.  414.210(g)(9)(iv) to specify 
for items and services furnished in areas other than rural and 
noncontiguous areas with dates of service from June 1, 2018 through 
March 5, 2020, based on the fee schedule amount for the area is equal 
to 100 percent of the adjusted payment amount established under Sec.  
414.210(g)(1) through (8) (``this section'' in the regulation text).

C. Summary of Cost and Benefits

1. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Fee Schedule Adjustments
    We estimate that the DMEPOS fee schedule adjustment methodologies 
established in this final rule will increase payments an estimated $4.6 
billion from the Federal Government to DMEPOS suppliers from CY 2022 to 
CY 2026 (for the purposes of this estimate, it is assumed the PHE ends 
on April 16, 2022, which is a necessary assumption for accounting 
purposes and is not intended to signal when the PHE will end). In CY 
2022, we estimate that Medicare payments will increase about $200 
million due to this provision of the final rule. Note, the Medicaid 
impact of this policy is explained later in this final rule.
2. DMEPOS Fee Schedule Adjustments for Items and Services Furnished in 
Rural Areas From June 2018 Through December 2018 and Exclusion of 
Infusion Drugs From the DMEPOS CBP
    This provision resumed the blended adjusted fee schedule amounts 
during the transition period for certain DMEPOS items and services that 
were furnished in rural and non-contiguous areas not subject to the CBP 
beginning June 1, 2018 and ending December 31, 2018. There is no impact 
assumed against the baseline, which is explained in the regulatory 
impact analysis section (RIA) later in this final rule, as the period 
during which these fee schedule adjustments were in effect has passed.
    The goal of the May 2018 IFC was 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 we would continue to study 
the impact of the change in payment rates on access to items and 
services in these areas. We believe that resuming the fee schedule 
adjustment transition period in rural and non-contiguous areas promoted 
stability in the DMEPOS market in these areas, and enabled us to work 
with stakeholders to preserve beneficiary access to DMEPOS.
3. Benefit Category and Payment Determinations for DME, Prosthetic 
Devices, Orthotics and Prosthetics, Therapeutic Shoes and Inserts, 
Surgical Dressings, or Splints, Casts, and Other Devices Used for 
Reductions of Fractures and Dislocations
    We are finalizing a process for making benefit category and payment 
determinations for items and services that are DME, prosthetic devices, 
orthotics and prosthetics, therapeutic shoes and inserts, surgical 
dressings, or splints, casts, and other devices used for reductions of 
fractures and dislocations. This policy is assumed to have an 
indeterminable fiscal impact due to the unique considerations given to 
establishing payment for specific items.
4. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B
    We are finalizing a policy that classifies adjunctive CGMs as DME. 
In addition, we are addressing comments on the proposed rule. This 
classification is assumed to have no fiscal impact when considered 
against the baseline, which is further explained in the regulatory 
impact analysis (RIA) section of this final rule.
5. DME Interim Pricing in the CARES Act
    This section finalizes the temporary increase to certain DME 
payment rates from March 6, 2020 through the remainder of the duration 
of the emergency period (PHE) for COVID-19, in accordance with section 
3712 of the CARES Act. Section 3712 of the CARES Act increases Medicare 
expenditures and beneficiary cost-sharing by increasing Medicare 
payment rates for certain DMEPOS items furnished in non-rural and 
contiguous non-competitively bid areas.
    The increase is a result of paying a blend of 75 percent of the 
fully adjusted payment rates and 25 percent of the unadjusted payment 
rates and is estimated to increase affected DME fee schedule amounts by 
33 percent, on average. This provision will have a negligible fiscal 
impact if the emergency period for COVID-19 ends by April 2022.

II. Rulemaking Overview

    In the May 11, 2018 Federal Register (83 FR 21912), we published an 
interim final rule with comment period (IFC) titled ``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''. In the May 8, 2020 Federal Register (85 FR 
27550), we published an IFC titled ``Medicare and Medicaid Programs, 
Basic Health Program, and Exchanges; Additional Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency and Delay 
of Certain Reporting Requirements for the Skilled Nursing Facility 
Quality Reporting Program'' (hereinafter referred to as the May 2020 
COVID-19 IFC). Subsequently in the November 4, 2020 Federal Register 
(85 FR 70358), we published a proposed rule titled ``Medicare Program; 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Policy Issues and Level II of the Healthcare Common Procedure 
Coding System (HCPCS)'' (hereinafter referred to as the November 2020 
proposed rule).
    We received 331 (208 on the May 2018 IFC, 6 on the May 2020 COVID-
19 IFC, and 117 on the November 2020 proposed rule) timely pieces of 
correspondence containing multiple comments on the provisions of the 
previously mentioned IFCs and proposed rule. Comments were submitted by 
DMEPOS suppliers, manufacturers, trade associations, beneficiaries, the 
Medicare Payment Advisory Commission (MedPAC), law firms, and 
healthcare providers.
    The provisions that we are finalizing in this final rule range from 
minor clarifications to more significant modifications based on the 
comments received. Summaries of the public comments received and our 
responses to those public comments are set forth in the various 
sections of this final rule under the appropriate headings. We also 
note that some of the public comments received for the provisions 
addressed in this final rule were outside of the scope of the 
previously mentioned IFCs and proposed rule and as such, those out-of-
scope public comments are not addressed in this final rule.
    Additionally, we will not be finalizing three provisions of the 
November 2020 proposed rule in this final rule. The provision titled 
``Exclusion of Complex Rehabilitative Manual Wheelchairs and Certain 
Other Manual Wheelchairs From the CBP'' was finalized in the FY

[[Page 73863]]

2022 Inpatient Rehabilitation Facility (IRF) final rule published on 
August 4, 2021 (86 FR 42362). Secondly, after further consideration, we 
will not be finalizing the proposed provisions titled ``Healthcare 
Common Procedure Coding System (HCPCS) Level II Code Application 
Process'' and ``Expanded Classification of External Infusion Pumps as 
DME.''
    We are not finalizing any of the ``Healthcare Common Procedure 
Coding System (HCPCS) Level II Code Application Process'' proposals. We 
intend to continue to evaluate our processes, particularly as CMS and 
stakeholders continue to gain experience with the more frequent coding 
cycles.
    We received 34 public comments on the HCPCS proposals. The public 
comments raised concerns about the HCPCS proposals. With regard to our 
proposed HCPCS Level II code application cycles, application 
resubmission, and reevaluation policies, commenters opposed the 
proposal for CMS to potentially delay a preliminary or final decision 
without placing a limit on the number of cycles a decision could be 
delayed.
    Commenters also opposed our proposal to allow only two 
resubmissions of a code application for reevaluation for the same item 
or service particularly if new information is provided with the 
resubmission. While commenters mostly supported the proposals to codify 
more frequent coding cycles, a number of commenters requested 
additional process changes and increased transparency that in many 
cases may be infeasible within the proposed timelines for a coding 
cycle. Overwhelmingly, commenters responded negatively to our 
explanation of the term ``claims processing need'' and how it would 
apply throughout the HCPCS Level II code application evaluation 
process. Commenters also did not support CMS assessing whether a given 
item or service is ``primarily medical in nature'' as a threshold HCPCS 
Level II code application evaluation factor.
    In addition, we are not finalizing the ``Expanded Classification of 
External Infusion Pumps as DME'' proposal because many commenters 
believed that the proposed rule was unclear, needed more development, 
raised concerns about cost-sharing and cost-shifting to the 
beneficiary, and raised safety concerns related to decisions regarding 
what drug therapies could safely be administered in a home/non-facility 
setting. Several commenters noted the proposed rule could increase 
beneficiary costs, and a commenter noted the policy would result in the 
use of an infusion pump as the choice of drug administration for 
payment purposes even if it was the less optimal method of 
administration. A commenter believed that the proposal would result in 
the beneficiary paying more for less, in light of the higher out-of-
pocket costs for home administration of infusion drugs, and the home 
not being the highest-quality setting for infusion drug administration.
    We proposed that an external infusion pump would be considered 
``appropriate for use in the home'' if: (1) The Food and Drug 
Administration (FDA)-required labeling requires the associated home 
infusion drug to be prepared immediately prior to administration or 
administered by a health care professional or both; (2) a qualified 
home infusion therapy supplier (as defined at Sec.  486.505) 
administers the drug or biological in a safe and effective manner in 
the patient's home (as defined at Sec.  486.505); and (3) the FDA-
required labeling specifies infusion via an external infusion pump as a 
route of administration, at least once per month, for the drug. We 
received 31 comments on this proposal from DME and infusion suppliers, 
beneficiaries, manufacturers, insurance companies, and trade 
associations. Many commenters supported the proposed interpretation of 
``appropriate for use in the home'' and the three proposed criteria for 
determining when an infusion pump was ``appropriate for use in the 
home,'' as well as the fact that if finalized, this proposal would 
necessitate updates to the LCD for external infusion pumps to include 
additional drugs and biologicals. However serious concerns were raised 
about other aspects of the proposed rule. Some commenters stated that 
the proposal would be a very narrow policy change that would offer 
little in the way of expanded benefits for patients and would create 
administrative complexity and uncertainty regarding Medicare coverage. 
Some commenters supported the first criterion in our proposed standard 
for determining whether an external infusion pump and associated 
supplies could be covered under the Medicare Part B benefit for DME. 
However, those commenters advocated that CMS remove the requirement 
that the FDA-required labeling require the associated home infusion 
drug be ``prepared immediately prior to administration.'' They noted 
that this requirement is unclear, as most drugs have storage 
information which permits use of a drug after mixing. Some commenters 
supported the second criterion in our proposed standard, which required 
that a qualified home infusion therapy services supplier administer the 
drug or biological in a safe and effective manner in the patient's 
home.
    Commenters opposed the third criterion in our proposed standard, 
and recommended that CMS remove the requirement that the FDA-required 
labeling specify an external infusion pump as a possible route of 
administration. Commenters stated that this requirement was too 
restrictive and could limit access to therapies that would otherwise be 
clinically appropriate for use in the home. Several commenters pointed 
out that not all drugs included in the LCDs for Intravenous Immune 
Globulin (policy number L33610) currently have labels that specify 
using an external infusion pump as a possible route of administration, 
though prescribers most often require these pumps to control the rate 
of infusion. Several commenters believed that the proposed rule needed 
more development, was unclear about which drugs could be covered under 
the Medicare Part B benefit for DME as supplies, and could pose safety 
concerns. A commenter noted the home setting is not the ideal 
environment for prepping sterile medications for injection or infusion. 
This commenter also stressed that the beneficiary may not be aware when 
selecting an administration site (home or outpatient) of the large 
difference in cost-sharing. Another commenter indicated that CMS should 
not be the agency to decide if home infusion was safe and appropriate. 
This commenter urged CMS to delay the expansion of the definition of 
DME to include additional external infusion pumps until CMS can gather 
an exact list of the drugs and biologicals that would be affected by 
this policy and determine whether such drugs and biologicals can be 
administered in the home safely and effectively under the parameters 
CMS proposed. We thank the commenters for their input on the HCPCS and 
infusion pump proposals.

III. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Fee Schedule Adjustments

A. Background

1. DMEPOS Competitive Bidding Program
    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(Pub. L. 108-173), mandates the Medicare DMEPOS CBP for contract

[[Page 73864]]

award purposes to furnish certain competitively priced DMEPOS items and 
services subject to the 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; and
     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.
    Section 1847(a) of the Act 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. Section 
1847(a)(1)(B)(i) of the Act mandates that the programs be phased into 
100 of the largest metropolitan statistical areas (MSA) by 2011 and 
additional areas after 2011. Thus far, CBAs have been either an MSA or 
a part of an MSA. Under the Office of Management and Budget (OMB) 
standards for delineating MSAs, MSAs have at least one urbanized area 
that has a population of at least 50,000. The MSA comprises the central 
county or counties containing the core, plus adjacent outlying counties 
having a high degree of social and economic integration with the 
central county or counties as measured through commuting.\1\ OMB 
updates MSAs regularly and the most recent update can be found in OMB 
Bulletin No. 20-01.\2\ The statute allows us to exempt rural areas and 
areas with low population density within urban areas that are not 
competitive, unless there is a significant national market through mail 
order for a particular item or service, from the CBP. We may also 
exempt from the CBP items and services for which competitive 
acquisition is unlikely to result in significant savings.
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    \1\ OMB 2010 Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas; Notice, June 28, 2010 (75 FR 37252).
    \2\ https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf?#.
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    We refer to areas in which the CBP is not or has not been 
implemented as non-competitive bidding areas (non-CBAs). We use the 
term ``former CBAs'' to refer to the areas that were formerly CBAs 
prior to a gap in the CBP, to distinguish those areas from ``non-
CBAs.'' More information on why there was a gap in the CBP from January 
1, 2019 through December 31, 2020 can be found in the November 14, 2018 
final rule titled ``Medicare Program; End-Stage Renal Disease 
Prospective Payment System, 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 (DMEPOS) Competitive Bidding 
Program (CBP) and Fee Schedule Amounts, and Technical Amendments To 
Correct Existing Regulations Related to the CBP for Certain DMEPOS,'' 
(83 FR 56922) (hereinafter ``CY 2019 ESRD PPS DMEPOS final rule'').
    Non-CBAs include rural areas, non-rural areas, and non-contiguous 
areas. A rural area is defined in 42 CFR 414.202 as 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 MSA. 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. Non-contiguous 
areas refer to areas outside the contiguous U.S.--that is, areas such 
as Alaska, Guam, and Hawaii (81 FR 77936).
2. Payment Methodology for CBAs
    In the DMEPOS CBP, suppliers bid for contracts for furnishing 
multiple items and services, identified by HCPCS codes, under several 
different product categories. In the CY 2019 ESRD PPS DMEPOS final 
rule, we made significant changes to how we calculate single payment 
amounts (SPAs) under the DMEPOS CBP. Prior to these changes, for 
individual items within each product category in each CBA, the median 
of the winning bids for each item was used to establish the SPA for 
that item in each CBA. As a result of the changes we made in the CY 
2019 ESRD PPS DMEPOS final rule, SPAs are calculated for the lead item 
in each product category (per Sec.  414.402, the item in a product 
category with multiple items with the highest total nationwide Medicare 
allowed charges of any item in the product category prior to each 
competition) based on the maximum winning bid (the highest of bids 
submitted by winning suppliers) in each CBA.
    Per Sec.  414.416(b)(3), the SPA for each non-lead item in a 
product category (all items other than the lead item) is calculated by 
multiplying the SPA for the lead item by the ratio of the average of 
the 2015 fee schedule amounts for all areas for the non-lead item to 
the average of the 2015 fee schedule amounts for all areas for the lead 
item.
    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 fee schedule 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.
3. Fee Schedule Adjustment Methodology for Non-CBAs
    Section 1834(a)(1)(F)(ii) of the Act requires the Secretary to use 
information on the payment determined under the Medicare DMEPOS CBP to 
adjust the fee schedule amounts for DME items and services furnished in 
all non-CBAs on or after January 1, 2016. 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 under the CBP 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 
the Secretary to specify the methodology to be used in making these fee 
schedule adjustments by regulation, and to consider, among other 
factors, the costs of items and services in non-CBAs (where the 
adjustments would be applied) compared to the payment rates for such 
items and services in the CBAs.
    In accordance with the requirements of section 1834(a)(1)(G) of the 
Act, we conducted notice-and-comment rulemaking in 2014 to specify 
methodologies for adjusting the fee schedule amounts for DME, enteral 
nutrition, and OTS orthotics in non-CBAs in 42 CFR 414.210(g). We will 
provide a summary of these methodologies, but also refer readers to the 
July 11, 2014 proposed rule titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Quality Incentive Program, and 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies,'' (79 
FR 40208) (hereinafter ``CY 2015 ESRD PPS DMEPOS proposed rule''), and 
the November 6, 2014 final rule titled ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System, Quality Incentive Program, 
and Durable

[[Page 73865]]

Medical Equipment, Prosthetics, Orthotics, and Supplies,'' (79 FR 
66120) (hereinafter ``CY 2015 ESRD PPS DMEPOS final rule'') for 
additional details.
    The methodologies set forth in Sec.  414.210(g) account for 
regional variations in prices, including for rural and non-contiguous 
areas of the U.S. In accordance with Sec.  414.210(g)(1), we determine 
regional adjustments to fee schedule amounts for each State in the 
contiguous U.S. and the District of Columbia, based on the definition 
of region in Sec.  414.202, which refers to geographic areas defined by 
the Bureau of Economic Analysis (BEA) in the Department of Commerce for 
economic analysis purposes (79 FR 66226). Under Sec.  414.210(g)(1)(i) 
through (iv), adjusted fee schedule amounts for areas within the 
contiguous U.S. are determined based on regional prices limited by a 
national ceiling of 110 percent of the regional average price and a 
floor of 90 percent of the regional average price (79 FR 66225). Under 
Sec.  414.210(g)(1)(v), adjusted fee schedule amounts for rural areas 
are based on 110 percent of the national average of regional prices. 
Under Sec.  414.210(g)(2), fee schedule amounts for non-contiguous 
areas are adjusted based on the higher of the average of the SPAs for 
CBAs in non-contiguous areas in the U.S., or the national ceiling 
amount.
    For items and services that have been included in no more than 10 
CBPs, Sec.  414.210(g)(3) specifies adjustments based on 110 percent of 
the average of the SPAs. In cases where the SPAs from DMEPOS CBPs that 
are no longer in effect are used to adjust fee schedule amounts, Sec.  
414.210(g)(4) requires that the SPAs be updated by an inflation 
adjustment factor on an annual basis based on the Consumer Price Index 
for all Urban Consumers update factors from the mid-point of the last 
year the SPAs were in effect to the month ending 6 months prior to the 
date the initial payment adjustments would go into effect.
    Under Sec.  414.210(g)(5), in situations where a HCPCS code that 
describes an item used with different types of base equipment is 
included in more than one product category in a CBA, 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). Under Sec.  
414.210(g)(6), we will adjust the SPAs for certain items prior to using 
those SPAs to adjust fee schedule amounts for items and services if 
price inversions have occurred under the DMEPOS CBP. Price inversions 
occur when one item in a grouping of items in a product category 
includes a feature that another similar item in the product category 
does not, and the average of the 2015 fee schedule amounts for the item 
with the feature is higher than the average of the 2015 schedule 
amounts for the item without the feature, but following a CBP 
competition, the SPA for the item with the feature is lower than the 
SPA for the item without the feature. For groupings of similar items 
where price inversions have occurred, the SPAs for the items in the 
grouping are adjusted to equal the weighted average of the SPAs for the 
items in the grouping.\3\
---------------------------------------------------------------------------

    \3\ For further discussion regarding adjustments to SPAs to 
address price inversions, we refer readers to the CY 2017 ESRD PPS 
DMEPOS final rule, titled 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 
77937 (November 4, 2016).
---------------------------------------------------------------------------

    In Sec.  414.210(g)(8), the adjusted fee schedule amounts are 
revised each time a SPA for an item or service is updated following one 
or more new DMEPOS CBP competitions and as other items are added to the 
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 or, in accordance 
with Sec.  414.210(g)(10), when there are temporary gaps in the DMEPOS 
CBP. Updates to the SPAs may occur as contracts are recompeted. In the 
CY 2015 ESRD PPS DMEPOS final rule, we established Sec.  414.210(g)(9) 
to provide for a transitional phase-in period of the DMEPOS fee 
schedule adjustments. We established a 6-month transition period for 
blended rates from January 1 through June 30, 2016 (79 FR 66228 through 
66229). In establishing a transition period, we agreed with commenters 
that phasing in the adjustments to the fee schedule amounts would allow 
time for suppliers to adjust to the new payment rates, and further 
noted that we would monitor the impact of the change in payment rates 
on access to items and services and health outcomes using real time 
claims data and analysis (79 FR 66228). Under Sec.  414.210(g)(9)(i), 
we specified that the fee schedule adjustments for items and services 
furnished between January 1, 2016 through June 30, 2016 would be based 
on a blend of 50 percent of the unadjusted fee schedule amount and 50 
percent of the adjusted fee schedule amount. Under Sec.  
414.210(g)(9)(ii), we specified that for items and services furnished 
with dates of service on or after July 1, 2016, the fee schedule 
amounts would be fully adjusted in accordance with the rules specified 
in Sec.  414.210(g)(1) through Sec.  414.210(g)(8).
4. 21st Century Cures Act
    Section 16007(a) of the Cures Act was enacted on December 13, 2016, 
and extended the transition period for the phase-in of fee schedule 
adjustments at Sec.  414.210(g)(9)(i) by an additional 6 months from 
July 1, 2016 through December 31, 2016. In the May 2018 IFC, we amended 
Sec.  414.210(g)(9)(i) to implement the 6-month extension to the 
initial transition period, as mandated by section 16007(a) of the Cures 
Act. Accordingly, the fee schedule amounts were based on blended rates 
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 (83 FR 21915). Section 16008 of the 
Cures Act amended section 1834(a)(1)(G) of the Act to require that the 
Secretary take into account certain factors when making any fee 
schedule adjustments under sections 1834(a)(1)(F)(ii) or (iii), 
1834(h)(i)(H)(ii), or 1842(s)(3)(B) of the Act for items and services 
furnished on or after January 1, 2019. Specifically, the Secretary was 
required to take into account: (1) Stakeholder input solicited 
regarding adjustments to fee schedule amounts using information from 
the DMEPOS CBP; (2) the highest bid by a winning supplier in a CBA; and 
(3) 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, and the number of 
suppliers in the area.
5. Extension of DMEPOS Fee Schedule Transition Period & Revised 
Methodology
    In the May 2018 IFC (83 FR 21918), we expressed an immediate need 
to resume the transitional, blended fee schedule amounts in rural and 
non-contiguous areas, noting strong stakeholder concerns about the 
continued viability of many DMEPOS suppliers, our finding of a decrease 
in the number of suppliers furnishing items and services subject to the 
fee schedule adjustments, as well as the Cures Act mandate to consider 
additional information material to

[[Page 73866]]

setting fee schedule adjustments based on information from the DMEPOS 
CBP for items and services furnished on or after January 1, 2019. We 
explained that resuming these transitional blended rates would preserve 
beneficiary access to needed DME items and services in a contracting 
supplier marketplace, while also allowing us time to address the 
adequacy of the fee schedule adjustment methodology, as required by 
section 16008 of the Cures Act. As a result, we amended Sec.  
414.210(g)(9) by adding Sec.  414.210(g)(9)(iii) 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. We explained that resuming these transitional blended rates 
would 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 us to monitor the impact of the blended rates. We also amended 
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, 
fully adjusted fee schedule amounts would apply (83 FR 21922). In 
addition, we added Sec.  414.210(g)(9)(iv) to specify that fully 
adjusted fee schedule amounts would apply for items furnished in non-
CBAs other than rural and non-contiguous areas from June 1, 2018 
through December 31, 2018 (83 FR 21920). We explained that we would use 
the extended transition period to further analyze our findings and 
consider 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 (83 FR 21918 through 21919).
    In the CY 2019 ESRD PPS DMEPOS final rule, we finalized changes to 
bidding and pricing methodologies under the DMEPOS CBP for future 
competitions (83 FR 57020 through 57025). Specifically, we finalized 
lead item pricing for all product categories under the DMEPOS CBP, 
which would use the bid for the lead item to establish the SPAs for 
both the lead item and all other items in the product category (the 
non-lead items). We explained that this change would reduce the burden 
on suppliers since they would no longer have to submit bids on numerous 
items in a product category. We also finalized changes to the 
methodology for calculating SPAs under the DMEPOS CBP based on lead 
item pricing using maximum winning bids for lead items in each product 
category. We finalized revisions to Sec. Sec.  414.414 and 414.416 to 
reflect our changes to the bidding and pricing methodologies, and 
revised the definitions of bid, composite bid, and lead item in Sec.  
414.402. We expected that these changes would have a minimal effect on 
savings under the DMEPOS CBP. However, during Round 2021 of the DMEPOS 
CBP, we observed numerous occurrences where capacity, demand, and 
projected savings, in concert with our policies, were incomparable to 
previous rounds of competition.
    Also, in the CY 2019 ESRD PPS DMEPOS final rule, we established fee 
schedule adjustment transition rules for items and services furnished 
from January 1, 2019 through December 31, 2020. We decided to make 
these fee schedule adjustment transition rules effective for a 2-year 
period only, for two reasons. First, we believed that we must proceed 
cautiously when adjusting fee schedules in the short term in an effort 
to protect access to items, while we continued to monitor health 
outcomes, assignment rates, and other information (83 FR 57029). 
Second, as part of the final rule, we made significant changes to the 
way bids are submitted and SPAs are calculated under the CBP. We stated 
in the final rule these changes could warrant further changes to the 
fee schedule adjustment methodologies in the future (83 FR 57030).
    Consistent with the requirements of section 16008 of the Cures Act, 
we set forth our analysis and consideration of stakeholder input 
solicited on adjustments to fee schedule amounts using information from 
the DMEPOS CBP, the highest bid by a winning supplier in a CBA, and a 
comparison of the various factors with respect to non-CBAs and CBAs. We 
noted stakeholder concerns that the adjusted payment amounts 
constrained suppliers from furnishing items and services to rural 
areas, and their request for an increase to the adjusted payment 
amounts for these areas (83 FR 57025). In reviewing highest winning 
bids, we found no pattern indicating that maximum bids were higher for 
areas with lower volume than for areas with higher volume (83 FR 
57026). In our consideration of the Cures Act factors with respect to 
non-CBAs and CBAs, we found higher costs for non-contiguous areas, an 
increased average travel distance in certain rural areas, a 
significantly lower average volume per supplier in non-CBAs, especially 
in rural and non-contiguous areas, and a decrease in the number of non-
CBA supplier locations. Based on our consideration of the foregoing, we 
expressed our belief that the fee schedule amounts for items and 
services furnished from January 1, 2019 through December 31, 2020, in 
all rural or non-contiguous areas should be based on a blend of 50 
percent of the adjusted fee schedule amounts and 50 percent of the 
unadjusted fee schedule amounts in accordance with the current 
methodologies under paragraphs (1) through (8) of Sec.  414.210(g) (83 
FR 57029).
    We also expressed our belief that the fee schedule amounts for 
items and services furnished from January 1, 2019 through December 31, 
2020, in all areas that are non-CBAs, but are not rural or non-
contiguous areas, should be based on 100 percent of the adjusted fee 
schedule amounts in accordance with the current methodologies under 
paragraphs (1) through (8) of Sec.  414.210(g) (83 FR 57029). We 
finalized amendments to the transition rules at Sec.  414.210(g)(9) to 
reflect these fee schedule adjustment methodologies for items and 
services furnished from January 1, 2019 through December 31, 2020 (83 
FR 57039; 83 FR 57070 through 57071).
6. The Coronavirus Aid, Relief, and Economic Security Act
    The Coronavirus Aid, Relief, and Economic Security (CARES) Act 
(Pub. L. 116-136) was enacted on March 27, 2020. Section 3712 of the 
CARES Act specifies the payment rates for certain DME and enteral 
nutrients, supplies, and equipment furnished in non-CBAs through the 
duration of the emergency period described in section 1135(g)(1)(B) of 
the Act. Section 3712(a) of the CARES Act continues our policy of 
paying the 50/50 blended rates for items furnished in rural and non-
contiguous non-CBAs through December 31, 2020, or through the duration 
of the emergency period, if longer. Section 3712(b) of the CARES Act 
increased the payment rates for DME and enteral nutrients, supplies, 
and equipment furnished in areas other than rural and non-contiguous 
non-CBAs through the duration of the emergency period. Beginning March 
6, 2020, the payment rates for DME and enteral nutrients, supplies, and 
equipment furnished in these areas are based on 75 percent of the 
adjusted fee schedule amount and 25 percent of the historic, unadjusted 
fee schedule amount, which results in higher payment rates as compared 
to the full fee schedule adjustments that were previously required 
under Sec.  414.210(g)(9)(iv). We made changes to

[[Page 73867]]

the regulation text at Sec.  414.210(g)(9), consistent with section 
3712 of the CARES Act, in an IFC that we published in the May 8, 2020 
Federal Register titled ``Medicare and Medicaid Programs; Additional 
Policy and Regulatory Revisions in Response to the COVID-19 Public 
Health Emergency.''

B. Current Issues

    In the proposed rule (85 FR 70364), we proposed to establish fee 
schedule adjustment methodologies for items and services furnished in 
non-CBAs on or after April 1, 2021, or the date immediately following 
the duration of the emergency period described in section 1135(g)(1)(B) 
of the Act (42 U.S.C. 1320b-5(g)(1)(B)), whichever is later. In the 
proposed rule (85 FR 70364), we stated that though the transition rules 
under 42 CFR 414.210(g)(9)(iii) and 414.210(g)(9)(v) expired on 
December 31, 2020, we believe that the rest of the current fee schedule 
adjustment rules at Sec.  414.210(g) would continue to be in effect 
should the emergency period described in section 1135(g)(1)(B) of the 
Act (42 U.S.C. 1320b-5(g)(1)(B) (PHE) expire after January 1, 2021, and 
before April 1, 2021. At the time, we presumed that the PHE would 
expire in early 2021, and that we would finalize the proposed rule 
around that time. Now that April 1, 2021 has passed, but the PHE is 
still ongoing, and the proposed rule has yet to be finalized, we are 
making a technical edit to reflect the new effective date for this 
final rule. Consistent with our proposal, in the event that the 
emergency period described in section 1135(g)(1)(B) of the Act (42 
U.S.C. 1320b-5(g)(1)(B)) expires before the effective date specified in 
the DATES section of this final rule (rather than April 1, 2021), the 
current fee schedule adjustment rules at Sec.  414.210(g)(1) through 
(8) would be used to adjust fee schedule amounts for items and services 
furnished in non-CBAs and the current fee schedule adjustment rule at 
Sec.  414.210(g)(10) would be used to adjust fee schedule amounts for 
items and services furnished in CBAs or former CBAs until the final 
rule takes effect on the effective date specified in the DATES section 
of this final rule.
1. Section 16008 of the Cures Act Analysis
    Section 1834(a)(1)(G) of the Act requires CMS to specify by 
regulation the methodology to be used in adjusting DMEPOS fee schedule 
amounts based on information from the DMEPOS CBP. Section 16008 of the 
Cures Act amended section 1834(a)(1)(G) to specifically require that 
CMS take into account a number of factors in making any fee schedule 
adjustments for items and services furnished on or after January 1, 
2019, including: (1) Stakeholder input we have solicited on adjustments 
to fee schedule amounts using information from the DMEPOS CBP; (2) the 
highest bid by a winning supplier in a CBA; and (3) a comparison of the 
factors outlined in section 16008 of the Cures Act with respect to non-
CBAs and CBAs. Our analysis of the Cures Act factors focuses on the 
effect we believe increased payment levels have had in rural and non-
contiguous non-CBAs, and the effect we believe fully adjusted fees have 
had in non-rural contiguous non-CBAs. We also provide our analysis of 
other metrics we believe are important in measuring the impacts of our 
payment policies.
a. Stakeholder Input Gathered in Accordancew With Section 16008 of the 
Cures Act
    Section 16008 of the Cures Act requires us to solicit and take into 
account stakeholder input in making fee schedule adjustments based on 
information from the DMEPOS CBP for items and services furnished on or 
after January 1, 2019. On March 23, 2017, we hosted a national provider 
call to solicit stakeholder input regarding adjustments to fee schedule 
amounts using DMEPOS CBP information (83 FR 57025 through 57026). More 
than 330 participants called in, with 23 participants providing verbal 
comments during the call. We also received 125 written comments from 
stakeholders in response to our request for written comments. Our 
announcement of this call, a copy of our presentation, the audio 
recording of the call, and its transcript can be found at the following 
link on the CMS website.\4\
---------------------------------------------------------------------------

    \4\ https://www.cms.gov/Outreach-and-Education/Outreach/NPC/National-Provider-Calls-and-Events-Items/2017-03-23-DMEPOS.
---------------------------------------------------------------------------

    In general, the commenters were mostly suppliers located in MSAs, 
but also included manufacturers, trade organizations, and healthcare 
providers such as physical and occupational therapists. For additional 
details about the national provider call and a summary of oral and 
written comments received, we refer readers to the CY 2019 ESRD PPS/
DMEPOS proposed rule (83 FR 57026). For a summary of public comments 
received on the CY 2019 ESRD PPS DMEPOS proposed rule and our 
responses, we refer readers to the CY 2019 ESRD PPS DMEPOS final rule 
(83 FR 57030 through 57036).
    While the stakeholder input from 2017 did not quantify the degree 
to which costs of furnishing items in CBAs versus rural areas or any 
other non-CBAs, the comments we received in response to our 2014 
proposed rule (79 FR 40208) indicated that the adjusted fee schedule 
amounts for rural areas should be equal to 120 to 150 percent of the 
average of the regional single payment amounts (RSPAs) rather than 110 
percent of the average of the RSPAs. In addition, a 2015 industry 
survey of suppliers of respiratory equipment indicated that the cost of 
furnishing respiratory equipment in ``super rural'' areas is 17 percent 
higher than the cost of furnishing respiratory equipment in CBAs.\5\ 
The term ``super rural'' refers to areas identified as ``qualified 
rural areas'' under the ambulance fee schedule statute at section 
1834(l)(12)(B) of the Act (as implemented at 42 CFR 414.610(c)(5)(ii)).
---------------------------------------------------------------------------

    \5\ https://www.cqrc.org/img/CQRCCostSurveyWhitePaperMay2015Final.pdf.
---------------------------------------------------------------------------

    For the purposes of the fee schedule for ambulance services, rural 
areas are defined at 42 CFR 414.605 as areas located outside an urban 
area (MSA), or a rural census tract within an MSA as determined under 
the most recent version of the Goldsmith modification as determined by 
the Federal Office of Rural Health Policy at the Health Resources and 
Services Administration (HRSA). The most recent version of the 
Goldsmith Modification are the Rural-Urban Commuting Area (RUCA) codes, 
which are a method of determining rurality.\6\ Under 42 CFR 
414.610(c)(5)(ii), for ground ambulance services furnished during the 
period July 1, 2004 through December 31, 2022, the payment amount for 
the ground ambulance base rate is increased by 22.6 percent where the 
point of pickup is in a rural area determined to be in the lowest 25 
percent of rural population arrayed by population density. We refer to 
this as the ``super rural'' bonus, and the areas that receive this 
super rural bonus as ``super rural'' areas.\7\ For purposes of payment 
under the Medicare ambulance fee schedule, a ``super rural'' area is 
thus a rural area determined to be in the lowest 25 percent of rural 
population arrayed by population density. DMEPOS industry stakeholders 
have recommended that this differential in payment between super rural 
areas and MSAs may be adopted in the DMEPOS fee schedule payment 
context as well.
---------------------------------------------------------------------------

    \6\ https://www.hrsa.gov/rural-health/about-us/definition/index.html.
    \7\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AmbulanceFeeSchedule/afspuf.

---------------------------------------------------------------------------

[[Page 73868]]

    In general, we continue to receive feedback from industry 
stakeholders expressing their belief that the fully adjusted fee 
schedule amounts are too low and would have an adverse impact on 
beneficiary access to items and services furnished in rural areas if 
they are resumed in these areas. Industry stakeholders have also stated 
that the fully adjusted fee schedule amounts are insufficient to cover 
the supplier's costs, particularly for delivering items in rural areas.
    We indicated in the November 2020 proposed rule that we have been 
closely monitoring beneficiary health outcomes and access to DMEPOS 
items. We stated that there has been no decline in allowed services for 
items subject to the fee schedule adjustments at any point in time, 
including 2017 and the first half of 2018 when payment in rural and 
non-contiguous areas was based on the fully adjusted fee schedule 
amounts. Traditional Medicare or fee-or-service allowed services for 
items subject to the fee schedule adjustments rose from 24,882,018 in 
2015 to 25,604,836 in 2016, 26,065,601 in 2017, and 26,481,002 in 2018. 
This increase in allowed services occurred even though beneficiary fee-
for-service enrollment dropped by 0.6 percent from 33.7 million in 2016 
to 33.5 million in 2018 while Medicare Advantage beneficiary enrollment 
rose by 16.0 percent from 18.4 million in 2016 to 21.3 million in 2018. 
During this time, suppliers accepted assignment (Medicare payment in 
full) for most items and services (99.79 percent in 2017 and 99.81 
percent in 2018). This rate of assignment remained extremely high 
(99.68 percent in 2017 and 99.70 percent in 2018) even after removing 
claims for Medicare participating suppliers and suppliers furnishing 
items to beneficiaries with dual (Medicare and Medicaid) eligibility, 
where assignment is mandatory. In addition, we stated that we continue 
to monitor over one thousand health metrics (emergency room visits, 
physician office visits, nursing home and hospital admissions, length 
of need, deaths, etc.) and have not detected any negative impact of the 
fee schedule adjustments on health outcomes. When analyzing the 2015 
monthly average health outcome rates for beneficiaries in non-CBAs, 
which was the last year we did not make any fee schedule adjustments in 
non-CBAs, we noted reductions in both 2017 and 2018 in mortality rates, 
hospitalization rates, physician visits, SNF admissions, and monthly 
days in the hospital. The percentage of beneficiaries with emergency 
room visits increased from 3.6 to 3.9 percent and monthly days in 
nursing homes remained unchanged. Finally, we noted that beneficiary 
inquiries and complaints related to DMEPOS items and services have 
steadily declined since 2016 and have not increased.
b. Highest Winning Bids in CBAs Analysis
    Section 16008 of the Cures Act requires us to take into account the 
highest amount bid by a winning supplier in a CBA when making fee 
schedule adjustments based on information from the DMEPOS CBP for items 
and services furnished on or after January 1, 2019. As discussed 
earlier, in the CY 2019 ESRD PPS DMEPOS final rule (83 FR 57026), we 
found no pattern indicating that maximum bids are higher for areas with 
lower volume than for areas with higher volume. For additional details, 
we refer readers to the CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 
34360 through 34367). Additionally, for Round 2021 of the DMEPOS CBP, 
SPAs were calculated for the lead item in each product category based 
on the maximum winning bid, and therefore the maximum winning bid is 
taken into account when making fee schedule adjustments based on 
information from the CBP for items and services included in Round 2021 
and furnished on or after January 1, 2019.
c. Travel Distance Analysis
    Section 16008 of the Cures Act also requires us to take into 
account a comparison of the average travel distance and costs 
associated with furnishing items and services in CBAs and non-CBAs. In 
the CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 34367 through 34371), 
we compared the average size of different non-CBAs nationally and found 
that the CBAs had much larger service areas than the non-CBAs. We also 
compared the average travel distances for suppliers in the different 
areas using claims data for items and services subject to the fee 
schedule adjustments. From our analysis, we found that the average 
distance traveled in CBAs was generally greater than in most non-CBAs. 
However, in reviewing certain non-CBAs, such as Frontier and Remote 
(FAR) areas,\8\ Outside Core Based Statistical Areas (OCBSAs),\9\ and 
super rural areas,\10\ we found that suppliers generally must travel 
farther distances to beneficiaries located in those areas than for 
beneficiaries located in CBAs and other non-CBAs. For additional 
details on our previous travel distance analysis, we refer readers to 
the CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 34367 through 34371).
---------------------------------------------------------------------------

    \8\ A Frontier and Remote (FAR) area is statistically delineated 
by the Health Resources and Services Administration (HRSA) based on 
remoteness and population sparseness. HRSA Methodology for 
Designation of Frontier and Remote Areas, 79 FR 25599 through 25603 
(May 5, 2014).
    \9\ Outside Core Based Statistical Areas are delineated by OMB 
as counties that do not qualify for inclusion in a Core Based 
Statistical Area. OMB 2010 Standards for Delineating Metropolitan 
and Micropolitan Statistical Areas; Notice, 75 FR 37245 (June 28, 
2010).
    \10\ Under the Ambulance Fee schedule (AFS), temporary add-on 
payments known as the ``super rural bonus'' are available in 
relation to areas that are within the lowest 25 percentile of all 
rural areas arrayed by population density. 42 CFR 414.610(c)(5)(ii).
---------------------------------------------------------------------------

    In the November 2020 proposed rule, we updated some of the travel 
distance data used in our previous travel distance analysis with data 
from 2018, which at the time was the most recent full year of CBP data. 
As of January 1, 2021, Round 2021 of the CBP is underway and there are 
currently contract suppliers furnishing OTS back and knee braces in 
CBAs. We did not award competitive bidding contracts to suppliers for 
any of the other product categories that were bid during Round 2021 of 
the CBP because the SPAs (calculated based on bids) did not achieve 
expected savings.\11\
---------------------------------------------------------------------------

    \11\ https://www.cms.gov/files/document/round-2021-dmepos-cbp-single-payment-amts-fact-sheet.pdf.
---------------------------------------------------------------------------

    As we indicated in the CY 2019 ESRD DMEPOS final rule (83 FR 
57027), we looked at hospital beds and oxygen and oxygen equipment, as 
they are items that are most likely to be delivered locally by 
suppliers using company vehicles, as well as all items subject to the 
fee schedule adjustments. The last time these items were included in 
the CBP was in 2018, and so we believe this 2018 data is still relevant 
for the purposes of this analysis.
    In reviewing the data from 2018, we found that the same trends we 
presented in the CY 2019 ESRD PPS DMEPOS proposed rule, which were 
based on 2016 data, apply. Similar to our previous travel distance 
analysis, to prevent the data from being skewed in certain ways, we 
only included claims where the supplier billing address is in the same 
or adjoining State as the beneficiary address, and we excluded claims 
from suppliers with multiple locations that always use the same billing 
address. These data restrictions left in place 96 percent of allowed 
claims lines when looking at hospital beds, 97 percent when looking at

[[Page 73869]]

oxygen, and 92 percent when looking at all items.

                    Table 1--2018 Average Number of Miles Between Supplier and Beneficiary *
----------------------------------------------------------------------------------------------------------------
                        Beneficiary area                           Hospital beds      Oxygen         All items
----------------------------------------------------------------------------------------------------------------
CBAs............................................................              28              23              30
Non-CBA MSAs....................................................              24              22              28
Non-CBA Micro Areas.............................................              22              22              27
Non-CBA OCBSA...................................................              28              31              37
Super Rural.....................................................              37              37              42
FAR level 1.....................................................              27              31              36
FAR level 3.....................................................              40              41              47
----------------------------------------------------------------------------------------------------------------
* Includes claims where the supplier billing address is in the same or adjoining state as the beneficiary
  address, excluding claims from suppliers with multiple locations that always use the same billing address.

    We also reviewed in the November 2020 proposed rule travel distance 
data updated by partial 2019 data spanning January through November 
2019 (85 FR 70366). Average travel distances in former CBAs decreased, 
while average travel distances in rural and non-rural non-CBAs 
increased. Section 16008 of the Cures Act requires a comparison of 
average travel distance with respect to non-CBAs and CBAs. At the time 
of the November 2020 proposed rule, there were no CBAs due to the gap 
period in the DMEPOS CBP, allowing any Medicare-enrolled DMEPOS 
suppliers to furnish DMEPOS items and services. In the November 2020 
proposed rule, we still reviewed data from former CBAs, as we believed 
the decrease in average travel distance in the former CBAs was 
additional confirmation that travel distances are generally greater in 
CBAs while a CBP is in effect, when compared to non-CBAs. We stated 
that average supplier travel distances in the former CBAs decreased for 
a variety of reasons. For one, CBP contract suppliers must furnish 
items and services to any beneficiary located in a CBA. During a gap 
period in the CBP, any supplier may furnish items and services to a 
beneficiary located in a former CBA and suppliers are no longer 
obligated to service a beneficiary who may be farther away from the 
supplier. Additionally, more suppliers can now furnish items and 
services to beneficiaries, so a beneficiary could also receive items 
and services furnished by a supplier located closer to the beneficiary. 
Section 16008 of the Cures Act requires us to take into account a 
comparison of the average travel distance and costs associated with 
furnishing items and services in CBAs and non-CBAs. As a result, we 
believe a payment methodology should account for this factor, and the 
increased costs suppliers may face in reaching certain non-CBAs. When 
we say certain non-CBAs, we are referring to non-CBAs classified as 
either super rural, FAR, or OCBSA. This is because although we found 
that the average travel distance for suppliers in non-CBAs is generally 
lower than the average travel distance and costs for suppliers in CBAs 
while the CBP was in effect, we found that suppliers generally must 
travel farther distances to beneficiaries located in non-CBAs that are 
super rural, FAR or OCBSA than for beneficiaries located in CBAs and 
other non-CBAs. Still, industry stakeholders have expressed their 
belief that the fully adjusted fee schedule amounts are too low and 
have an adverse impact on beneficiary access to items and services 
furnished in rural non-CBAs. We have not seen evidence of this, but 
because stakeholder input is another factor in section 16008 of the 
Cures Act, we are also factoring stakeholder input into our payment 
methodology, and therefore believe a payment methodology should result 
in higher payments for DMEPOS suppliers that furnish items and services 
to all rural areas, instead of just those areas with greater travel 
distance than CBAs. We believe this errs on the side of caution and may 
incentivize suppliers to furnish items and services to all rural areas.
d. Cost Analysis
    We presented our analysis of different sources of cost data in the 
CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 34371 through 34377). 
Overall, in comparing CBAs to non-CBAs, we found that CBAs tended to 
have the highest costs out of the cost data we examined. For certain 
cost data, we also found that Alaska and Hawaii--both non-contiguous 
areas--tended to have higher costs than many contiguous areas of the 
U.S. We stated in the November 2020 proposed rule that we updated this 
analysis with more recent data and did not notice any significant 
differences in these overall findings.
    We believe these findings support a payment methodology that 
considers such increased costs in non-contiguous areas.
    We also noted in the November 2020 proposed rule that we consider 
assignment rates as a source of cost data and consider it a measure of 
the sufficiency of payment to cover a supplier's costs for furnishing 
items and services under the Medicare program (85 FR 70366). Assignment 
rates for items subject to the fee schedule adjustments have not varied 
significantly around the country, and they have consistently remained 
over 99 percent in all areas. Thus, for the overwhelming majority of 
claims for items and services furnished in the non-CBAs that were 
subject to the fee schedule adjustments, suppliers have decided to 
accept the Medicare payment amount in full, and have not needed to 
charge the beneficiary for any additional costs that the Medicare 
allowed payment amount did not cover. Of note, for the 17 months from 
January 2017 through May 2018 when Medicare paid at the fully adjusted 
fee level in all areas, or about 40 percent below the un-adjusted fee 
schedule amounts on average, the assignment rate did not dip below 99 
percent for the items and services subject to the adjusted fee schedule 
amounts.
e. Average Volume of Items and Services Furnished by Suppliers in the 
Area Analysis
    Section 16008 of the Cures Act requires that we take into account a 
comparison of the average volume of items and services furnished by 
suppliers in CBAs and non-CBAs. In the CY 2019 ESRD PPS DMEPOS proposed 
rule (83 FR 34377), we found that in virtually all cases, the average 
volume of items and services furnished by suppliers is higher in CBAs 
than non-CBAs. In the November 2020 proposed rule we reviewed updated 
data from 2018, and found that in most cases, the average volume of 
items and services furnished by suppliers was higher in

[[Page 73870]]

CBAs than in non-CBAs (85 FR 70367). We reviewed the number of allowed 
claim lines on a national level for 15 different product categories 
subject to the fee schedule adjustments. In doing so, we found that 
non-CBAs had more allowed claim lines than CBAs for 4 of the 15 product 
categories that we reviewed (nebulizer, oxygen, seat lifts, and 
transcutaneous electrical nerve stimulation (TENS) devices). Rural non-
CBAs had more allowed claim lines than CBAs for 2 of the 15 product 
categories that we reviewed (seat lifts and TENS). Finally, non-rural 
non-CBAs had more allowed claims lines than CBAs for those same two 
product categories (seat lifts and TENS).
    Additionally, total services per supplier continued to increase in 
2018 and 2019 in all non-CBAs. Thus, we found that the average volume 
per supplier in non-CBAs continues to increase while assignment rates 
are 99 percent or higher, and overall utilization remains steady or is 
increasing. We believe these findings support a payment methodology 
that takes into account and ensures beneficiary access to items and 
services in non-CBAs with relatively low volume.
f. Number of Suppliers Analysis
    Section 16008 of the Cures Act requires us to take into account a 
comparison of the number of suppliers in the area.
    The number of suppliers billing Medicare Fee-for-Service (FFS) for 
items subject to fee schedule adjustments in all non-CBAs declined from 
June 2018 through the end of 2019, which is the time period in which we 
paid the fully adjusted fees in non-rural, contiguous non-CBAs and the 
blended rates in rural and non-contiguous non-CBAs, in accordance with 
42 CFR 414.210(g)(9)(iii) and (iv). More specifics about this decline 
can be found in Table 2. We note that the decline in the number of 
billing suppliers is part of a long-term trend that preceded the 
adjustment of the fee schedule amounts beginning in 2016, but we are 
still concerned about this trend, particularly for rural and non-
contiguous areas, because beneficiaries could have trouble accessing 
items and services in these lower population areas if more suppliers 
decide to stop serving these areas.
    In the November 2020 proposed rule we studied supplier numbers and 
found that when looking at a sample of HCPCS codes for high volume 
items subject to fee schedule adjustments (E1390 for oxygen 
concentrators, E0601 for CPAP machines, E0260 for semi-electric 
hospital beds, and B4035 for enteral nutrition supplies), that the 
average volume of items furnished by suppliers before they stopped 
billing Medicare is very small compared to the average volume of items 
furnished by suppliers who continued to bill (85 FR 70367). Data showed 
that large national chain suppliers were accepting a large percentage 
of the beneficiaries who were previously served by the smaller 
suppliers that exited the Medicare market. In addition, the average 
volume per supplier continues to increase (as the number of suppliers 
who bill Medicare has declined in recent years, the suppliers that 
still bill Medicare are picking up more volume), while overall services 
continue to grow, suggesting industry consolidation rather than any 
type of access issue for DME. Therefore, the decline in the number of 
supplier locations may be largely a result of the same degree of 
consolidation of suppliers furnishing items subject to the fee schedule 
adjustments rather than a decline in beneficiary access to items 
subject to the fee schedule adjustments. In addition, this trend in 
consolidation is matched by an increase in the average volume of items 
furnished per supplier, increasing economies of scale for these 
suppliers, although this does decrease the number of overall suppliers' 
beneficiaries can choose from to provide DMEPOS items. We do note that 
the number of enrolled DMEPOS suppliers did increase by 2 percent from 
86,061 in 2019 to 87,800 in 2020, the highest total since 2016 when the 
total number of enrolled DMEPOS suppliers was 88,786. There are 
therefore still many DMEPOS supplier locations throughout the country 
furnishing DMEPOS items and services.
    However, to determine what effect, if any, our payment amounts have 
had on the number of billing suppliers, in the November 2020 proposed 
rule, we also examined supplier numbers during defined timeframes in 
which we paid suppliers the unadjusted and adjusted fees, and the 50/50 
blended rates (50 percent unadjusted and 50 percent adjusted) (85 FR 
70367). The declines in the number of billing suppliers in both rural 
and non-rural non-CBAs were very similar, even when we increased 
payment levels to the blended rates in rural and non-contiguous non-
CBAs, and continued paying the fully adjusted fees in non-rural/
contiguous non-CBAs. We did not see an appreciable difference in 
supplier reductions between the two areas. We noted that non-contiguous 
non-CBAs exhibited a slightly different trend than other non-CBAs, as 
the number of billing suppliers in these areas increased from 2015 to 
2016 when we paid the unadjusted fees, and January 2017 to May 2018 
when we paid the fully adjusted fees, but subsequently declined between 
June 2018 to November 2019 when we paid the blended rates.
    For this analysis, we reviewed the following timeframes and noted 
the payment policies in effect at that time:
     Period 1: January 2015-December 2015: Unadjusted fees in 
all non-CBAs.
     Period 2: January 2016-December 2016: Blended rates in all 
non-CBAs (as noted previously, Congress passed section 16007 of the 
Cures Act on December 13, 2016, which made the blended rates effective 
retroactively in all non-CBAs from June 30 through December 31, 2016).
     Period 3: January 2017-May 2018: Fully adjusted fees in 
all non-CBAs.
     Period 4: June 2018-November 2019: Blended rates in rural 
and non-contiguous non-CBAs, fully adjusted fees in non-rural non-CBAs 
in the contiguous U.S.

                                 Table 2--Number of Suppliers Who Billed for DME Subject to the Fee Schedule Adjustments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Non-CBA non-                Non-CBA                 Non-CBA non-
                     Period                           CBA        % Change      rural       % Change      rural       % Change    contiguous    % Change
--------------------------------------------------------------------------------------------------------------------------------------------------------
Jan 2015-Dec 2015...............................       12,717  ...........       10,694  ...........       11,491  ...........        1,150  ...........
Jan 2016-Dec 2016...............................       11,698         -8.0       10,103         -5.5       10,772         -6.3        1,229          6.9
Jan 2017-May 2018 (fully adjusted)..............        9,127        -22.0        9,520         -5.8       10,173         -5.6        1,295          5.4
Jun 2018-Nov 2019...............................       10,381         13.7        8,778         -7.8        9,401         -7.6        1,238         -4.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Claims data through 2019/11/29 (2019 Week 48), Provider Enrollment, Chain, and Ownership System (PECOS) data through 2019/09/17.


[[Page 73871]]

    As we noted in our previous analysis (83 FR 34380), we believe that 
oxygen and oxygen equipment is one of the most critical items subject 
to the fee schedule adjustments in terms of beneficiary access. If 
access to oxygen and oxygen equipment is denied to a beneficiary who 
needs oxygen, serious health implications can result. Oxygen and oxygen 
equipment are also items that must be delivered to the beneficiary, and 
set up and used properly in the home for safety reasons. Access to 
oxygen and oxygen equipment in remote areas thus remains critical and 
has been stressed by stakeholders. To determine if there were pockets 
of the country where access to oxygen and oxygen equipment was in 
jeopardy, in the November 2020 proposed rule, we reviewed data 
depicting how many non-CBA counties are being served by only one oxygen 
supplier (85 FR 70368). From 2016 to 2018, there was a total of 2,691 
non-CBA counties with beneficiaries receiving Medicare-covered oxygen 
supplies. For each year, there were approximately 38 to 39 counties 
being served by only one oxygen supplier, serving approximately 68 to 
78 beneficiaries receiving approximately 736 to 896 services (annually) 
in those areas. Among the counties with only one oxygen supplier, the 
majority had only one oxygen user during that year. All counties with a 
single oxygen supplier from 2016 to 2018 had 100 percent assignment 
rates for oxygen services, and more than half of the single-supplier 
counties were in Puerto Rico.
    We believe this shows that access to oxygen and oxygen equipment is 
not in jeopardy. If there are oxygen claims for only one beneficiary in 
the area, then only one billing supplier would show up in the data. 
This does not mean that the supplier submitting the claims for this one 
beneficiary is the only supplier available to furnish oxygen and oxygen 
equipment in the area. There may be other suppliers able to serve these 
areas as well and this would show up in the claims data if there were 
more beneficiaries using oxygen in these areas and these beneficiaries 
used more than one supplier. This also shows how non-CBAs can have far 
less volume and fewer billing suppliers than CBAs. Thus, we believe 
paying more money to suppliers serving rural and non-contiguous non-
CBAs takes into account those factors specified in section 16008 of the 
Cures Act (volume and number of suppliers), and it errs on the side of 
caution to prevent beneficiary access issues.
2. DMEPOS Fee Schedule Adjustment Impact Monitoring Data
    In addition to the various Cures Act factors, we monitored other 
metrics we believe are important in measuring the impacts of our 
payment policies. We stated in the November 2020 proposed rule (85 FR 
70368) that in reviewing claims data processed through mid-November in 
2018 and 2019, that assignment rates for all claims for DMEPOS items 
and services subject to fee schedule adjustments went up slightly from 
2018 to 2019 in both non-rural non-CBAs (from 99.826 percent or 
12,948,603 assigned services out of 12,971,110 to 99.833 percent or 
11,594,547 assigned services out of 11,613,970) and rural non-CBAs 
(from 99.79 percent or 13,285,838 assigned services out of 13,313,575 
to 99.81 percent or 11,863,434 assigned services out of 11,885,683). We 
stated to keep in mind that the 2019 claims data was not yet complete, 
so the number of allowed services will be greater than what we 
reported, but the final rate of assignment will likely not change much 
if at all.
    When looking at claims processed through May 28, 2021, we found 
that assignment rates for all claims for DMEPOS items and services 
subject to fee schedule adjustments went slightly up in non-rural non-
CBAs from 2019 to 2020 (99.82 percent to 99.85 percent) and 2020 to 
2021 (99.85 percent to 99.88 percent). Assignment rates also increased 
in rural non-CBAs from 2019 to 2020 (99.80 to 99.84 percent) and 2020 
to 2021 (99.84 to 99.85 percent). Finally, assignment rates also 
increased in non-contiguous non-CBAs from 2019 to 2020 (99.53 percent 
to 99.79 percent) and 2020 to 2021 (99.79 percent to 99.89 percent). We 
have also been monitoring other claims data from non-CBAs, and we have 
not observed any trends indicating an increase in adverse beneficiary 
health outcomes associated with the fee schedule adjustments. We 
monitor mortality rates, hospitalization rates, ER visit rates, SNF 
admission rates, physician visit rates, monthly days in hospital, and 
monthly days in SNF. Except for death information, which comes from the 
Medicare Enrollment Database, all other outcomes are derived from 
claims (inpatient, outpatient, Part B carrier, and SNF). Our monitoring 
materials cover historical and regional trends in these health outcome 
rates across a number of populations, allowing us to observe deviations 
that require further drilldown analyses. We monitor health outcomes in 
the enrolled Medicare population (Medicare Parts A and B), dual 
Medicare and Medicaid population, long-term institutionalized 
population, as well as various DME utilizers and access groups. This 
helps paint a complete picture of whether an increase in an outcome is 
across the board (not linked to DME access), or is unique to certain 
populations. Specifically, we focus on any increases that are unique to 
the DME access groups, which include beneficiaries who are likely to 
use certain DME based on their diagnoses, and we would conduct 
drilldown analyses and policy research to pinpoint potential reasons 
for such increases.
    In addition, in the November 2020 proposed rule, we examined what 
effect, if any, paying the blended rates in rural and non-contiguous 
non-CBAs had on utilization of DME (85 FR 70368). We compared the 
utilization of oxygen equipment between June 2017 through December 
2017, and June 2018 through December 2018. We compared these two time 
periods, because we paid the blended rates in rural and non-contiguous 
non-CBAs from June 1, 2018 through December 31, 2018, in accordance 
with the 2018 IFC (83 FR 21915). During the 2017 time period, we paid 
the fully adjusted fees in all non-CBAs. During the 2018 time period, 
we paid the blended rates in rural and non-contiguous non-CBAs and the 
fully adjusted fees in the non-rural contiguous non-CBAs from June 1, 
2018 through December 31, 2018. We specifically studied oxygen 
utilization in rural areas without Micropolitan Statistical Areas, that 
is OCBSAs, as these counties have the least populated urban areas, and 
as we stated in the CY 2019 ESRD PPS DMEPOS final rule, one reason for 
paying higher rates was to ensure beneficiary access in rural and 
remote areas (83 FR 57029). We found that the number of allowed units 
in OCBSAs decreased comparably in all areas. Payment at the blended 
rates between June 1, 2018, and December 31, 2018, increased allowed 
charges in OCBSAs by 42 percent, but this had no apparent effect on 
increasing services in OCBSAs. Additionally, the significant reduction 
of liquid oxygen equipment allowed services trend continued in OCBSAs 
as well as in all areas. The decline in the number of oxygen 
concentrators that were furnished declined at the same rate in OCBSAs 
as in all areas. Access to oxygen equipment in OCBSAs was unchanged, 
despite a 49 percent increase in unit prices.
    In sum, we do not believe our payment rates had a discernible 
impact on any trends that were already occurring before we paid the 
higher fees, and we did not see any appreciable differences between the 
areas in which

[[Page 73872]]

we paid the higher 50/50 blended rates in rural and non-contiguous non-
CBAs and the areas in which we pay the fully adjusted fees in non-
rural/contiguous non-CBAs. In addition, assignments rates are still 
high in all non-CBAs--over 99 percent--which means over 99 percent of 
suppliers are accepting Medicare payment as payment in full and not 
balance billing beneficiaries for the cost of the DME.
    We sought comments on all of our findings.

 Table 3--Summary of Our Analysis of the Section 16008 Cures Act Factors
------------------------------------------------------------------------
  Section 16008 Cures Act factors          Summary of our analysis
------------------------------------------------------------------------
Stakeholder Input.................   Most of the input we have
                                     received has come from the DMEPOS
                                     industry, such as DMEPOS suppliers,
                                     expressing that the fully adjusted
                                     fee schedule amounts are too low,
                                     and that CMS should increase how
                                     much Medicare pays DMEPOS suppliers
                                     to furnish items and services to
                                     beneficiaries in non-CBAs. These
                                     stakeholders expressed concerns
                                     that the level of the adjusted
                                     payment amounts constrains
                                     suppliers from furnishing items and
                                     services to rural areas.
                                     Stakeholder input that did
                                     not support such payment increases
                                     included input from the Medicare
                                     Payment Advisory Commission
                                     (MedPAC), which believed any
                                     adjustment for rural and non-
                                     contiguous areas should be limited
                                     to only the amount needed to ensure
                                     access, targeted at areas and
                                     products for which an adjustment is
                                     needed, and that CMS should
                                     consider taking steps to offset the
                                     cost of any adjustments. MedPAC
                                     supported setting fee schedule
                                     rates in urban, contiguous non-CBAs
                                     based 100 percent on information
                                     from the CBP.*
Highest Winning Bid...............   In the CY 2019 ESRD PPS
                                     DMEPOS final rule (83 FR 57026), we
                                     found no pattern indicating that
                                     maximum bids are higher for areas
                                     with lower volume than for areas
                                     with higher volume.
Travel Distance...................   Average travel distance
                                     between the supplier and
                                     beneficiary is generally higher in
                                     CBAs than in non-CBAs, except for
                                     non-CBAs classified as FAR, super
                                     rural, or OCBSA.
Cost..............................   We examined four sources of
                                     cost data: (1) The Practice Expense
                                     Geographic Practice Cost Index (PE
                                     GPCI), (2) delivery driver wages
                                     from the Bureau of Labor Statistics
                                     (BLS), (3) real estate taxes from
                                     the U.S. Census Bureau's American
                                     Community Survey (ACS), and (4) gas
                                     and utility prices from the
                                     Consumer Price Index (CPI).
                                     Overall, in comparing CBAs
                                     to non-CBAs, CBAs tended to have
                                     the highest costs out of the cost
                                     data we examined. For certain cost
                                     data, we also found that Alaska and
                                     Hawaii--both non-contiguous areas--
                                     tended to have higher costs than
                                     many contiguous areas of the U.S.
                                     Assignment rates, which we consider
                                     to be a measure of the sufficiency
                                     of payment to cover a supplier's
                                     costs for furnishing items and
                                     services under the Medicare
                                     program, have consistently remained
                                     high at over 99 percent (out of
                                     100) in non-CBAs, meaning over 99
                                     percent of suppliers furnishing
                                     items subject to fee schedule
                                     adjustments in the non-CBAs are
                                     accepting the Medicare payment in
                                     full.
Volume............................   CBAs generally have higher
                                     volume than non-CBAs.
                                     Total services per supplier
                                     continued to increase in 2018 and
                                     2019 in non-CBAs.
Number of Suppliers...............   The number of suppliers
                                     billing Medicare for furnishing
                                     items and services subject to fee
                                     schedule adjustments in the non-
                                     CBAs has been declining for several
                                     years, and this downward trend
                                     started years before CMS started
                                     adjusting fee schedule amounts in
                                     the non-CBAs in 2016.
                                     When looking at a sample of
                                     HCPCS codes for high volume items
                                     subject to fee schedule
                                     adjustments, the average volume of
                                     items furnished by suppliers before
                                     they stopped billing Medicare is
                                     very small compared to the average
                                     volume of items furnished by
                                     suppliers who continued to bill.
                                     Data shows that large national
                                     chain suppliers are accepting a
                                     large percentage of the
                                     beneficiaries who were previously
                                     served by the smaller suppliers
                                     that exited the Medicare market. In
                                     addition, the average volume per
                                     supplier continues to increase (as
                                     the number of suppliers who bill
                                     Medicare decline, the suppliers
                                     that still bill Medicare are
                                     picking up more volume), while
                                     overall services continue to grow,
                                     suggesting industry consolidation
                                     rather than any type of access
                                     issue for DME. Therefore, the
                                     decline in the number of supplier
                                     locations is largely a result of
                                     the consolidation of suppliers
                                     furnishing items subject to the fee
                                     schedule adjustments rather than a
                                     decline in beneficiary access to
                                     items subject to the fee schedule
                                     adjustments.
                                     When looking at different
                                     timeframes over the last several
                                     years in which we paid different
                                     fee schedule amounts (unadjusted
                                     fees, adjusted fees, and the 50/50
                                     blended rates), we did not see an
                                     appreciable effect that these
                                     payment changes had on stemming the
                                     reduction in the number of
                                     suppliers billing Medicare.
                                     All counties with a single
                                     oxygen supplier from 2016 to 2018
                                     had 100 percent assignment rates
                                     for oxygen services, and more than
                                     half of the single-supplier
                                     counties were in Puerto Rico.
------------------------------------------------------------------------
* https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/comment-letters/08312018_esrd_cy2019_dme_medpac_comment_v2_sec.pdf.

C. Proposed Provisions

    After reviewing updated information that must be taken into 
consideration in accordance with section 1834(a)(1)(G) of the Act in 
determining adjustments to DMEPOS fee schedule amounts, we proposed to 
revise Sec.  414.210(g) to establish three different methodologies for 
adjusting fee schedule amounts for DMEPOS items and services included 
in more than 10 competitive bidding programs furnished in non-CBAs on 
or after April 1, 2021, or the date immediately following the duration 
of the emergency period described in section 1135(g)(1)(B) of the Act 
(42 U.S.C. 1320b-5(g)(1)(B)), whichever is later (85 FR 70370). We 
proposed three different fee schedule adjustment methodologies, based 
on the non-CBA in which the items are furnished: (1) One fee schedule 
adjustment methodology for items and services furnished in non-
contiguous non-CBAs; (2) another adjustment methodology for items and 
services furnished in non-CBAs within the contiguous United States that 
are defined as rural areas at Sec.  414.202; and (3) a third adjustment 
methodology for items and services furnished in all other non-CBAs 
(non-rural areas within the contiguous United States) (85 FR 70370). 
With respect to

[[Page 73873]]

items and services furnished in no more than ten competitive bidding 
programs, we proposed to continue using the methodology in Sec.  
414.210(g)(3) to adjust the fee schedule amounts for these items 
furnished on or after April 1, 2021 (85 FR 70370). The rest of the 
discussion that follows addresses the fee schedule adjustments for 
items and services that have been included in more than ten competitive 
bidding programs.
    First, we proposed to continue paying the 50/50 blended rates in 
non-contiguous non-CBAs (85 FR 70370). However, we proposed that the 
50/50 blend will no longer be a transition rule under Sec.  
414.210(g)(9), and will instead be the fee schedule adjustment 
methodology for items and services furnished in these areas under Sec.  
414.210(g)(2) unless revised in future rulemaking. We proposed that the 
fee schedule amounts for items and services furnished on or after April 
1, 2021, or the date immediately following the duration of the 
emergency period described in section 1135(g)(1)(B) of the Act (42 
U.S.C. 1320b-5(g)(1)(B)), whichever is later, in non-contiguous non-
CBAs be adjusted so that they are equal to a blend of 50 percent of the 
greater of the average of the SPAs for the item or service for CBAs 
located in non-contiguous areas or 110 percent of the national average 
price for the item or service determined under Sec.  414.210(g)(1)(ii) 
and 50 percent of the unadjusted fee schedule amount for the area, 
which is the fee schedule amount in effect on December 31, 2015, 
increased for each subsequent year beginning in 2016 by the annual 
update factors specified in sections 1834(a)(14), 1834(h)(4), and 
1842(s)(1)(B) of the Act, respectively, for durable medical equipment 
and supplies, off-the-shelf orthotics, and enteral nutrients, supplies, 
and equipment. We explained our rationale for a methodology that 
incorporates 110 percent of the national average price in our CY 2015 
ESRD PPS DMEPOS final rule (79 FR 66225). We stated that we believe 
that a variation in payment amounts both above and below the national 
average price should be allowed, and we believe that allowing for the 
same degree of variation (10 percent) above and below the national 
average price is more equitable and less arbitrary than allowing a 
higher degree of variation (20 percent) above the national average 
price than below (10 percent), as in the case of the national ceiling 
and floor for the Prosthetic & Orthotic fee schedule, or allowing for 
only 15 percent variation below the national average price, as in the 
case of the national ceiling and floor for the DME fee schedule (79 FR 
66225).
    Second, we proposed to continue paying the 50/50 blended rates in 
rural contiguous areas; however, we proposed that the 50/50 blend will 
no longer be a transition rule under Sec.  414.210(g)(9), and will 
instead be the fee schedule adjustment methodology for items and 
services furnished in these areas under Sec.  414.210(g)(2) unless 
revised in future rulemaking (85 FR 70370). We proposed that the fee 
schedule amounts for items and services furnished in rural contiguous 
areas on or after April 1, 2021 or the date immediately following the 
duration of the emergency period described in section 1135(g)(1)(B) of 
the Act (42 U.S.C. 1320b-5(g)(1)(B)), whichever is later, be adjusted 
so that they are equal to a blend of 50 percent of 110 percent of the 
national average price for the item or service determined under Sec.  
414.210(g)(1)(ii) and 50 percent of the fee schedule amount for the 
area in effect on December 31, 2015, increased for each subsequent year 
beginning in 2016 by the annual update factors specified in sections 
1834(a)(14), 1834(h)(4), and 1842(s)(1)(B) of the Act, respectively, 
for durable medical equipment and supplies, off-the-shelf orthotics, 
and enteral nutrients, supplies, and equipment. We also proposed to 
revise Sec.  414.210(g)(1)(v) to address the period before April 1, 
2021, to say that for items and services furnished before April 1, 
2021, the fee schedule amount for all areas within a State that are 
defined as rural areas for the purposes of this subpart is adjusted to 
110 percent of the national average price determined under paragraph 
(g)(1)(ii) of this section. We decided to propose a policy of paying a 
50/50 blend of adjusted and unadjusted rates in non-contiguous non-CBAs 
and in rural non-CBAs, as opposed to a different ratio (such as a 75/25 
blend, which is an alternative we considered and discuss further in 
this section), because past stakeholder input from the DME industry has 
expressed support for this 50/50 blend. For instance, we proposed 
paying the 50/50 blend for rural and non-contiguous non-CBAs from 
January 1, 2019 through December 31, 2020 in our CY 2019 ESRD PPS 
DMEPOS proposed rule, and we finalized this policy in our CY 2019 ESRD 
PPS DMEPOS final rule. Most of the comments we received on the proposed 
rule were from commenters in the DME industry, such as homecare 
associations, DME manufacturers, and suppliers, and these commenters 
generally supported the 50/50 blended rates provisions.
    Third, for items and services furnished on or after April 1, 2021 
or the date immediately following the duration of the emergency period 
described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later, in all other non-rural non-CBAs within 
the contiguous United States, we proposed that the fee schedule amounts 
be equal to 100 percent of the adjusted payment amount established 
under Sec.  414.210(g)(1)(iv) (85 FR 70370).
    Accordingly, we proposed to add paragraph Sec.  414.210(g)(9)(vi) 
to say that for items and services furnished in all areas with dates of 
service on or after April 1, 2021, or the date immediately following 
the duration of the emergency period described in section 1135(g)(1)(B) 
of the Act, whichever is later, based on the fee schedule amount for 
the area is equal to the adjusted payment amount established under 
Sec.  414.210(g) (85 FR 70370).
    Thus under our proposed provision, we will continue paying 
suppliers significantly higher rates for furnishing items and services 
in rural and non-contiguous areas as compared to items and services 
furnished in other areas because of stakeholder input indicating higher 
costs in these areas, greater travel distances and costs in certain 
non-CBAs compared to CBAs, the unique logistical challenges and costs 
of furnishing items to beneficiaries in the non-contiguous areas, 
significantly lower volume of items furnished in these areas versus 
CBAs, and concerns about financial incentives for suppliers in 
surrounding urban areas to continue including outlying rural areas in 
their service areas. Previous feedback from industry stakeholders 
expressed concern regarding beneficiary access to items and services 
furnished in rural and remote areas.
    Furthermore, in our analysis, we found that suppliers must travel 
farther distances to deliver items to beneficiaries located in super 
rural areas and areas outside both MSAs and micropolitan statistical 
areas than the distances they must travel to deliver items to 
beneficiaries located in CBAs (while the CBP was in effect). We also 
found that certain non-contiguous areas tended to have higher costs, 
and had smaller numbers of oxygen suppliers and beneficiaries. Rural 
and non-contiguous areas also have much lower volume of DMEPOS items 
furnished by suppliers than in CBAs, and we are also concerned that 
national chain suppliers or suppliers in higher populated urban areas 
that are currently serving rural areas may abandon these areas if they 
are less profitable markets due to fee

[[Page 73874]]

schedule adjustments and may instead concentrate on the larger markets 
only. We believe that this feedback as well as these findings supports 
a payment methodology that errs on the side of caution and ensures 
adequate payment for items and services furnished to beneficiaries in 
all rural and non-contiguous non-CBAs. We also believed that the 
proposed fee schedule adjustment methodologies would create an 
incentive for suppliers to continue serving areas where fewer 
beneficiaries reside and will therefore further ensure beneficiary 
access to items and services in these areas. We proposed to continue 
paying the 50/50 blended rates in rural and non-contiguous non-CBAs, 
and 100 percent of the adjusted payment amount established under Sec.  
414.210(g)(1)(iv) in non-rural non-CBAs in the contiguous U.S., takes 
into account stakeholder feedback as well as information from our 
previous and updated analyses of the Cures Act factors (85 FR 70371).
    The proposed fee schedule adjustment methodologies rely on SPAs 
generated by the CBP. We only awarded Round 2021 CBP contracts to 
bidders in the OTS back braces and OTS knee braces product 
categories.\12\ We did not award Round 2021 CBP contracts to bidders 
that bid in any other product categories that were included in Round 
2021 of the CBP, therefore, CMS does not have any new SPAs for these 
items and services. As a result, we stated in the November 2020 
proposed rule that we were seriously considering whether to simply 
extend application of the current fee schedule adjustment transition 
rules for all of the items and services that were included in Round 
2021 of the CBP but have essentially been removed from Round 2021 of 
the CBP (85 FR 70371). That is, for non-CBAs, the fee schedule 
adjustment transition rules at Sec.  414.210(g)(9) and, for CBAs and 
former CBAs (CBAs where no CBP contracts are in effect), the fee 
schedule adjustment rules at Sec.  414.210(g)(10), would be extended 
until a future round of the CBP. More specifically, for non-CBAs, we 
proposed to extend the transition rules at Sec.  414.210(g)(9)(iii) and 
(v) for items and services included in product categories other than 
the OTS back and knee brace product categories, and, for these same 
items and services furnished in CBAs or former CBAs, we proposed to 
extend the rules at Sec.  414.210(g)(10), until such product categories 
are competitively bid again in a future round of the CBP (85 FR 70371). 
In this situation, we stated that the proposed fee schedule adjustments 
discussed previously in the November 2020 proposed rule and in this 
final rule would only apply to OTS back braces and OTS knee braces 
furnished in non-CBAs on or after April 1, 2021 (85 FR 70371) . 
However, as we discussed previously in this final rule, now that April 
1, 2021 has passed, but the PHE is still ongoing, and this rule has yet 
to be finalized, we are finalizing the proposed language with a 
technical edit to reference the effective date specified in the DATES 
section of this final rule to reflect the new effective date.
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    \12\ The link to the announcement is https://www.cms.gov/files/document/round-2021-dmepos-cbp-single-payment-amts-fact-sheet.pdf.
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    In short, beginning on the effective date specified in the DATES 
section of this final rule or the date immediately following the 
duration of the emergency period described in section 1135(g)(1)(B) of 
the Act, whichever is later, there would be several different fee 
schedule adjustment methodologies in effect, depending on where an item 
or service is furnished, and whether CMS has awarded Round 2021 CBP 
contracts for that item or service. For OTS back braces and OTS knee 
braces included in Round 2021 of the CBP and furnished in CBAs, payment 
would be made in accordance with the methodologies described in 42 CFR 
414.408. For OTS back braces and OTS knee braces included in Round 2021 
of the CBP and furnished in rural and non-contiguous non-CBA areas, 
payment would be made in accordance with the methodologies we have 
proposed in the November 2020 proposed rule (85 FR 70371) and discuss 
in this final rule at Sec.  414.210(g)(2). For OTS back braces and OTS 
knee braces included in Round 2021 of the CBP furnished in non-rural 
and contiguous non-CBA areas, payment would be made using the 
methodologies described in 42 CFR 414.210(g)(1)(iv).
    For items and services included in the product categories that have 
essentially been removed from Round 2021 of the CBP, payment would be 
based on the methodologies described in 42 CFR 414.210(g)(10) when such 
items and services are furnished in CBAs or former CBAs. When such 
items and services are furnished in rural and non-contiguous non-CBAs, 
payment would be based on the methodologies we proposed at 42 CFR 
414.210(g)(2) and the methodology at 42 CFR 414.210(g)(4). In non-rural 
and contiguous non-CBA areas, payment for these items and services 
would be based on the methodologies described in 42 CFR 
414.210(g)(1)(iv) and the methodology at (g)(4). CMS welcomed comment 
on whether the transition rules at Sec.  414.210(g)(9) and fee schedule 
adjustment rules at Sec.  414.210(g)(10) should continue for these 
items and services that have essentially been removed from Round 2021 
of the CBP. Specifically, we invited comment on whether we should 
extend the transition rules at Sec.  414.210(g)(9)(iii) and (v) for 
items and services furnished in non-CBAs and included in product 
categories other than the OTS back and knee brace product categories, 
and, for these same items and services furnished in CBAs or former 
CBAs, whether we should extend the rules at Sec.  414.210(g)(10), until 
such product categories are competitively bid again in a future round 
of the CBP.
    Comment: Several commenters supported paying the 50/50 blended 
rates in rural and non-contiguous non-CBAs on a permanent basis. A few 
commenters believed this methodology will better ensure beneficiary 
access by helping DMEPOS suppliers stay in business and account for 
costs related to the COVID-19 pandemic. A commenter stated that there 
are costs related to the pandemic that are unlikely to be eliminated by 
the end of the COVID-19 public health emergency, and they thus support 
a permanent extension of the current rural non-CBA blended rates. A 
commenter stated they appreciated that the proposal would bring 
stability to DMEPOS suppliers by eliminating the transitional nature of 
these rates and making them part of the fee schedule adjustment 
methodology until revised in future rulemaking. A commenter supported 
higher payments in rural areas, and stated they supported the proposal 
that for DME items and services furnished before April 1, 2021, the fee 
schedule amount for all areas within a State that are defined as rural 
areas would be adjusted to 110 percent of the national average price.
    Response: We thank the commenters for support of our proposal. In 
finalizing this fee schedule adjustment methodology, we aim to ensure 
that suppliers are incentivized to serve beneficiaries in rural and 
non-contiguous non-CBAs.
    We agree that higher payments can better ensure access to items and 
services and maintain, if not increase, a supplier's willingness to 
furnish items and services. We do point out however that higher 
payments to suppliers results in higher cost sharing for beneficiaries, 
which could negatively affect access to DMEPOS items and services if 
beneficiaries decide to forego such items and services due to higher 
cost sharing.
    Regarding comments supporting a permanent adoption of the 50/50 
blended rates in rural and non-contiguous non-CBAs, as well as the

[[Page 73875]]

comment appreciating that this methodology will no longer be a 
transition rule under Sec.  414.210(g)(9), we note that although we are 
finalizing our proposal to pay 50/50 blended rates in the rural and 
non-contiguous non-CBAs, as we further discuss in section ``E. 
Provisions of Final Rule'' of this final rule, we will likely be 
revisiting this issue and the fee schedule adjustment methodologies for 
all items in all areas again in the future. Furthermore, regarding 
commenter's concerns about the potential for lasting COVID-19 pandemic 
costs, and the permanence of the 50/50 blended rate fee schedule 
adjustment methodology, we are unsure of the extent to which COVID-19 
has affected the costs of furnishing DMEPOS and whether such costs will 
indeed be permanent. For example, we have not seen any significant 
changes in assignment rates across the country, and we consider 
assignment rates to be indicative of the sufficiency of payment to 
cover a supplier's costs for furnishing DMEPOS items and services to 
Medicare beneficiaries. We will continue to monitor payments in rural 
and contiguous areas and all non-CBAs, as well as health outcomes, 
assignment rates, and other information in such areas.
    Regarding the comment supporting our proposal that for DME items 
and services furnished before April 1, 2021, the fee schedule amount 
for all areas within a State that are defined as rural areas would be 
adjusted to 110 percent of the national average price, we note that the 
effective date for this final rule will now be the effective date 
specified in the DATES section of this final rule rather than April 1, 
2021. Additionally, the COVID-19 PHE was renewed, effective on October 
18, 2021.
    As a result, we are finalizing the language as proposed with a 
technical edit to now address the period before the effective date 
specified in the DATES section of this final rule, instead of before 
April 1, 2021. Specifically, for items and services furnished before 
the effective date specified in the DATES section of this final rule, 
the fee schedule amount for all areas within a State that are defined 
as rural areas for the purposes of this subpart is adjusted to 110 
percent of the national average price determined under paragraph 
(g)(1)(ii) of this section. In the November 2020 proposed rule, we 
proposed to reference April 1, 2021 in the revised Sec.  
414.210(g)(1)(v). However, as we previously discussed in this final 
rule, April 1, 2021 has passed and the PHE is still ongoing. Because 
this rule has not finalized yet, we are finalizing the proposed 
regulation text with a technical edit to reference the effective date 
specified in the DATES section of this final rule rather than the April 
1, 2021 effective date.
    Comment: A commenter believed that the closer the rates are to the 
2015 unadjusted fee schedule, the more innovation there would be from 
providers.
    Response: We thank the commenter for their comment. The commenter 
did not elaborate on why they believed the closer the rates are to the 
2015 fee unadjusted fee schedule, the more innovation there would be 
from providers. Nevertheless, we are not aware of, nor do we believe 
there is a link between innovation and the 2015 fee schedule. In fact, 
the Government Accountability Office (GAO) and the HHS Office of 
Inspector General (OIG) have published numerous reports detailing how 
the unadjusted fee schedule amounts were higher, often significantly, 
than the amounts that suppliers paid to purchase products from 
manufacturers and wholesalers, the list prices on suppliers' websites, 
and the amounts paid by private payers and other government 
purchasers.\13\ We do not think using the 2015 fee schedule rates leads 
to innovation.
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    \13\ https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun18_medpacreporttocongress_rev_nov2019_note_sec.pdf.
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    Comment: Some commenters, in expressing their support of the 
proposed 50/50 blended rates in rural and non-contiguous non-CBAs, 
highlighted differences between rural and urban areas. A commenter 
stated that non-urban costs-to-serve is higher due to labor/drive 
times, use of higher cost third party distribution services, and lower 
equipment return rates. A commenter also discussed their hiring 
practices and associated labor costs, stating that employing 
individuals they deemed to be qualified in areas outside of the 
metropolitan areas is more challenging and costlier because of a 
limited pool of qualified individuals in these areas. Another commenter 
stated that Medicare beneficiaries in rural areas are geographically 
dispersed, hard to reach, and do not have the same access to systems of 
care available in more populated areas. The commenter stated that tough 
terrain, long distances between patients and providers/suppliers, and 
fewer health care resources mean that DME suppliers must incur added 
costs to deliver the appropriate medical equipment and supplies to 
patients on a timely basis. The commenter stated that this translates 
into added costs for transportation, delivery and clinical staff, fuel, 
and other expenses. The commenter stated that extension of the blended 
rates promotes access for beneficiaries in rural areas, making it less 
likely suppliers will be forced to close or stop providing DME to 
Medicare beneficiaries, and that they provide choices to beneficiaries 
to select from among a greater number of DME suppliers, as well as a 
greater variety of brand-name items and services that may meet their 
needs better than others.
    Response: We have presented our analysis of factors that affect the 
cost of furnishing DMEPOS items and services in rural areas (areas 
outside MSAs) versus non-rural areas (MSAs) in past rulemaking (83 FR 
57025) and in the preamble of the proposed rule and this final rule. 
While the data shows that the volume of items furnished in CBAs and 
MSAs is higher than the volume of items furnished in areas outside 
MSAs, the data we analyzed indicates that other factors such as: Labor 
rates/wages; gasoline prices; rent, utilities and other overhead costs; 
average travel time and distances; etc., suggest that these costs are 
higher in CBAs and MSAs than in areas outside MSAs. We have not been 
able to definitively conclude that the overall costs of furnishing 
DMEPOS items and services are higher or lower in rural areas than in 
other areas. However, for now, we believe it is necessary to continue 
paying the higher rates to suppliers for furnishing items in rural and 
non-contiguous areas to maintain access to DMEPOS items and services in 
these more remote areas.
    Comment: Several commenters stated that the fee schedule rates for 
non-rural areas should be at a 75/25 blended rate. Commenters stated 
that the 75/25 blended rates that are currently in effect in non-rural 
contiguous non-CBAs, in accordance with section 3712(b) of the CARES 
Act, should continue even after the public health emergency ends. A 
commenter supported continuing the 75/25 blend, and to phase in the 
full fee schedule adjustments in these areas beginning January 1, 2024. 
A commenter clarified that the 75 percent portion should be based on 
the current rates in former CBAs, and the 25 percent portion of the 
blended payment formula should be based on the unadjusted fee schedule. 
A few commenters stated that the current rates were developed via a 
flawed auction bid methodology, and they were based on pre-pandemic 
demand and cost structure. A commenter stated that this payment should 
last not just through the end of the public health emergency, but until 
the product categories can be re-bid under a program structured to 
reflect

[[Page 73876]]

what they say are true market conditions. Another commenter stated the 
75/25 blended rates will ensure suppliers can continue to provide 
critical DME to beneficiaries as suppliers encounter increased costs 
and a different market as a result of the pandemic. A few commenters 
stated that there are costs related to the pandemic that are unlikely 
to be eliminated by the end of the public health emergency, and they 
thus support a permanent extension of the current non-rural non-CBA 
blended rates.
    A few commenters also stated concerns regarding access to home 
respiratory services, including oxygen. For instance, commenters 
discussed how the COVID-19 PHE has caused more patients to receive home 
respiratory therapy. Commenters were unsure how many of these patients 
would require home respiratory therapy on a long-term basis, and that 
it was therefore important that CMS establish payment rates that will 
sustain DME and home respiratory therapy suppliers now and over the 
longer term.
    Response: Section 3712 of the CARES Act (Pub. L. 116-136) specifies 
the payment rates for certain DME and enteral nutrients, supplies, and 
equipment furnished in non-CBAs through the duration of the emergency 
period described in section 1135(g)(1)(B) of the Act. Section 3712(a) 
of the CARES Act continued our policy of paying the 50/50 blended rates 
for items furnished in rural and non-contiguous non-CBAs through 
December 31, 2020, or through the duration of the emergency period, if 
longer. Section 3712(b) of the CARES Act increased the payment rates to 
a 75/25 blend for DME and enteral nutrients, supplies, and equipment 
furnished in areas other than rural and non-contiguous non-CBAs through 
the duration of the COVID-19 public health emergency period.
    In the May 2020 COVID-19 IFC, we stated we believed the purpose of 
section 3712 of the CARES Act was to aid suppliers in furnishing items 
under very challenging situations during the COVID-19 PHE (85 FR 
27571).
    Furthermore, we have long maintained that the fully adjusted rates 
in non-rural non-CBAs are sufficient. For instance, we indicated in the 
CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 34382) that although the 
average volume of items and services furnished by suppliers in non-
rural non-CBAs is lower than the average volume of items and services 
furnished by suppliers in CBAs, the travel distances and costs for 
these areas are lower than the travel distances and costs for CBAs. We 
stated that because the travel distances and costs for these areas are 
lower than the travel distances and costs for CBAs, we believe the 
fully adjusted fee schedule amounts are sufficient.
    Assignment rates were above 99 percent in non-rural contiguous non-
CBAs when the fully adjusted rates were implemented. With regards to 
oxygen, in 2019 when we were paying the fully adjusted rates in non-
rural non-CBAs, the assignment rate for oxygen was 99.95 percent. From 
2020 to 2021, assignment rates for oxygen in non-rural non-CBAs were 
nearly identical--99.96 percent in 2020, and 99.95 percent in 2021. 
Additionally, when looking at non-CBAs on a national level, we have not 
seen evidence of a sustained increase in oxygen use as a result of the 
COVID-19 PHE. For all non-CBAs, the total number of claim lines for 
oxygen declined from 2019 to 2020 by 5.63 percent, and declined by 2.27 
percent from 2020 to 2021. This is from using data through the same 
week in the respective year (week 42), to understand the impact of the 
fee schedule adjustment while accounting for claim delay.
    We will continue to monitor payments in all non-CBAs, as well as 
health outcomes, assignment rates, and other information.
    Comment: A commenter stated the rates for the non-rural non-CBAs 
should increase at least to the clearing price (or to the maximum 
winning bids) of the ``old'' SPA, or an additional 5-10 percent, to 
account for an increase in costs of raw materials, production, and 
supply chain. The commenter stated that they expected SPAs to increase 
under the new bidding methodologies we finalized in the CY 2019 ESRD 
PPS DMEPOS final rule, and that the non-rural non-CBA rates should 
reflect these expected increases.
    Another commenter stated CMS should apply an adjustment to the 
pricing methodology to offset the lack of volume increase in the non-
rural non-CBAs.
    Response: We continue to believe that the fully adjusted rates in 
non-rural non-CBAs are sufficient and that paying any additional amount 
once the PHE ends would be unnecessary. We will continue to monitor 
payments in these and all non-CBAs, including health outcomes, 
assignment rates, and other information.
    Comment: A commenter stated CMS should extend the 50/50 blended 
rates to non-rural, non-CBAs to ensure that beneficiaries have 
appropriate access and choice of quality DME items and services, 
including OTS orthoses subject to competitive bidding for the first 
time.
    Response: As noted previously, once the PHE ends, we believe paying 
fee schedule amounts equal to 100 percent of the adjusted payment 
amount established under Sec.  414.210(g)(1)(iv) in non-rural 
contiguous non-CBAs will be sufficient. Assignment rates were above 99 
percent in these areas when the fully adjusted rates were implemented. 
We will continue to monitor payments in these and all non-CBAs, 
including health outcomes, assignment rates, and other information.
    Comment: A few commenters discussed how in a bidding program, there 
is a guarantee that there will be fewer competitors and larger volume 
of business, but that does not exist in non-bid areas and therefore 
there is no logical nexus between rates established in CBAs and the 
costs to serve in non-CBAs. The commenters also cited concern with the 
steady decreasing number of DME suppliers across the country, and 
stated it indicates a dwindling number of suppliers and real potential 
access issues.
    Response: We believe there is a logical nexus between rates 
established in CBAs and the costs to furnish items in non-CBAs. We 
believe the 99 percent assignment rate in non-CBAs is a strong 
indication that there is a logical nexus between CBAs and the costs to 
furnish items in non-CBAs. As we noted in the November 2020 proposed 
rule, we consider assignment rates as a source of cost data and 
consider it a measure of the sufficiency of payment to cover a 
supplier's costs for furnishing items and services under the Medicare 
program (85 FR 70366). Assignment rates for items subject to the fee 
schedule adjustments have not varied significantly around the country, 
and they have consistently remained over 99 percent in all areas. Thus, 
for the overwhelming majority of claims for items and services 
furnished in the non-CBAs that were subject to the fee schedule 
adjustments, suppliers have decided to accept the Medicare payment 
amount in full, and have not needed to charge the beneficiary for any 
additional costs that the Medicare allowed payment amount did not 
cover. We also have not seen evidence of fee schedule adjustments 
causing access issues, but we will continue to monitor for any such 
issues. Finally, we note that the number of enrolled DMEPOS suppliers 
increased by 2 percent from 86,061 in 2019 to 87,800 in 2020, the 
highest total since 2016 when the total number of enrolled DMEPOS 
suppliers was 88,786. There are therefore still many DMEPOS supplier 
locations throughout the

[[Page 73877]]

country furnishing DMEPOS items and services.
    Comment: The commenters shared the changes they have experienced as 
a result of the COVID-19 pandemic, as well as their recommendations for 
what the payment rates should be in the former CBAs. Several commenters 
stated they oppose extending the application of the current fee 
schedule adjustment transition rules for all of the items and services 
that were included in Round 2021 of the CBP but were effectively 
removed from Round 2021 of the CBP. A few commenters cited the COVID-19 
pandemic as a reason for opposing extending the transition period and 
rates, saying that these rates were based on pre-PHE demand, and that 
fee schedule adjustments should reflect a new environment suppliers and 
manufacturers are facing as a result of the COVID-19 pandemic. 
Commenters stated additional costs from increased freight and other 
supply chain costs, shipping delays, hazard pay for direct care 
employees, personal protective equipment (PPE), and software and 
hardware to enable employees to work remotely. Commenters stated that 
these additional costs will likely continue throughout the pandemic, 
and may continue post-pandemic. A few commenters stated that SPAs were 
developed via a flawed auction bid methodology, and were outdated. A 
commenter recommended that the rates in former CBAs should reflect 
those established for Round 2 and Round 1 re-compete, updated by the 
CPI-U for each year since then. The commenter stated that setting the 
SPAs at these prior rates will provide suppliers with an increase that 
is necessary to reflect the 2020 change in the market.
    Many commenters stated payment rates in the former CBAs should be 
based on a 90/10 blended payment formula, with the 90 percent based on 
the current payment rates in former CBAs (including the CPI-U updates), 
and the 10 percent based on the 2015 unadjusted fee schedules. 
Commenters stated that setting the rates based upon a 90-10 blended 
rate would provide for a modest increase to compensate for what they 
say is a flawed SPA setting methodology, for rates they say are 6 years 
old in a market they say has changed over those years, and for what 
they say are increased costs caused by the COVID-19 pandemic. A 
commenter stated that rates in former CBAs should at least be increased 
to the clearing price of those former bid program amounts.
    Response: Per Sec.  414.210(g)(10), during a temporary gap in the 
entire DMEPOS CBP and National Mail Order CBP or both, the fee schedule 
amounts for items and services that were competitively bid and 
furnished in areas that were competitive bidding areas at the time the 
program(s) was in effect are adjusted based on the SPAs in effect in 
the competitive bidding areas on the last day before the CBP contract 
period of performance ended, increased by the projected percentage 
change in the Consumer Price Index for all Urban Consumers (CPI-U) for 
the 12-month period ending on the date after the contract periods 
ended. If the gap in the CBP lasts for more than 12 months, the fee 
schedule amounts are increased once every 12 months on the anniversary 
date of the first day of the gap period based on the projected 
percentage change in the CPI-U for the 12-month period ending on the 
anniversary date.
    We do not agree that increasing the adjusted fee schedule amounts 
for items and services furnished in the former CBAs based on a 90/10 
blended payment formula is necessary. The assignment rate for the vast 
majority of the items and services that were included in Round 2021 of 
the CBP has remained around 99 percent in the former CBAs in 2020 and 
2021. If the costs to furnish DMEPOS items and services in the former 
CBAs increased as a result of COVID-19 or the DME market has 
fundamentally changed as a result of the COVID-19 pandemic to the point 
where the current payment rates are insufficient, we believe this would 
be reflected in the assignment rates and assignment rates would 
decrease across a variety of former CBAs and product categories in 2020 
and 2021. However, that has not happened. For instance, when looking at 
the monthly assignment rate for oxygen in 2020 (the assignment rates of 
all former CBAs aggregated, with claims data through May 14, 2021), 
every month in 2020 had an assignment rate of 99 percent.
    Further, in 2021, the assignment rate has remained the same except 
for the months of March and April, in which there was 100 percent 
assignment. Finally, in response to comments saying that setting the 
rates based upon a 90-10 blended rate would provide for a modest 
increase to compensate for a flawed SPA calculation methodology, and 6-
year-old rates in a changed market, we would like to note that it has 
not been 6 years since the last CBP contract performance period ended.
    Until the next round of the CBP commences, we believe the payment 
rates set forth in Sec.  414.210(g)(10) for the former CBAs will be 
sufficient, but we will continue to monitor for any issues.
    Comment: A few commenters supported the proposal for CBAs and 
former CBAs (CBAs where no CBP contracts are in effect), in which the 
fee schedule adjustment rules at Sec.  414.210(g)(10) would be extended 
until a future round of the CBP.
    Response: We thank the commenters for their support of our 
proposal.
    Comment: A couple of commenters requested that given concerns and 
uncertainty caused by the COVID-19 pandemic, CMS should postpone the 
implementation of the fee schedule adjustment methodologies in non-CBAs 
for the orthotics, back and knee braces included in Round 2021 of the 
CBP. The commenters stated that they should be paid at the unadjusted 
fee schedule amount for furnishing such items outside of CBAs. The 
commenters stated there are significant differences between the 
provision of DME and O&P care in urban/suburban areas and the rural or 
non-contiguous areas that make up the majority of non-CBAs. For 
instance, a commenter discussed how Medicare beneficiaries in rural 
areas are geographically dispersed, hard to reach, and do not have the 
same access to systems of care available in more populated areas. The 
commenter stated that tough terrain, long distances between patients 
and providers/suppliers, and fewer health care resources mean that DME 
suppliers must incur added costs to deliver the appropriate medical 
equipment and supplies to patients on a timely basis. The commenter 
stated this translates into added costs for transportation, delivery 
and clinical staff, fuel, and other expenses.
    Response: We have been closely monitoring the implementation of 
Round 2021 of the CBP, and have not detected any issues with the fee 
schedule adjustments for OTS back and knee braces. In the non-CBAs, the 
assignment rates for the back and knee braces included in Round 2021 of 
the CBP are over 99 percent. We also believe that continuing to pay for 
those orthotic codes at the unadjusted fee schedule amount would be 
fiscally imprudent as that would mean continuing to pay at rates the 
HHS Office of Inspector General has previously found to be grossly 
excessive.\14\ MedPAC noted in its comments on the CY 2019 ESRD PPS 
DMEPOS final rule (83 FR 57035) that, ``Expanding CBP into new product 
categories, such as orthotics, would produce substantial savings and 
help

[[Page 73878]]

prevent fraud and abuse.'' \15\ MedPAC, when discussing the history of 
DMEPOS payment methods, has also noted that excessively high payment 
rates increased expenditures and likely encouraged inappropriate 
utilization.\16\ This is of particular relevance because of recent past 
instances of fraud involving orthotic braces.\17\ \18\
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    \14\ https://oig.hhs.gov/oas/reports/region5/51700033.pdf.
    \15\ https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/comment-letters/08312018_esrd_cy2019_dme_medpac_comment_v2_sec.pdf.
    \16\ https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun18_medpacreporttocongress_rev_nov2019_note_sec.pdf.
    \17\ https://www.justice.gov/opa/pr/federal-indictments-and-law-enforcement-actions-one-largest-health-care-fraud-schemes.
    \18\ https://www.justice.gov/opa/pr/five-individuals-charged-roles-65-million-nationwide-conspiracy-defraud-federal-health-care.
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    We believe fee schedule adjustments for these items and services 
are appropriate, and we would like to note that such adjustments are 
mandated by section 1834(a)(1)(F) of the Act. We will continue to 
monitor for any issues.
    Comment: A commenter stated there were flaws in the data CMS 
presented, such as not having a control group to see if data like ER 
admission rates are relative to DMEPOS changes or other trends like 
pressure on hospitals from CMS to decrease readmissions or face 
penalties.
    Response: We believe our health outcomes monitoring data are robust 
and a valuable tool. We compare historical health outcomes data between 
CBAs, non-rural non-CBAs, and rural CBAs in the same BEA region. Thus, 
we do see if health outcomes changes are unique to certain BEA regions 
or areas within those regions, and if they track with other BEA regions 
or other areas within the same BEA region. We also compare historical 
health outcomes data for non-contiguous non-CBAs and non-contiguous 
CBAs.
    As we indicated in the November 2020 proposed rule, we monitor 
mortality rates, hospitalization rates, ER visit rates, SNF admission 
rates, physician visit rates, monthly days in hospital, and monthly 
days in SNF (85 FR 70368). Except for death information, which comes 
from the Medicare Enrollment Database, all other outcomes are derived 
from claims (inpatient, outpatient, Part B carrier, and SNF). Our 
monitoring materials cover historical and regional trends in these 
health outcome rates across a number of populations, allowing us to 
observe deviations that require further drilldown analyses. We monitor 
health outcomes in the enrolled Medicare population (Medicare Parts A 
and B), dual Medicare and Medicaid population, long-term 
institutionalized population, as well as various DME utilizers and 
access groups. This helps paint a complete picture of whether an 
increase in an outcome is across the board (not linked to DME access), 
or is unique to certain populations. Specifically, we focus on any 
increases that are unique to the DME access groups, which include 
beneficiaries who are likely to use certain DME based on their 
diagnoses, and we would conduct drilldown analyses and policy research 
to pinpoint potential reasons for such increases.
    Additionally, our health outcomes monitoring data is but one piece 
of multiple sources of data that we use to analyze the effects of the 
fee schedule adjustments. We also analyze assignment rates, total 
services, total services by supplier, travel distance, and other data 
to provide a more complete picture on the effects of the fee schedule 
adjustments.
    Comment: A commenter discussed the assignment rate data that 
continues to be above 99 percent in non-CBAs, saying the increase in 
assignment rate over time does not surprise them, as the commenter, a 
DME supplier, says customers choose to pay cash for common affordable 
items, such as walkers, instead of pursuing a prescription or 
documentation as it is not worth the time and hassle. The commenter 
stated that if a beneficiary sees a doctor for a walker, in order for 
the beneficiary to get reimbursed for the walker, the beneficiary will 
likely have to schedule another visit for the more major health issues 
they are experiencing, as the commenter stated most doctors now only 
address one issue at a time, and that this will never be measured in 
the CMS data.
    Response: Although there could be a situation in which a 
beneficiary elects to pay cash for some DME items, we do not believe 
this explains the consistently high assignment rates across different 
parts of the country for prolonged periods of time. High assignment 
rates preceded the fee schedule adjustments, and high assignment rates 
have continued even after the fee schedule adjustments have been in 
effect for the last several years. We believe the high assignment rates 
are an indication that the payment rates are sufficient and that 
assignment rates are a valuable tool in monitoring the effects of the 
fee schedule adjustments.
    Comment: Commenters shared their concerns in regards to beneficiary 
complaints and patient choice of equipment. Specifically, a commenter 
stated its hypothesis that beneficiary complaints to CMS have decreased 
because beneficiaries have become resigned to accept low quality 
products because the commenter, a DME supplier, has told beneficiaries 
they cannot afford to buy the name brand products at the rates Medicare 
pays. The commenter also stated that spending an hour navigating 
through call centers to complain about the big national and regional 
chains where they are being consolidated is fruitless. Additionally, 
the commenter stated that complaining to CMS is fruitless if the 
beneficiary does not like the one option offered by a supplier 
accepting assignment, and that beneficiaries accept what they can get 
and if it does not work they come back and buy the nice piece of 
equipment out of pocket. The commenter also stated that suppliers will 
continue to consolidate, and that beneficiaries will continue to have 
fewer options not just in terms of suppliers, but in DMEPOS products. 
Another commenter expressed concern that suppliers have stopped 
carrying specific items for which Medicare payments are too low, and 
stated that they have seen many essential items such as heavy-duty 
walkers are not well reimbursed and thus it is harder to find a DME 
supplier that carries one and will sell to Medicare patients.
    Response: We recognize the value of and encourage beneficiaries to 
communicate any complaints about their DME to Medicare. More 
information on filing a complaint about DME can be found here: https://www.medicare.gov/claims-appeals/file-a-complaint-grievance/complaints-about-durable-medical-equipment-dme.
    With regard to patient choice and suppliers supplying specific 
equipment, we believe the situations the commenters describe underscore 
one of the many benefits of the DMEPOS CBP. We also believe that 
expanding the CBP into additional areas of the country would provide 
these benefits to more beneficiaries and could work towards addressing 
some of the concerns the commenters have expressed.
    The Medicare Learning Network Fact Sheet MLN900927 titled, ``DMEPOS 
Competitive Bidding Program Referral Agents'' discusses some of these 
benefits that are relevant to those situations the commenters 
describe.\19\
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    \19\ https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/DME_Ref_Agt_Factsheet_ICN900927.pdf.
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    In particular, and as discussed in MLN900927, the CBP includes a 
beneficiary safeguard to ensure that beneficiaries have access to 
specific

[[Page 73879]]

brands when needed to avoid an adverse medical outcome. This safeguard, 
which is sometimes called the Physician Authorization Process, allows a 
physician (including a podiatric physician) or treating practitioner 
(that is, a physician assistant, clinical nurse specialist, or nurse 
practitioner) to prescribe a specific brand or mode of delivery to 
avoid an adverse medical outcome. The physician or treating 
practitioner must document in the beneficiary's medical record the 
reason why the specific brand is necessary to avoid an adverse medical 
outcome. This documentation, which would be in the physician's order 
and notes, must include all of the following:
     The product's brand name.
     The features that this product has versus other brand name 
products.
     An explanation of how these features are necessary to 
avoid an adverse medical outcome.
    If a physician or treating practitioner prescribes a particular 
brand for a beneficiary to avoid an adverse medical outcome, the 
contract supplier must, as a term of its contract, ensure that the 
beneficiary receives the needed item. The contract supplier has three 
options:
     The contract supplier can furnish the specific brand as 
prescribed.
     The contract supplier can consult with the physician or 
treating practitioner to find another appropriate brand of item for the 
beneficiary and obtain a revised written prescription.
     The contract supplier can assist the beneficiary in 
locating a contract supplier that will furnish the particular brand of 
item prescribed by the physician or treating practitioner.
    If the contract supplier cannot furnish the specific brand and 
cannot obtain a revised prescription or locate another contract 
supplier that will furnish the needed item, the contract supplier must 
furnish the item as prescribed. We discuss this particular issue 
further in the final rule we published in the Federal Register on April 
10, 2007 titled ``Medicare Program; Competitive Acquisition for Certain 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) and Other Issues'' (72 FR 18064).
    A contract supplier is prohibited from submitting a claim to 
Medicare if it provides an item other than that specified in the 
written prescription. Any change in the prescription requires a revised 
written prescription. In addition, contract suppliers are required to 
accept assignment for items they furnish to Medicare beneficiaries.
    Comment: A commenter questioned why the total number of DMEPOS 
services had been increasing from 2016 to 2018 despite a decline in 
enrolled beneficiaries. The commenter posited several theories for this 
increase, including the notion that it is because items supplied have 
decreased in quality and require more frequent replacement, the 
surviving regional and national suppliers know that they can only be 
profitable when ``up-selling'' customers to accept all eligible 
accessories and supplies when dispensing, that technology advances have 
allowed for an increase in resupply rates, and that there is rampant 
fraud resulting in billions of dollars of claims. Finally, the 
commenter questioned whether the numbers would look different if all 
the fraud-related items and suppliers were not in this data.
    Response: We have been monitoring claims and health outcomes data 
such as deaths, emergency room visits, physician office visits, 
hospital and nursing home admissions and lengths of stay, etc., very 
closely since the fee schedule adjustments were implemented in 2016 and 
have not seen any signs that health outcomes have been negatively 
affected by the fee schedule adjustments. Overall, health outcomes have 
remained the same or have improved since 2016, and this is an 
indication that there has not been a decrease in the quality of DMEPOS 
items and services furnished. Although we know that a certain 
percentage of Medicare claims for DMEPOS items and services are 
fraudulent, we do not currently have data to determine whether fee 
schedule adjustments have had any impact on the number of fraudulent 
claims furnished for DMEPOS items and services.
    In the CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 57032), we 
discussed utilization trends in the non-CBAs for the 2016 to 2018 time 
period. In particular, we noted that while utilization of DME varied 
throughout area and by particular item, the number of total services 
increased from 2016 to 2017 (2.05 percent), and from 2017 to 2018 (3.08 
percent) when looking at the number of total services furnished through 
week 34 of the respective year. We noted that there had been a 
persistent increase in total volume of services furnished in non-CBAs 
from 2016 to 2018, and that this was driven by an increase in CPAP/
RADs. All other products exhibited either a continuous decline from 
2016 through 2018, or at least a decline from 2017 to 2018.
    When looking at updated data from 2019 to 2020 and 2020 to 2021 
(using data through the same week in the respective year--week 42--to 
understand the impact of the fee schedule adjustment while accounting 
for claim delay), the total number of claim lines for all items and 
services subject to fee schedule adjustments in the non-CBAs slightly 
decreased, and we believe COVID-19 likely played a role in this 
decrease. For instance, researchers have documented that in 2020 there 
was a decrease in health care utilization as a result of the COVID-19 
pandemic.20 21
---------------------------------------------------------------------------

    \20\ https://www.healthsystemtracker.org/chart-collection/how-have-healthcare-utilization-and-spending-changed-so-far-during-the-coronavirus-pandemic/#item-covidcostsuse_marchupdate_4.
    \21\ https://aspe.hhs.gov/pdf-report/Medicare-FFS-Spending-Utilization.
---------------------------------------------------------------------------

    From 2019 to 2020, the only product categories that experienced an 
increase in total number of claim lines were CPAP device and supplies, 
infusion pump and supplies, and insulin infusion pump and supplies. For 
example, for CPAP device and supplies, the total number of claim lines 
increased by 3.43 percent from 2019 to 2020 (when using data through 
week 42 of the respective year). From 2020 to 2021, only the 
transcutaneous electrical nerve stimulation (TENS) product category 
experienced an increase in total number of claim lines with a 0.78 
percent increase.
    Comment: Commenters provided insights into our travel distance 
analysis. Specifically, a commenter stated that the travel distance 
analysis CMS presented in the November 2020 proposed rule, which 
presented the average number of miles between suppliers and 
beneficiaries, does not accurately reflect their business network, nor 
service and clinical support infrastructure. For instance, the 
commenter stated that while their patients do receive services directly 
to their home, the majority of services are delivered to the hospital 
or outpatient setting at the time of discharge. The commenter stated 
they also maintain distribution centers to allow shipment of ongoing 
supplies as needed, and that often their central distribution 
warehouses are used to ship on behalf of the service billing locations. 
Another commenter stated that average travel distance to furnish items 
and services to beneficiaries in 2017 was far greater outside of CBAs 
than in CBAs.
    Response: We appreciate learning about the nature of the 
commenter's business network and how it effects their travel distance 
for furnishing services to beneficiaries. Section 16008 of the Cures 
Act requires us to conduct a comparison of several factors with respect 
to non-CBAs and CBAs, and one of those factors is the average travel 
distance and cost associated with

[[Page 73880]]

furnishing items and services in the area. The kind of travel that the 
commenter experiences may be true for their particular company. 
However, past stakeholder input from the DME industry has often focused 
on the travel distances DME suppliers travel to reach beneficiaries' 
homes, particularly in rural areas. As such, that is why we decided to 
focus on the travel distance between the beneficiary's residential ZIP 
code and the supplier's ZIP code. With regard to the commenter saying 
that the average travel distance to furnish items and services to 
beneficiaries in 2017 was far greater outside of CBAs than in CBAs, our 
data does not show that to be the case, unless looking at specific 
types of areas. As we found in the CY 2019 ESRD PPS DMEPOS proposed 
rule (83 FR 34367 through 34371) and in the November 2020 proposed rule 
(85 FR 70366), travel distances were only greater in certain non-CBAs, 
which included Frontier and Remote (FAR), OCBSAs, and Super Rural 
areas.

D. Alternatives Considered but Not Proposed

    We considered, but did not propose, three alternatives to our 
provisions and we sought comments on these alternatives:
1. Adjust Fee Schedule Amounts for Super Rural Areas and Non-Contiguous 
Areas Based on 120 Percent of the Fee Schedule Amounts for Non-Rural 
Areas
    Under the first alternative, we considered prior suggestions from 
stakeholders to use the ambulance fee schedule concept of a ``super 
rural area'' when determining fee schedule adjustments for non-CBAs (85 
FR 70371). Specifically, we considered the provision to eliminate the 
definition of rural area at Sec.  414.202 and 42 CFR 414.210(g)(1)(v), 
which brings the adjusted fee schedule amounts for rural areas up to 
110 percent of the national average price determined under Sec.  
414.210(g)(1)(ii). In place of this definition and rule, we considered 
the provision for an adjustment to the fee schedule amounts for DMEPOS 
items and services furnished in super rural non-CBAs within the 
contiguous U.S. equal to 120 percent of the adjusted fee schedule 
amounts determined for other, non-rural non-CBAs within the same State. 
For example, the adjusted fee schedule amount for super rural, non-CBAs 
within Minnesota would be based on 120 percent of the adjusted fee 
schedule amount (in this case, the regional price) for Minnesota 
established in accordance with Sec.  414.210(g)(1)(i) through (iv). 
Consistent with the ambulance fee schedule rural adjustment factor at 
Sec.  414.610(c)(5)(ii), we considered defining ``super rural'' as a 
rural area determined to be in the lowest 25 percent of rural 
population arrayed by population density, where a rural area is defined 
as an area located outside an urban area (MSA), or a rural census tract 
within an MSA as determined under the most recent version of the 
Goldsmith modification as determined by the Federal Office of Rural 
Health Policy at the Health Resources and Services Administration. Per 
this definition and under this alternative rule, certain areas within 
MSAs would be considered super rural areas whereas now they are treated 
as non-rural areas because they are located in counties that are 
included in MSAs. For all other non-CBAs, including areas within the 
contiguous U.S. that are outside MSAs but do not meet the definition of 
super rural area, we considered adjusting the fee schedule amounts 
using the current fee schedule adjustment methodologies under Sec.  
414.210(g)(1) and Sec.  414.210(g)(3) through (8).
    In addition to addressing past stakeholder input, this alternative 
approach would provide a payment increase that is somewhat higher than, 
but similar to the 17 percent payment differential identified by 
stakeholders in 2015 based on a survey of respiratory equipment 
suppliers.\22\ In addition, we have received input from suppliers that 
serve low population density areas within MSAs that are not CBAs. These 
stakeholders claim that they are serving low population density areas 
that are not near to or served by suppliers located in the urban core 
areas of the MSA and believe they must receive higher payments than 
suppliers serving the higher population density areas of the MSA. Under 
the alternative fee schedule adjustment methodology, if these low 
population density areas were to meet the definition of super rural 
area, they would receive a 20 percent higher payment than areas that 
are not super rural areas. This alternative payment rule would address 
these concerns with how the current payment rules and definition of 
rural area affect these areas, and would target payments for those 
rural areas that are low population density areas, regardless of 
whether they are located in an MSA or not. This approach would also 
address concerns raised from stakeholders on the March 23, 2017 call 
regarding the cost of traveling long distances to serve far away, 
remote areas.
---------------------------------------------------------------------------

    \22\ https://www.cqrc.org/img/CQRCCostSurveyWhitePaperMay2015Final.pdf.
---------------------------------------------------------------------------

    Under this alternative, Sec.  414.210(g)(2), which addresses fee 
schedule adjustments for DMEPOS items and services furnished in non-
contiguous areas, would be replaced with a new rule that adjusts the 
fee schedule amounts for non-contiguous areas based on the higher of 
120 percent of the average of the SPAs for the item or service in CBAs 
outside the contiguous U.S. (currently only Honolulu, Hawaii), or the 
national average price determined under Sec.  414.210(g)(1)(ii).
    Comment: A couple commenters stated that while they did not support 
the alternative of adjusting the fee schedule amounts for super rural 
and non-contiguous areas based on 120 percent of the fee schedule 
amounts for non-rural areas, they recommend eliminating the fee 
schedule amounts for rural areas up to 110 percent of the national 
average price determined under Sec.  414.210(g)(1)(ii)) and maintaining 
the 50/50 blend, but replacing the current rural definition (and 
corresponding ZIP codes) by including the ``super rural'' ZIP codes 
within the current array of rural ZIP codes. The commenters stated that 
because certain areas within MSAs are treated as non-rural areas, as 
they are located in counties that are included in MSAs, the commenters 
were concerned that the current array of suppliers in higher populated 
urban areas that are currently serving these rural areas within an MSA 
may abandon these areas if they are less profitable.
    Response: Although we are not finalizing this particular 
alternative that we considered, we acknowledge the commenters' 
recommendations regarding this particular alternative and we will keep 
these points in mind for future consideration.
    Comment: A commenter stated it would not be appropriate to adjust 
the fee schedule amounts relying on the geographic designations used in 
the Ambulance Fee Schedule, or suggested rates based on industry data 
from 2015. The commenter stated many things have changed since 2015 
that have affected the costs of furnishing items and services, 
including the COVID-19 pandemic and the increased costs of personal 
protective equipment (PPE), supply shortages, and personnel costs. The 
commenter also stated that the Census Bureau has shifted to a sampling 
methodology that impacts the RUCAs, which has changed the way the ZIP 
code designations are calculated under the Ambulance Fee Schedule, and 
that they were concerned that these changes have led super-rural areas 
and rural areas being designated as urban. The

[[Page 73881]]

commenter stated that before this methodology is applied to any other 
part of Medicare, CMS must work to address the underlying problems 
these changes have created.
    Response: We are not finalizing this particular alternative and 
will keep these points in mind for future consideration.
    After consideration of the public comments we received, we are not 
finalizing this alternative considered.
2. Establish Additional Phase-in Period for Fully Adjusted Fee Schedule 
Amounts for Rural Areas and Non-Contiguous Areas
    We considered proposing an alternative fee schedule adjustment 
methodology that would establish an additional transition period to 
allow us to determine the impact of the new SPAs and monitor the impact 
of adjusted fee schedule amounts (85 FR70372). Under this alternative, 
we considered adjusting the fee schedule amounts for items and services 
furnished in rural areas and non-contiguous non-CBAs based on a 75/25 
blend of adjusted and unadjusted rates for the 3-year period from April 
1, 2021, or the date immediately following the duration of the 
emergency period described in section 1135(g)(1)(B) of the Act (42 
U.S.C. 1320b-5(g)(1)(B)), whichever is later, through December 31, 
2023. Such a phase-in would bring the fee schedule payment amounts down 
closer to the fully adjusted fee levels and allow for a 3-year period 
to monitor the impact of the lower rates on access to items and 
services in these areas before potentially phasing in the fully 
adjusted rates in 2024.
    Comment: A commenter stated they favor the permanent extension of 
the current rural and non-rural non-CBA blended rates instead of the 
alternative phase-in of the fully adjusted fee schedule amounts 
discussed in the November 2020 proposed rule, as it is important for 
patients and suppliers to have stable rates, in their view.
    Response: We did not propose to extend the 75/25 blended rates in 
the non-rural contiguous non-CBAs once the PHE ends. We did, however, 
propose a fee schedule adjustment methodology under Sec.  414.210(g)(1) 
for the non-rural contiguous non-CBAs that is not time-limited, 
transitional, or dependent upon the next round of the CBP. We agree 
with the commenter that it is important to provide patients and 
suppliers with stable rates to the extent feasible. Of note, the fully 
adjusted rates had been in continuous effect in the non-rural 
contiguous non-CBAs from January 2017 through March 5, 2020. During 
that time period, the rate of assignment for items and services subject 
to fee schedule adjustments furnished in those areas was over 99 
percent. We believe that the fully adjusted rates will be sufficient 
for when the PHE ends.
    After consideration of the public comments we received, we are not 
finalizing this alternative considered.
3. Extend Current Fee Schedule Adjustments for Items and Services 
Furnished in Non-CBAs, CBAs, and Former CBAs That Were Included in 
Product Categories Removed From Round 2021 of the CBP
    CMS only awarded Round 2021 CBP contracts to bidders in the OTS 
back braces and OTS knee braces product categories. CMS did not award 
Round 2021 CBP contracts to bidders that bid in any other product 
categories that were included in Round 2021 of the CBP, therefore, CMS 
does not have any new SPAs for these items and services. As a result, 
under this alternative, we considered whether to simply extend 
application of the current fee schedule adjustment rules for all of the 
items and services that were included in Round 2021 of the CBP but were 
essentially removed from Round 2021 of the CBP (85 FR 70372). 
Specifically, for items and services included in product categories 
that have essentially been removed from Round 2021 of the CBP, CMS 
considered extending the transition rules at Sec.  414.210(g)(9)(iii) 
and (v) for items and services furnished in non-CBAs and the fee 
schedule adjustment rules at Sec.  414.210(g)(10) for items and 
services furnished in CBAs or former CBAs until such product categories 
are competitively bid again in a future round of the CBP. Under this 
alternative, we would adjust the fee schedule amounts for items and 
services furnished in areas other than rural areas and non-contiguous 
non-CBAs in accordance with Sec.  414.210(g)(9)(v) based on 100 percent 
of the adjusted rates beginning on April 1, 2021 or the date 
immediately following the duration of the emergency period described in 
section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)), 
whichever is later, through the date immediately preceding the 
effective date of the next round of CBP contracts. As previously 
discussed in this final rule, now that April 1, 2021 has passed, but 
the public health emergency is still ongoing, and this rule has yet to 
be finalized, we are making a technical edit to reflect the new 
effective date for this final rule. The fee schedule amounts for items 
and services removed from the CBP and furnished in rural and non-
contiguous non-CBAs would continue to be adjusted based on a 50/50 
blend in accordance with Sec.  414.210(g)(9)(iii) through the date 
immediately preceding the effective date of the next round of CBP 
contracts. Under, this alternative, the fee schedule adjustment 
transition rules under Sec.  414.210(g)(9) would continue in effect 
through the date immediately preceding the effective date of the next 
round of CBP contracts. This alternative differs from our proposal and 
this final rule, as we proposed and are finalizing a fee schedule 
adjustment methodology for non-CBAs under Sec.  414.210(g)(1) and 
(g)(2), that is not time-limited, transitional, or dependent upon the 
next round of the CBP.
    For items and services included in product categories that have 
effectively been removed from Round 2021 of the CBP, the fee schedule 
amounts for items and services furnished in CBAs or former CBAs would 
continue to be adjusted in accordance with Sec.  414.210(g)(10) through 
the date immediately preceding the effective date of the next round of 
CBP contracts. In contrast, for items and services that are included in 
Round 2021 of the CBP, the fee schedule amounts for such items and 
services would be adjusted in accordance with the adjustment 
methodologies outlined in this final rule; we would pay the 50/50 
blended rates in rural and non-contiguous non-CBAs, and 100 percent of 
the adjusted payment amount established under Sec.  414.210(g)(1)(iv) 
in non-rural non-CBAs in the contiguous U.S.
    Comment: Commenters opposed this alternative for the reasons 
discussed in previous comments in section III.C. of this final rule. 
Most commenters opposed continuation of the current rates in the former 
CBAs, supported a permanent extension of the 50/50 blended rates in 
rural and non-contiguous non-CBAs, and opposed paying 100 percent of 
the adjusted payment amount established under Sec.  414.210(g)(1)(iv) 
in non-rural non-CBAs in the contiguous U.S. Commenters opposed 
continuation of the current rates in the former CBAs saying they are 
based on SPAs established by a flawed bid methodology developed over 6 
years ago. Instead, and as previously discussed, many commenters 
supported a permanent extension of the 50/50 blended rates in rural and 
non-contiguous non-CBAs, a 75/25 blended rate methodology in the non-
rural non-CBAs in the contiguous U.S., and a 90/10 blended rate 
methodology in the former CBAs in which the 90 percent must be based on 
the current payment

[[Page 73882]]

rates in the former CBAs (including the CPI-U updates) and the 10 
percent must be based on the 2015 unadjusted fee schedule. Finally, as 
previously discussed, a few commenters supported the proposal for CBAs 
and former CBAs (CBAs where no CBP contracts are in effect), in which 
the fee schedule adjustment rules at Sec.  414.210(g)(10) would be 
extended until a future round of the CBP. However, these commenters did 
not support the non-CBA policies in this alternative considered, and 
instead supported a permanent extension of the 50/50 blended rates in 
rural and non-contiguous non-CBAs, and a 75/25 blended rate methodology 
in the non-rural non-CBAs in the contiguous U.S.
    Response: After consideration of the public comments we received, 
we are not finalizing this alternative considered. As we discuss in 
section III.E. of this final rule titled ``Provisions of Final Rule'', 
we will be finalizing our proposals discussed later in this section. We 
expect to revisit fee schedule adjustments in the future.

E. Provisions of Final Rule

    We are finalizing our proposals, with the modification of the 
effective date, in this final rule. In the November 2020 proposed rule, 
we proposed the fee schedule adjustment methodologies for items and 
services furnished in non-CBAs on or after April 1, 2021, or the date 
immediately following the duration of the emergency period described in 
section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)), 
whichever is later (85 FR 70370). However, as we previously discussed 
in this final rule, now that April 1, 2021 has passed, and given that 
the COVID-19 PHE is still ongoing, we are making a technical edit to 
change the April 1, 2021 date to the effective date specified in the 
DATES section of this final rule to reflect the new effective date for 
these provisions. Other than the modification of the April 1, 2021 
effective date, we are finalizing our proposals without modification.
    First, we will continue paying the 50/50 blended rates in non-
contiguous non-CBAs, but the 50/50 blend will no longer be a transition 
rule under Sec.  414.210(g)(9), and will instead be the fee schedule 
adjustment methodology for items and services furnished in these areas 
under Sec.  414.210(g)(2) unless revised in future rulemaking. For 
items and services furnished in non-contiguous non-CBAs, the fee 
schedule amounts for such items and services furnished on or after the 
effective date specified in the DATES section of this final rule, or 
the date immediately following the duration of the emergency period 
described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later, will be adjusted so that they are 
equal to a blend of 50 percent of the greater of the average of the 
SPAs for the item or service for CBAs located in non-contiguous areas 
or 110 percent of the national average price for the item or service 
determined under Sec.  414.210(g)(1)(ii) and 50 percent of the 
unadjusted fee schedule amount for the area, which is the fee schedule 
amount in effect on December 31, 2015, increased for each subsequent 
year beginning in 2016 by the annual update factors specified in 
sections 1834(a)(14), 1834(h)(4), and 1842(s)(1)(B) of the Act, 
respectively, for durable medical equipment and supplies, off-the-shelf 
orthotics, and enteral nutrients, supplies, and equipment.
    Second, we will continue paying the 50/50 blended rates in rural 
contiguous areas, but the 50/50 blend will no longer be a transition 
rule under Sec.  414.210(g)(9), and will instead be the fee schedule 
adjustment methodology for items and services furnished in these areas 
under Sec.  414.210(g)(2) unless revised in future rulemaking. For 
items and services furnished in rural contiguous areas on or after the 
effective date specified in the DATES section of this final rule or the 
date immediately following the duration of the emergency period 
described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later, the fee schedule amounts will be 
adjusted so that they are equal to a blend of 50 percent of 110 percent 
of the national average price for the item or service determined under 
Sec.  414.210(g)(1)(ii) and 50 percent of the fee schedule amount for 
the area in effect on December 31, 2015, increased for each subsequent 
year beginning in 2016 by the annual update factors specified in 
sections 1834(a)(14), 1834(h)(4), and 1842(s)(1)(B) of the Act, 
respectively, for durable medical equipment and supplies, off-the-shelf 
orthotics, and enteral nutrients, supplies, and equipment.
    We note that the 50/50 blended rates for DMEPOS items and services 
furnished in rural and non-contiguous areas that we are finalizing in 
this rule are, on average, approximately 66 percent higher than the 
fully adjusted fee schedule amounts. Previous stakeholder input from 
MedPAC has indicated that the 50/50 blended rates are ``costly'' and 
create ``. . . a financial burden for the Medicare program and 
beneficiaries''. MedPAC has also previously opined on the 
appropriateness of the unadjusted fee schedule, which comprises 50 
percent of the 50/50 blended rates. MedPAC stated, ``products not 
included in the CBP continue to largely be paid on the basis of the 
historical fee schedule, and the Commission has found many of these 
rates are likely excessive.'' \23\ In light of this previous 
stakeholder input from MedPAC, we are concerned that this fee schedule 
adjustment methodology may result in payment amounts that are excessive 
compared to the fully adjusted fee schedule amounts. However, as we 
discussed in the November 2020 proposed rule, this fee schedule 
adjustment methodology errs on the side of caution, as we aim to ensure 
beneficiary access to items and services in rural and remote areas of 
the country. For instance, we proposed paying the 50/50 blend for rural 
and non-contiguous non-CBAs from January 1, 2019, through December 31, 
2020, in our CY 2019 ESRD PPS DMEPOS proposed rule, and we finalized 
this policy in our CY 2019 ESRD PPS DMEPOS final rule. Most of the 
comments we received on this proposal were from commenters in the DME 
industry, such as homecare associations, DME manufacturers, and 
suppliers, and these commenters generally supported the 50/50 blended 
rates proposal.
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    The 50/50 blended rates were initially established for phase in 
purposes, so we may consider alternative methodologies for adjusting 
fee schedule amounts for rural and non-contiguous areas in the future. 
We will be undertaking analyses to assess the extent to which these 
payments are ``excessive'', as per MedPAC's comment. In addition, we 
may decide it is necessary to propose changes to the fee schedule 
adjustment methodologies in the future depending on potential changes 
to the CBP. Therefore, we will likely be revisiting this issue and the 
fee schedule adjustment methodologies for all items in all areas again 
in the future.
    Third, we will revise Sec.  414.210(g)(1)(v) to establish that for 
items and services furnished before the effective date specified in the 
DATES section of this final rule, the fee schedule amount for all areas 
within a state that are defined as rural areas for the purposes of this 
subpart is adjusted to 110 percent of the national average price 
determined under paragraph (g)(1)(ii) of this section. In the November 
2020 proposed rule, we proposed to reference April 1, 2021 in the 
revised Sec.  414.210(g)(1)(v). However, as we previously discussed in 
this final rule,

[[Page 73883]]

April 1, 2021, has passed and the COVID-19 PHE is still ongoing. 
Because this rule has yet to be finalized, the regulation text will 
reference the effective date specified in the DATES section of this 
final rule effective date rather than April 1, 2021.
    Fourth, we are finalizing our proposal so that for items and 
services furnished on or after the effective date specified in the 
DATES section of this document, or the date immediately following the 
termination of the emergency period described in section 1135(g)(1)(B) 
of the Act (42 U.S.C. 1320b-5(g)(1)(B)) (that is, the COVID-19 PHE), 
whichever is later, in all other non-rural, non-CBAs within the 
contiguous United States, the fee schedule amounts will be equal to 100 
percent of the adjusted payment amount established under Sec.  
414.210(g)(1)(iv).
    Fifth and finally, we are finalizing our proposal to add paragraph 
Sec.  414.210(g)(9)(vi) to establish that for items and services 
furnished in all areas with dates of service on or after the effective 
date specified in the DATES section of this document, or the date 
immediately following the duration of the emergency period described in 
section 1135(g)(1)(B) of the Act, whichever is later, based on the fee 
schedule amount for the area is equal to the adjusted payment amount 
established under Sec.  414.210(g).

IV. DMEPOS Fee Schedule Adjustments for Items and Services Furnished in 
Rural Areas From June 2018 Through December 2018 and Exclusion of 
Infusion Drugs From the DMEPOS CBP

A. Overview

    On May 11, 2018 we published an IFC (83 FR 21912) in the Federal 
Register titled ``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''. In this 
section of this final rule, we will present the provisions of the May 
2018 IFC followed by summation of the comments received and our 
responses.
    Section 5004(b) of the Cures Act amended section 1847(a)(2)(A) of 
Act to exclude drugs and biologicals described in section 1842(o)(1)(D) 
of the Act from the DMEPOS CBP. In the May 2018 IFC, we made 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.
    As discussed in section II. of this rule, in the May 2018 IFC, we 
also expressed an immediate need to resume the transitional, blended 
fee schedule amounts in rural and non-contiguous areas, noting strong 
stakeholder concerns about the continued viability of many DMEPOS 
suppliers, our finding of a decrease in the number of suppliers 
furnishing items and services subject to the fee schedule adjustments, 
as well as the Cures Act mandate to consider additional information 
material to setting fee schedule adjustments based on information from 
the DMEPOS CBP for items and services furnished on or after January 1, 
2019 (83 FR 21918). We amended Sec.  414.210(g)(9) by adding Sec.  
414.210(g)(9)(iii) 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. We also amended 
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, 
fully adjusted fee schedule amounts would apply (83 FR 21922). We also 
added Sec.  414.210(g)(9)(iv) to specify that fully adjusted fee 
schedule amounts would apply for certain items furnished in non-CBAs 
other than rural and non-contiguous areas from June 1, 2018 through 
December 31, 2018 (83 FR 21920). We explained that we would use the 
extended transition period to further analyze our findings and consider 
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 were 
necessary (83 FR 21918 through 21919). We respond to the comments we 
received on these issues later in this final rule.

B. Background

1. Background for Payment Revisions for DMEPOS
    For further background regarding the DMEPOS CBP, payment 
methodology for CBAs, and the fee schedule adjustment methodology for 
non-CBAs, we refer readers to section III.A. of this final rule.
    On February 26, 2014, we published an Advance Notice of Proposed 
Rulemaking (ANPRM) in the Federal Register titled, ``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 State government offices. Commenters generally stated that costs 
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. A 
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 titled ``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

[[Page 73884]]

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 is described in section III.A. of this final rule.
    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 (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 a 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).
2. Transition Period for Phase-In of Fee Schedule Adjustments
    We 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 to ensure access to necessary items and 
services in these areas. The May 2018 IFC amended 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. The May 2018 IFC also amended Sec.  414.210(g)(9) to 
resume the transition period for the phase-in of adjustments to 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 final rule.
a. 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 must: (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.\24\ 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 industry stakeholders expressed concerns 
that the level of the adjusted payment amounts constrained suppliers 
from furnishing items and services to rural areas. These 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 commenters claimed that the adjusted 
fees were not sufficient to cover the costs of furnishing items and 
services in rural and non-contiguous areas and that it was having an 
impact on access to items and services in these areas. For additional 
details about the national provider call and a summary of oral and 
written comments received, we refer readers to the CY 2019 ESRD PPS/
DMEPOS proposed rule (83 FR 57026).
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    In the May 2018 IFC, we stated that 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

[[Page 73885]]

services furnished by suppliers in an area (83 FR 21917). We then noted 
that data for items furnished in 2016 and 2017 showed that the average 
volume of items furnished by suppliers in CBAs exceeded the average 
volume of items furnished by suppliers in rural and non-contiguous 
areas. We stated that 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 (83 FR 21917).
    In addition, at the time of this May 2018 IFC, the adjusted fee 
schedule amounts for stationary oxygen equipment in non-contiguous, 
non-CBAs were 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 were lower than the 
SPAs in CBAs within the same State. This was due to the combination of 
the fee schedule adjustments and the budget neutrality offset that CMS 
applied 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 is located at section 1834(a)(9)(D) of the Act, and at the time 
of the May 2018 IFC, section 1834(a)(9)(D) of the Act only allowed CMS 
to establish new classes of oxygen and oxygen equipment if such classes 
were budget neutral, which meant that the establishment of new oxygen 
payment classes did not result in oxygen and oxygen equipment 
expenditures for any year that were more or less than the expenditures 
that would have been made had the new classes not been established. We 
also stated that in the May 2018 IFC that accordance with Sec.  
414.226(c)(6), CMS reduced the fee schedule amounts for stationary 
oxygen equipment in non-CBAs to make the payment classes for oxygen and 
oxygen equipment budget neutral as required by section 1834(a)(9)(D) of 
the Act (83 FR 21917). 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 were lower than the SPAs in Honolulu, Hawaii, and CBAs 
within the same State, respectively. We stated that this was 
significant because the methodology at 42 CFR 414.210(g) attempted to 
ensure that the adjusted fee schedule amounts for items and services 
furnished in rural areas within a State were no lower than the adjusted 
fee schedule amounts for non-rural areas within the same State. We then 
noted that 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, and that CBAs tend to have higher 
population densities and typically correspond with urban census tracts 
(83 FR 21917).
    We explained that the budget neutrality offset resulted in payment 
amounts for stationary oxygen equipment in CBAs being higher than the 
adjusted fee schedule amounts in some cases. We stated that 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, we stated payment at the 
blended rates would avoid situations where payment for furnishing 
oxygen in a rural or non-contiguous, non-CBA was lower than payment for 
furnishing oxygen in a CBA (83 FR 21917). The May 2018 IFC also 
contained provisions related to wheelchair payment. For further 
discussion of the wheelchair payment provisions that were included in 
the May 2018 IFC, see the final rule titled: Medicare Program; 
Inpatient Rehabilitation Facility Prospective Payment System for 
Federal Fiscal Year 2022 and Updates to the IRF Quality Reporting 
Program; Payment for Complex Rehabilitative Wheelchairs and Related 
Accessories (Including Seating Systems) and Seat and Back Cushions 
Furnished in Connection With Such Wheelchairs, published on August 4, 
2021 (86 FR 42362).
    Since the publication of the May 2018 IFC, the Consolidated 
Appropriations Act of 2021 (Pub. L. 116-260) was signed into law on 
December 27, 2020. Effective April 1, 2021, section 121 of this Act 
eliminated the budget neutrality requirement set forth in section 
1834(a)(9)(D)(ii) of the Act for separate classes and national limited 
monthly payment rates established for any item of oxygen and oxygen 
equipment using the authority in section 1834(a)(9)(D)(i) of the Act. 
Effective for claims with dates of service on or after April 1, 2021, 
the fee schedule amounts for HCPCS codes E0424, E0431, E0433, E0434, 
E0439, E0441, E0442, E0443, E0444, E0447, E1390, E1391, E1392, E1405, 
E1406, and K0738 are adjusted to remove a percentage reduction 
necessary to meet the budget neutrality requirement previously mandated 
by section 1834(a)(9)(D)(ii) of the Act.
b. Fee Schedule Adjustment Impact Monitoring Data
    We also discussed in the May 2018 IFC how we monitor claims data 
from non-CBAs, some of which at the time pre-dated the implementation 
of the fully adjusted fee schedule amounts (83 FR 21917). The data did 
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. We have continued to monitor claims data from non-CBAs and 
have not observed any trends indicating an increase in adverse 
beneficiary health outcomes associated with the fee schedule 
adjustments.
    In addition, we monitored and continue to monitor 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. Before and after the publication 
of the May 2018 IFC, assignment rates for items subject to fee schedule 
adjustments have continued to remain around 99 percent. We also 
solicited comments on ways to improve our fee schedule adjustment 
impact monitoring data in the May 2018 IFC.
c. Resuming Transitional Blended Fee Schedule Rates in Rural and Non-
Contiguous Areas
    We stated that the monitoring data described in section II.C.2. of 
the May 2018 IFC was retrospective claims data for payment of items 
already furnished, and that it was limited to a retrospective view to 
address potential future problems (83 FR 21918).
    We also provided Medicare claims data showing that the number of 
supplier locations furnishing DME items and services subject to the fee 
schedule adjustments decreased by 22 percent from 2013 to 2016 (83 FR 
21918).
    We stated there were 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. For instance, we stated that the average volume of items and 
services furnished per supplier in non-CBAs is

[[Page 73886]]

significantly less than the average volume of items and services 
furnished per supplier in CBAs. Additionally, we stated that the number 
of suppliers in general has been steadily decreasing over time, and as 
the number of suppliers serving non-CBAs continues to decline, the 
volume of items and services furnished by the remaining suppliers 
increases (83 FR 21918). At the time of the publication of the May 2018 
IFC, we did not know if the suppliers that remained would have the 
financial ability to continue expanding their businesses to continue to 
satisfy market demand. We also did not know if large suppliers serving 
both urban and rural areas would continue to serve the rural areas 
representing a much smaller percentage of their business than urban 
areas (83 FR 21918).
    Based on the stakeholder comments and decrease in the number of 
supplier locations, we stated there was an immediate need to resume the 
transitional, blended fee schedule amounts in rural and non-contiguous 
areas. We stated that resuming these transitional blended rates would 
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 (83 FR 21918).
    We stated that 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 (83 FR 
21918). Industry stakeholders stated that the fully adjusted fee 
schedule amounts were 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 continued to 
decline. We stated that 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 collected 
at the time included input from many stakeholders in the DMEPOS 
industry indicating that the fully adjusted fee schedule amounts were 
too low and that this was having an adverse impact on beneficiary 
access to items and services, particularly in rural and non-contiguous 
areas. Given these concerns about the continued viability of many 
DMEPOS suppliers, coupled with the Cures Act mandate to consider 
additional information material to setting fee schedule adjustments, we 
stated it would be unwise to continue with the fully adjusted fee 
schedule rates in the rural and non-contiguous areas for 7 months. We 
stated that any adverse impacts on beneficiary health outcomes, or on 
small businesses exiting the market, could be irreversible. We stated 
that it was 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. We stated that while our systematic monitoring in these 
areas has not shown problematic trends to this point, that monitoring 
by its nature looks backward. We stated that given the rapid changes in 
health care delivery that may disproportionately impact rural and more 
isolated geographic areas, there was concern that the continued decline 
of the fees and the number of suppliers in such areas may impact 
beneficiary access to items and services. We stated that 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. Therefore, we revised 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 analyzed this 
issue (83 FR 21918).

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

    Another provision in the May 2018 IFC that we are finalizing in 
this final rule relates to section 5004(b) of the Cures Act, which 
amended section 1847(a)(2)(A) of the Act to exclude drugs and 
biologicals described in section 1842(o)(1)(D) of the Act from the CBP. 
We made conforming technical changes to the regulations text consistent 
with statutory requirements to exclude drugs and biologicals from the 
CBP (83 FR 21920). We amended 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 reads as follows: 
``Supplies necessary for the effective use of DME other than inhalation 
and infusion drugs.''
    We also removed a reference to drugs being included in the CBP by 
deleting the phrase ``or subpart I'' in Sec.  414.412(b)(2). The 
sentence reads 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 made 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 reads 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.''

D. Provisions of the May 11, 2018 Interim Final Rule With Comment 
Period

1. Transition Period for Phase-In of Fee Schedule Adjustments
    We amended 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 also amended 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 
also added 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 added Sec.  414.210(g)(9)(iv) to reflect 
that fully adjusted fee schedule amounts

[[Page 73887]]

apply for certain items furnished in non-CBA areas other than rural and 
non-contiguous areas from June 1, 2018, through December 31, 2018.
    We discussed in section II.C.1. of the May 2018 IFC that industry 
stakeholders stated that the fully adjusted fee schedule amounts were 
not sufficient to cover supplier costs for furnishing items and 
services in rural and non-contiguous areas and were impacting 
beneficiary health outcomes (83 FR 21918). 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. We stated that 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 analyzed this issue to safeguard beneficiaries' access to 
necessary items and services in rural and non-contiguous areas. We 
stated that additional information and factors would 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 associated with furnishing items in heavier 
populated CBAs versus less populated or remote rural and non-contiguous 
areas (83 FR 21920). Even though January 1, 2019 was just 7 months away 
from the June 1, 2018, effective date of this May 2018 IFC, we believed 
that it would be unwise to continue with the fully adjusted fee 
schedule rates in the rural and non-contiguous areas for 7 months. 
Therefore, we concluded that we should resume the transition period's 
blended fee schedule rates for items furnished in rural areas and non-
contiguous areas not subject to the CBP from June 1, 2018, through 
December 31, 2018. We stated that the volume of items furnished per 
supplier in rural and non-contiguous areas was 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 (83 FR 
21920). We also expressed concern 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 (83 FR 
21920).
    We received a total of 208 timely pieces of correspondence in 
response to the May 2018 IFC. Many of the comments we received on the 
May 2018 IFC were similar to or the same as comments we received on the 
CY 2019 ESRD PPS DMEPOS proposed rule and which we summarized and 
responded to in the CY 2019 ESRD PPS DMEPOS final rule (83 FR 56922). 
Most of the commenters were DME suppliers.
    Comment: Most commenters supported extending the 50/50 blended 
rates to the rural and non-contiguous non-CBAs. Some reasons that 
commenters gave for why they supported this policy were that it would 
help suppliers stay in business and service rural patients. Commenters 
also discussed how rural areas face unique circumstances. For example, 
a commenter stated many of their patients are in islands in remote 
areas, and another commenter discussed the challenges they face when 
servicing Native American reservations, such as power failures, weather 
changes, longer travel distances, poor cell phone reception, and higher 
delivery charges. Another commenter stated beneficiaries in rural areas 
are geographically dispersed, harder to reach, and do not have the same 
access to systems of care as those in more populated areas. Some 
commenters who were DME suppliers stated that they have reduced their 
delivery service area due to not getting paid enough, and that the cost 
of doing business has increased, which warranted higher payments. Some 
commenters also stated that costs are higher in rural areas, and travel 
distances are larger than in urban areas. A commenter stated this 
policy furthers a goal of achieving rural health equity with healthier, 
wealthier suburban and urban areas.
    Response: We acknowledge the comments for this particular provision 
in the May 2018 IFC.
    Comment: Many commenters wanted CMS to extend the blended rates to 
all non-CBAs, and to do so for longer than the 7-month period that was 
established in the May 2018 IFC. Several commenters stated we should 
extend the blended rates to all non-CBAs in 2019. Some stated we should 
permanently extend the blended rates to all non-CBAs. As support for 
this some commenters stated that non-CBAs do not have the same level of 
volume as CBAs, non-CBAs have a lower population density, less 
suppliers, the cost of doing business is higher in non-CBAs than it is 
in CBAs, and that suppliers serving rural areas also serve non-rural 
areas. A commenter stated that providing the same services in some non-
CBAs requires more staff than in CBAs, and that Bureau of Labor 
Statistics (BLS) data show fuel and health care expenditures are higher 
in rural areas. Some commenters were concerned that beneficiaries would 
not get the items or services they need and their health outcomes would 
worsen as a result.
    Response: We continue to believe that the fully adjusted rates in 
non-rural and contiguous non-CBAs are sufficient. Assignment rates 
continued to remain above 99 percent after the publication of the May 
2018 IFC, and we have not found evidence that these fee schedule 
adjustments are causing beneficiary access or health outcomes issues. 
As we indicated in the CY 2019 ESRD PPS DMEPOS final rule (83 FR 
56922), we agree that the average volume of items and services 
furnished by suppliers in non-rural non-CBAs is lower than the average 
volume of items and services furnished by suppliers in CBAs, and that 
total population and population density are both lower in non-rural 
non-CBAs than in CBAs. However, volume of services furnished is only 
one factor impacting the cost of furnishing DMEPOS items and services. 
A number of other factors affecting the costs of furnishing DMEPOS 
items and services such as wages, gasoline, rent, utilities, travel 
distance and service area size point to higher costs in CBAs than non-
rural non-CBAs. Additionally, as we found in the CY 2019 ESRD PPS 
DMEPOS proposed rule (83 FR 34367 through 34371) and in the November 
2020 proposed rule (85 FR 70366), travel distances were only greater in 
certain non-CBAs, which included Frontier and Remote (FAR), OCBSAs, and 
Super Rural areas.
    Comment: Many commenters also wanted us to retroactively apply the 
blended rates to all the claims in 2017 and 2018 that we paid at the 
fully adjusted rate. Commenters stated that if we were concerned about 
the adequacy of the fully adjusted fees, then we should retroactively 
pay suppliers the blended rates for the time we paid them the fully 
adjusted rates. Commenters explained that 7 months of blended rates 
were not enough to stabilize an industry with a declining number of 
suppliers, and that paying the blended rates retroactively would also 
help ensure beneficiary access to DME.
    Response: In the May 2018 IFC we amended 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, as required by section 
16007(a) of the Cures Act. In the May 2018 IFC, we also continued the 
50/50 blend for rural, non-contiguous areas from June 1 through 
December 31, 2018. We did not believe it was appropriate or necessary 
to retroactively increase the rates paid for items and

[[Page 73888]]

services subject to the fee schedule adjustments that were furnished in 
2017. Retroactively increasing payment amounts for items and services 
that had already been furnished to beneficiaries would not result in an 
increase in access to such items and services.
    Comment: Some commenters stated CMS should adopt add-on payments 
for non-CBAs because of higher costs in non-CBAs. For instance, a 
commenter stated that CMS should establish two percentage add-ons for 
the non-CBA areas: One for the non-rural non-CBAs and one for the rural 
non-CBAs. The commenter stated that the costs of providing respiratory 
services can be higher than the costs for other products and they 
recommended setting the non-rural non-CBAs at the regional standard 
payment amount (SPA) + 16 percent, and the rural non-CBAs at the 
regional SPA + 22 percent. The commenter stated that they based these 
amounts on their own cost survey of oxygen and sleep therapy providers 
and manufacturing companies that showed costs were 5 percent higher 
than the SPAs in CBAs, that costs are 13 percent higher in non-CBAs 
than in CBAs, and 17.5 percent higher in super-rural areas than in 
CBAs. Some commenters used the Ambulance Fee Schedule as an example of 
an add-on policy CMS could use, which includes super-rural add-on 
payment. A commenter stated that CMS should set the 50/50 blend rates 
in all non-CBAs, and then pay an even higher amount of 10 percent in 
rural and non-contiguous areas. The commenter also stated that the most 
significant variables that affect DME supplier costs are labor rates, 
transportation, population density, miles/time between points of 
service, and regulatory costs. The commenter stated specific costs that 
CMS should take into account when adjusting fees in non-CBAs include 
geographic wage index factors, gas, taxes, employee wages and benefits, 
wear and tear of vehicles, average per capita income, training, 
delivery, set up, historical Medicare home placement volume, proximity 
to nearby CBAs, employing a respiratory therapist (required by State 
law in several States), electricity charges freight charges, 24/7 
service availability, documentation requirements, average per patient 
cost, licensing, accreditation surety bonds, audits, population 
density, miles and time between points of service, local and state 
regulatory costs, and vehicle insurance and liability insurance. 
Another commenter stated how CMS uses a special rule for rural areas 
for items included in more than 10 CBAs. The commenter stated CMS could 
supplement this special rule by making it more generous, and also 
applying the national ceiling prices in areas with a limited number of 
suppliers or low average volume of Medicare business. The commenter 
stated CMS could also establish an add-on payment for low volume or low 
supplier areas, based on its general approach used for rural areas in 
the ambulance fee schedule, which would involve increasing the base 
payment by a percentage amount. A commenter stated the 50/50 blended 
rates were not enough and that CMS should return to paying the 2015 
unadjusted fee schedule rates in all non-CBAs.
    Response: We did not implement any of the add-on payments described 
by the commenters in the May 2018 IFC, and did not discuss such 
policies in the Alternatives Considered section of the May 2018 IFC (83 
FR 21924). In the CY 2019 ESRD PPS DMEPOS final rule (83 FR 57034), in 
response to similar comments requesting such add-on payments, we 
thanked the commenters for their specific recommendations regarding 
adopting add-on payments for items and services furnished in non-CBAs. 
We also stated that we did not propose any payments like those 
described by commenters, but that we would keep these recommendations 
in mind for future rulemaking.
    In the November 2020 proposed rule, one of our Alternatives 
Considered (85 FR 70371) was proposing to eliminate the definition of 
rural area at Sec. Sec.  414.202 and 414.210(g)(1)(v), which brings the 
adjusted fee schedule amounts for rural areas up to 110 percent of the 
national average price determined under Sec.  414.210(g)(1)(ii). In 
place of this definition and rule, we considered proposing an 
adjustment to the fee schedule amounts for DMEPOS items and services 
furnished in super rural non-CBAs within the contiguous U.S. equal to 
120 percent of the adjusted fee schedule amounts determined for other, 
non-rural non-CBAs within the same State. For example, the adjusted fee 
schedule amount for super rural, non-CBAs within Minnesota would be 
based on 120 percent of the adjusted fee schedule amount (in this case, 
the regional price) for Minnesota established in accordance with Sec.  
414.210(g)(1)(i) through (iv).
    Consistent with the ambulance fee schedule rural adjustment factor 
at Sec.  414.610(c)(5)(ii), we considered defining ``super rural'' as a 
rural area determined to be in the lowest 25 percent of rural 
population arrayed by population density, where a rural area is defined 
as an area located outside an urban area (MSA), or a rural census tract 
within an MSA as determined under the most recent version of the 
Goldsmith modification as determined by the Federal Office of Rural 
Health Policy at the Health Resources and Services Administration. Per 
this definition and under this alternative rule, certain areas within 
MSAs would be considered super rural areas whereas now they are treated 
as non-rural areas because they are located in counties that are 
included in MSAs. For all other non-CBAs, including areas within the 
contiguous U.S. that are outside MSAs but do not meet the definition of 
super rural area, we considered adjusting the fee schedule amounts 
using the current fee schedule adjustment methodologies under Sec.  
414.210(g)(1) and (g)(3) through (8).
    We did not receive comments supporting finalizing this alternative, 
and we did not finalize this alternative considered in this final rule.
    Finally, as we stated in the CY 2019 ESRD PPS DMEPOS final rule (83 
FR 57034), we recognize that there are certain supplier cost and volume 
differences in rural and non-contiguous non-CBAs, which is why this 
final rule distinguishes rural and non-contiguous non-CBAs from other 
non-CBAs and results in higher payments to suppliers furnishing items 
in the rural and non-contiguous non-CBAs. We also believe that paying 
an amount in addition to the blended 50/50 payment rates would be 
excessive and unnecessary, and not in line with what most commenters 
requested, as most commenters specifically requested the blended 50/50 
payment rates in rural and non-contiguous non-CBAs. This indicates that 
such payment rates are sufficient, which is why we are also not 
incorporating the ambulance fee schedule's concept of a super rural 
add-on into our 50/50 blend. With regard to taking into account certain 
costs when adjusting fees in non-CBAs, we have already analyzed and 
taken into account several cost data variables as part of section 16008 
of the Cures Act in the CY 2019 ESRD PPS DMEPOS proposed rule (83 FR 
57027), and in the November 2020 proposed rule (85 FR 70367).
    Comment: Some commenters disagreed with our definition of rural at 
Sec.  414.202. Some commenters that were DME suppliers were 
dissatisfied that some areas that they service did not qualify as a 
rural area. A few commenters stated CMS should define all non-CBAs as 
rural. Another commenter stated the CMS definition of a rural area is 
extremely narrow, and that CMS should adopt, what the commenter 
referred to as OMB's rural definition, which the commenter stated

[[Page 73889]]

were all counties that are not part of an MSA. A commenter wondered why 
the rural definition at Sec.  414.202 did not match the criteria for a 
critical access hospital. A commenter stated all of West Virginia 
should be considered rural, and another commenter stated there were 
remote areas in West Virginia that were classified as non-rural per the 
rural definition at Sec.  414.202.
    Response: As defined in Sec.  414.202, rural area means, 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 area (MSA). A rural area also includes a geographic 
area represented by a postal zip code that is a low population density 
area excluded from a competitive bidding area in accordance with the 
authority provided by section 1847(a)(3)(A) of the Act at the time the 
rules at Sec.  414.210(g) are applied. We did not propose or implement 
any changes to our rural definition in the May 2018 IFC, but we will 
keep these points in mind for future rulemaking. For further background 
on the origin of our rural definition, see our CY 2015 ESRD PPS DMEPOS 
proposed rule (79 FR 40284) and the CY 2015 ESRD PPS DMEPOS final rule 
(79 FR 66228).
    Comment: MedPAC did not support our proposal extending the 50/50 
blended rates to rural non-CBAs. MedPAC stated that if CMS determines 
that payment rates in non-CBAs should be increased to maintain access 
to medically necessary DMEPOS products, then increases should be 
limited and targeted, and CMS should consider taking steps to offset 
the cost of higher payment rates. MedPAC stated that returning to a 50/
50 blend of historical fee schedule rates and competitive bidding 
program (CBP) derived rates will result in large payment increases, 
often of 50 percent or more. Further, these large increases are in 
addition to other payment rate adjustments CMS has already made to 
protect access, such as an increase of roughly 10 percent in rural non-
CBAs.
    MedPAC stated that while they understand CMS continues to study 
supplier costs in non-CBAs in accordance with its mandate under the 
Cures Act, the interim final rule does not present supplier cost data 
that could be used to justify the magnitude of the payment increase. 
MedPAC encouraged CMS to use the best available data to determine 
whether costs that suppliers must necessarily incur are higher in non-
CBAs relative to CBAs and, if so, whether an adjustment smaller than 
the one discussed in the interim final rule would be sufficient to 
ensure access.
    MedPAC stated any payment increase in non-CBAs should be directed 
only to products that exhibit signs of potential access problems, and 
that the cost of DMEPOS products themselves likely do not vary 
substantially across geographic areas, but other costs might (for 
example, delivery or personnel costs). Therefore, depending on the 
nature of the product, MedPAC concluded that the total cost associated 
with furnishing a product may or may not vary substantially across 
geographic areas, and the magnitude of that variation might also be 
different across products.
    Additionally, MedPAC stated that any payment increase in non-CBAs 
should be directed only to areas that exhibit signs of potential access 
problems. Non-CBAs include a wide variety of areas, ranging from 
moderate-size urban areas to remote rural areas. An identified 
potential access problem in a rural or non-contiguous area should not 
be used as a basis to increase payment rates across all non-CBAs. 
MedPAC stated issues faced by suppliers in rural and non-contiguous 
areas are likely different from those faced in urban non-CBAs, many of 
which are metropolitan statistical areas with populations of 250,000 or 
more. Furthermore, if CMS has concerns about payment rates in urban 
non-CBAs, CMS has better ways to establish appropriate payment rates 
than applying a large, across-the-board payment increase. For example, 
CMS could set payment rates in moderate-size urban non-CBAs by 
expanding the CBP to include those areas and use the information from 
those competitions to help set payment rates in smaller non-CBAs. 
Finally, MedPAC stated CMS should consider offsetting the increased 
costs by further expanding the products included in the CBP.
    Response: We appreciate MedPAC's comments on the May 2018 IFC. We 
agree that the 50/50 blended rates were a significant payment increase, 
and that they affected large parts of the country. However, at the time 
of publication of the May 2018 IFC, we were concerned about the 
potential for beneficiary access issues to occur based off of feedback 
from industry stakeholders and our data showing a reduction in the 
number of suppliers billing Medicare Fee-for-Service for items and 
services subject to fee schedule adjustments. To err on the side of 
caution, we decided we should immediately resume the transition period 
and pay 50/50 blended rates in rural and non-contiguous non-CBAs for 
all items and services subject to fee schedule adjustments.
    In looking back at the years since the publication of the May 2018 
IFC, we still have not seen evidence of the beneficiary access issues 
industry stakeholders claimed were happening as a result of the fee 
schedule adjustments. We also note that in the ensuing months in which 
we paid the fully adjusted rates in the non-rural and contiguous non-
CBAs and the 50/50 blended rates in the rural or non-contiguous non-
CBAs, the assignment rates for both areas remained around 99 percent. 
We will certainly keep MedPAC's points in mind for future rulemaking, 
particularly as we continue to evaluate the appropriateness of such 
significant payment increases for wide swaths of the country, and as we 
contemplate future changes to the CBP. Finally, we also agree with 
expanding the products included in the CBP, and we note that we have 
included OTS back and knee braces in Round 2021 of the CBP.
    Comment: Several commenters submitted comments on ways to improve 
the DMEPOS fee schedule adjustment impact monitoring data, in response 
to us soliciting comments on ways to improve our fee schedule 
adjustment impact monitoring data in the May 2018 IFC (83 FR 21917). 
Some commenters left comments about the Medicare complaint process. A 
commenter stated that it is hard for beneficiaries to navigate through 
the Medicare complaint process and that they have to get transferred to 
different offices to complain about access. The commenter was concerned 
complaints were going unreported or given up on due to the complexity 
of the reporting process, and the commenter encouraged CMS to develop 
one central, public facing hotline where beneficiaries can submit a 
complaint hotline without being transferred to several offices. Another 
commenter stated the CMS patient complaint and access monitoring is not 
capturing patient complaints, and that many patients are either paying 
out of pocket or are going without the care. The commenter recommended 
reaching out to hospital case managers and social workers about this 
issue. Another commenter stated that CMS should get another process for 
complaints that is easier to navigate. The commenter stated CMS should 
enhance beneficiary awareness of the complaint process, and to publicly 
report on the complaints we register, and to not only report those that 
are resolved by a supplier. The commenter also stated that CMS should 
establish a patient satisfaction survey/patient-reported outcomes 
measure for respiratory services that would capture

[[Page 73890]]

issues like isolation, reduced services, reduced delivery areas, and 
other impacts the commenter stated cannot be measured using claims 
data. The commenter also stated CMS should survey using statistically 
appropriate method prescribers of respiratory services to evaluate the 
difficulty of discharging patients who require such therapy, which 
would provide CMS with information about the delays in obtaining DME 
and respiratory services.
    Another commenter stated that CMS should create an ombudsman 
position for non-CBAs to monitor and address access, quality, supplier 
availability and other issues in non-CBAs. A commenter stated that CMS 
does not capture reports from Medicare beneficiaries and their 
caregivers going to other resources to get their home medical equipment 
and supplies (for example, garage/online sales) to get the medical 
equipment needed, and that this will never show up in CMS' reports 
unless they reach out to those resources or survey beneficiaries and 
healthcare providers. The commenter stated CMS should work with DME 
industry advocates on a survey to healthcare professionals who are 
responsible for ordering DME and supplies for their patients to 
determine any access to DME issues.
    A commenter provided several comments regarding impact monitoring 
data for respiratory services, particularly oxygen. They stated to 
compare the number of Medicare beneficiaries diagnosed with COPD, with 
the number of beneficiaries receiving home oxygen therapy. The 
commenter stated that there should be a standard benchmark to assess 
whether the percentage of patients who require the therapy because of 
their diagnosis actually receive it. The commenter stated CMS could 
compare the Medicare population receiving respiratory services with the 
expected incidence and prevalence of the most common disease 
indications for the therapy (for example, COPD) in the Medicare 
population, to determine if the percentage of Medicare patients 
receiving home respiratory therapy is aligned with the percentage of 
the population receiving the therapy. The commenter stated that this 
would help CMS see if there are delays in receiving the therapy, and if 
the therapy is being utilized by the patients who are likely to have a 
medical need for it. The commenter stated that CMS should determine 
whether hospital data (including observation stays), admissions, or 
readmissions are specific enough to track admissions/readmissions 
related to complications associated with noncompliance with respiratory 
services. The commenter stated the analysis should note that if metrics 
of hospitalizations for other chronic conditions are improving but the 
metric for COPD patients is flat or declining, there is a problem with 
access to home therapies. Finally, the commenter stated CMS should find 
out if skilled nursing facilities (SNF)/long term care (LTC) 
beneficiaries using home respiratory services is increasing.
    A commenter stated that the impact monitoring data does not reflect 
the companies closing their doors but who are still trying to collect 
money owed to them to help decrease the debt they owe to vendors. The 
commenter stated that the data falsely reflects a higher number of 
providers than are actually available to beneficiaries. Another 
commenter stated CMS should understand why utilization has decreased in 
non-CBAs. The commenter stated they do not agree with the conclusion 
that it is because of CMS efforts to address fraud, abuse and 
overutilization. The commenter stated it is because beneficiaries are 
going outside Medicare for DME and access problems. A commenter stated 
CMS should find out how access to Part B services affect an increase in 
the use of Part A services.
    Response: In the 2019 ESRD PPS DMEPOS proposed rule, we also sought 
comments on ways to improve our fee schedule adjustment impact 
monitoring data (83 FR 34380). We summarized and responded to these 
comments in our CY 2019 ESRD PPS DMEPOS final rule (83 FR 57036). 
Similarly, and as we indicated in the CY 2019 ESRD PPS DMEPOS final 
rule, these comments are outside the scope of the proposals in the May 
2018 IFC. We will take these comments into consideration going forward.
    Comment: Many commenters reiterated their opposition to the budget 
neutrality requirements discussed in the May 2018 IFC (83 FR 21917), 
and summarized in section IV.B.3.a. of this final rule. Commenters were 
disappointed that this requirement resulted in non-CBA area fee 
schedules for oxygen concentrators being below the SPA in certain CBAs. 
Some stated the reimbursement for oxygen is not enough and that it 
makes it harder to supply oxygen services to patients.
    A commenter stated that CMS incorrectly applied the oxygen budget 
neutrality to non-CBAs. The commenter stated that the regulation 
establishing the offset for E1390 concentrators applies to the 
unadjusted fee schedules under the fee schedule methodology mandated by 
Congress under section 1834 (a) of the Act. In contrast, the commenter 
stated that the 2017 fee schedules for concentrators in rural areas are 
based on information from competitive bidding programs under the 
methodology in 42 CFR 414.210 (g). The commenter stated that, 
Sec. Sec.  414.226 and 414.210(g), describe different reimbursement 
methodologies that do not overlap. The commenter noted that while Sec.  
414.226 applies to fee schedules based on suppliers' reasonable charges 
from 1986 to 1987, Sec.  414.210 (g) applies to fee schedules based on 
regional average special payments amounts (SPAs) from competitive 
bidding areas (CBAs). Similarly, another commenter stated that CMS has 
the authority to eliminate the budget neutrality requirement. The 
commenter stated that in implementing the requirement to adjust the DME 
Fee Schedule, CMS has replaced the national limited monthly payment 
amount at Sec.  414.226(c) with the regional price or 110 percent of 
the national average price at Sec.  414.210(g). By adopting the 
regional price for non-rural non-CBAs and 110 percent of the national 
average price for rural non-CBAs, the commenter stated that CMS has 
eliminated the national limited monthly payment amount, which was prior 
to this change the methodology for establishing rates under the fee 
schedule. Since the budget neutrality language applied only to the 
national limited monthly payment amount, the commenter stated it is not 
applicable to the new regional price or national average price. 
Finally, a commenter stated that CMS should change oxygen reimbursement 
to the 50/50 blended rates at a minimum.
    Response: Since the publication of the May 2018 IFC, the 
Consolidated Appropriations Act of 2021 (Pub. L. 116-260) was signed 
into law on December 27, 2020. Effective April 1, 2021, section 121 of 
this Act eliminated the budget neutrality requirement set forth in 
section 1834(a)(9)(D)(ii) of the Act for separate classes and national 
limited monthly payment rates established for any item of oxygen and 
oxygen equipment using the authority in section 1834(a)(9)(D)(i) of the 
Act. Effective for claims with dates of service on or after April 1, 
2021, the fee schedule amounts for HCPCS codes E0424, E0431, E0433, 
E0434, E0439, E0441, E0442, E0443, E0444, E0447, E1390, E1391, E1392, 
E1405, E1406, and K0738 are adjusted to remove a percentage reduction 
necessary to meet the budget neutrality requirement previously mandated 
by section 1834(a)(9)(D)(ii) of the Act.
    After consideration of the public comments we received, we are 
finalizing the May 2018 IFC provision titled ``Transition Period for 
Phase-In of Fee Schedule Adjustments'' without

[[Page 73891]]

modification. Of note, we published in the Federal Register on April 
26, 2021 a continuation of effectiveness and extension of timeline for 
publication for the May 2018 IFC, titled ``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; Extension of Timeline for Final Rule Publication'' (86 FR 
21949). In accordance with sections 1871(a)(3)(B) and 1871(a)(3)(C) of 
the Act, we provided a notification of continuation for the May 2018 
IFC, announcing the different timeline on which we intended to publish 
the final rule, and explained why we were unable to publish the final 
rule on the regular, required 3-year timeline. As a result of the 
publication of this notification of continuation, the timeline for 
publication of the final rule was extended until May 11, 2022.
    With regard to the May 2018 IFC provision titled ``Transition 
Period for Phase-In of Fee Schedule Adjustments'', this provision:
     Changed 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.
     Amended Sec.  414.210(g)(9)(ii) to reflect that fully 
adjusted fee schedule amounts applied from January 1, 2017 through May 
31, 2018, and then on or after January 1, 2019.
     Added 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.
     Added 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 noncontiguous areas from June 1, 2018 
through December 31, 2018.
2. Technical Changes To Conform the Regulations to Section 5004(b) of 
the Cures Act: Exclusion of DME Infusion Drugs Under CBPs
    We made conforming technical changes to the regulations text 
consistent with statutory requirements to exclude drugs and biologicals 
from the CBP. Specifically, we amended 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 also removed a reference to 
drugs being included in the CBP by deleting the phrase ``or subpart I'' 
in Sec.  414.412(b)(2). Similarly, we made 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''.
    Comment: Commenters on the technical changes we made in the May 
2018 IFC to conform the regulations to section 5004(b) of the Cures Act 
for the exclusion of DME infusion drugs under CBPs supported this 
change, saying such changes were consistent with the statute.
    Response: After further consideration of the public comments we 
received, we are finalizing our conforming technical changes to the 
regulations text consistent with statutory requirements to exclude 
drugs and biologicals from the CBP. Specifically, we amended 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 also 
removed a reference to drugs being included in the CBP by deleting the 
phrase ``or subpart I'' in Sec.  414.412(b)(2). Similarly, we made 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''.

V. Benefit Category and Payment Determinations for Durable Medical 
Equipment, Prosthetic Devices, Orthotics and Prosthetics, Therapeutic 
Shoes and Inserts, Surgical Dressings, Splints, Casts, and Other 
Devices Used for Reductions of Fractures and Dislocations

A. Background

1. Benefit Category Determinations
    Medicare generally covers an item or service that--(1) falls within 
a statutory benefit category; (2) is not statutorily excluded from 
coverage; and (3) is reasonable and necessary for the diagnosis or 
treatment of illness or injury or to improve the functioning of a 
malformed body member as described in section 1862(a)(1)(A) of the Act. 
We make benefit category determinations (BCDs) based on the scope of 
Part B benefits identified in section 1832 of the Act, as well as 
certain statutory and regulatory definitions for specific items and 
services. Section 1832(a)(1) of the Act defines the benefits under Part 
B to include ``medical and other health services,'' including items and 
services described in section 1861(s) of the Act such as surgical 
dressings, and splints, casts, and other devices used for reduction of 
fractures and dislocations under paragraph (5), prosthetic devices 
under paragraph (8), leg, arm, back, and neck braces, artificial legs, 
arms, and eyes under paragraph (9), therapeutic shoes under paragraph 
(12), and durable medical equipment (DME) under paragraph (6) and as 
defined in section 1861(n) of the Act. The words ``orthotic(s)'' or 
``orthosis(es)'' are used in various parts of the statute and 
regulations instead of the word brace(s) but have the same meaning as 
brace(s). For example, section 1847(a)(2)(C) of the Act refers to 
``orthotics described in section 1861(s)(9)'' of the Act. However, 
section 1861(s)(9) of the Act describes ``leg, arm, neck, and back 
braces'' and does not use the word ``orthotics.'' Likewise, section 
1834(h)(4)(C) of the Act specifies that ``the term `orthotics and 
prosthetics has the meaning given such term in section 1861(s)(9)'' of 
the Act; however, section 1861(s)(9) of the Act describes ``leg, arm, 
neck, and back braces'' and does not use the word ``orthotics.'' Also, 
the word ``prosthetic(s)'' is used in various parts of the statute and 
regulations to describe artificial legs, arms, and eyes referenced in 
section 1861(s)(9) of the Act, but it is important to note that these 
items are not the same items as the prosthetic devices referenced in 
section 1861(s)(8) of the Act.
    While the statutory definition of DME in section 1861(n) of this 
Act sets forth some items with particularity, such as iron lungs, 
oxygen tents, hospital beds, wheelchairs, and blood glucose monitors, 
whether other items and services are covered under the Medicare Part B 
DME benefit is based on our interpretation of the statute, which does 
not, for example, elaborate on the meaning of the word ``durable'' 
within the context of ``durable medical equipment.'' Therefore, we 
further defined DME in the regulation at 42 CFR 414.202 as equipment 
that: (1) Can withstand repeated use; (2) effective with respect to 
items classified as DME after January 1, 2012, has an expected life of 
at least 3 years; (3) is primarily and customarily used to serve a 
medical purpose; (4) generally is not useful to a person in the absence 
of an illness or injury; and (5) is appropriate for use in the home. In 
conducting an analysis of whether an item falls within the DME benefit 
category, we review the functions and features of the item, as well as 
other supporting material, where applicable. For example, research and 
clinical studies may help to demonstrate that the item meets the prongs 
of the

[[Page 73892]]

definition of DME at Sec.  414.202. For items to be considered DME, all 
requirements of the regulatory definition must be met. Additional 
details on the Medicare definition of DME are located in section 110.1 
of the Medicare Benefit Policy Manual (CMS 100-02). The Medicare 
definitions for surgical dressings, splints, casts, and other devices 
used for reductions of fractures and dislocations, prosthetic devices, 
orthotics and prosthetics, and therapeutic shoes and inserts are 
located in sections 100, 120, 130, and 140, respectively, of the 
Medicare Benefit Policy Manual (CMS 100-02).
    In situations where CMS has not established a BCD for an item or 
service, the BCD is made by the MACs on a case-by-case basis as they 
adjudicate claims. The MACs may have also addressed the benefit 
category status of an item or service locally in a written policy 
article. This final rule would apply to BCDs for all items and services 
described in section 1861(s) of the Act such as surgical dressings, and 
splints, casts, and other devices used for reduction of fractures and 
dislocations under paragraph (5), prosthetic devices under paragraph 
(8), leg, arm, back, and neck braces, artificial legs, arms, and eyes 
under paragraph (9), therapeutic shoes under paragraph (12), and DME 
under paragraph (6) and as defined in section 1861(n) of the Act.
2. Section 531(b) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554)
    Section 531(b) of BIPA required the Secretary to establish 
procedures for coding and payment determinations for new DME under 
Medicare Part B of the Act that permit public consultation in a manner 
consistent with the procedures established for implementing coding 
modifications to ICD-9-CM. Accordingly, we hosted public meetings that 
provide a forum for interested parties to make oral presentations and 
to submit written comments in response to preliminary HCPCS coding and 
Medicare payment determinations for new DME items and services. A 
payment determination for DME items and services would include a 
determination regarding which of the paragraphs (2) through (7) of 
subsection (a) of section 1834 of the Act the items and services are 
classified under as well as how the fee schedule amounts for the items 
and services are established so that they are in compliance with the 
exclusive payment rules under sections 1834(a) and 1847(a) and (b) of 
the Act. The preliminary HCPCS coding and Medicare payment 
determinations for new DME items and services are made available to the 
public via our website prior to the public meetings. In addition, 
although this type of forum and opportunity for obtaining public 
consultation on preliminary HCPCS coding and Medicare payment 
determinations for items and services other than new DME items is not 
mandated by the statute, we expanded this process for obtaining public 
consultation on preliminary coding and payment determinations to all 
HCPCS code requests for items and services in 2005, and since January 
2005, we have been holding public meetings to obtain public 
consultation on preliminary coding and payment determinations for non-
drug, non-biological items and services. As discussed in the November 
2020 proposed rule (85 FR 70376), we proposed to continue holding these 
public meetings for non-drug, non-biological items and services and, in 
limited circumstances, for drug or biological products (85 FR 70410)) 
that are associated with external requests for HCPCS codes. As 
indicated in the proposed rule (85 FR 70397), external requests for 
HCPCS codes are made by submitting a HCPCS application (OMB control 
number 0938-1042 titled HCPCS Modification to Code Set Form CMS-10224) 
available on the CMS.gov website at the following address: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Application_Form_and_Instructions.
    HCPCS Level II codes are used by Medicare, Medicaid, and other 
public health insurance programs and private insurers for the purpose 
of identifying items and services on health insurance claims. A code 
identifies and describes a category of items and services and the HCPCS 
Level II coding system and process is not used to make coverage or 
payment determinations on behalf of any insurer. Once a code describing 
a category of items and services is established, separate processes and 
procedures are used by insurers to determine whether payments for the 
item or service can be made, what method of payment, for example, 
purchase or rental, will be used to make payment for the item or 
service, and what amount(s) will be paid for the item or service. 
Whether or not an item falls under one of the Medicare benefit 
categories such as DME is a decision made by CMS or the MACs based on 
statutory and regulatory definitions, separate from the HCPCS Level II 
coding system and process for identifying items and services. Once a 
Medicare benefit category is identified, the coverage and payment 
indicators attached to any new HCPCS code(s) describing the item or 
service for claims processing purposes would reflect the benefit 
category and payment determinations made pursuant to the process 
established by this final rule.
    To make a Medicare payment determination for an item or service, 
that is, to determine the statutory and regulatory payment rules that 
apply to the item or service and how to establish allowed payment 
amounts for the item or service, CMS must first determine whether the 
item or service falls under a benefit category, for example DME, and if 
so, which benefit category in particular. Therefore, since 2001, the 
procedures established by CMS to obtain public consultation on national 
payment determinations for new DME items as mandated by section 531(b) 
of BIPA have also in effect been procedures for obtaining public 
consultation on national DME BCDs, or determinations about whether an 
item or service meets the Medicare definition of DME. Then in 2005, 
when these procedures were expanded to include requests for HCPCS codes 
for all items and services, they became in effect procedures for 
obtaining public consultation on BCDs and payment determinations for 
all items and services.

B. Current Issues

    To increase transparency and structure around the process for 
obtaining public consultation on benefit category and payment 
determinations for these items and services, we stated in the November 
2020 proposed rule (85 FR 70397) that it would be beneficial to set 
forth in our regulations the process and procedures that have been used 
since 2001 for obtaining public consultation on BCDs and payment 
determinations for new DME and since 2005 for requests for HCPCS codes 
for items and services other than DME. As further discussed in section 
IV.A.2. of the 2020 November proposed rule (85 FR 70374 through 70375), 
we recently revised our coding cycle for requests for HCPCS Level II 
codes to implement shorter and more frequent coding application 
cycles.\25\ Beginning January 2020, for non-drug, non-biological items 
and services, we shortened the existing annual coding cycle to conduct 
more frequent coding cycles on a bi-annual basis and include public 
meetings to obtain consultation on preliminary coding determinations 
twice a year

[[Page 73893]]

under these new bi-annual coding cycles. We believe that continuing to 
establish payment determinations, which, include BCDs, for new DME 
items and services and the other items and services described 
previously at these same bi-annual public meetings would be an 
efficient and effective way to address coding, benefit category, and 
payment issues for these new items and services and would prevent 
delays in coverage of new items and services.
---------------------------------------------------------------------------

    \25\ CMS, Announcement of Shorter Coding Cycle Procedures, 
Applications, and Deadlines for 2020, HCPCS--General Information. 
Available at: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo.
---------------------------------------------------------------------------

    In addition, in the past, manufacturers of new products would often 
ask CMS for guidance on whether or not the product(s) fall under a 
DMEPOS benefit category. Our informal advice regarding these products 
were sent directly to the manufacturers, outside of the HCPCS public 
meeting process. In the future, if a manufacturer requests a BCD for 
their product(s) outside of the process established in this final rule, 
we will instead issue a BCD and payment determination for the 
manufacturer through the BCD and payment determination procedures 
established by this rule. Such requests would be added as soon as 
possible to the agenda for an upcoming public meeting, which will be 
posted on CMS.gov two weeks prior to the meeting. Likewise, if CMS 
decides to address the benefit category for a new item or service that 
is not identified through the HCPCS editorial process, the benefit 
category determination and payment determination, if applicable, will 
be subject to the procedures established by this rule. Any manufacturer 
or other entity requesting a benefit category determination outside of 
the HCPCS editorial process) would still need to provide information on 
the product such as intended use, FDA clearance documents, any clinical 
studies, etc., that CMS will need to determine whether the product 
falls under a Medicare benefit category.

C. Proposed Provisions

    We proposed in the November 2020 proposed rule (85 FR 70397 through 
70398) to set forth in regulations BCD and payment determination 
procedures for new DME items and services described in sections 1861(n) 
and (s)(6) of the Act, as well as the items and services described in 
sections 1861(s)(5), (8), (9), and (12) of the Act, that permit public 
consultation at public meetings. The payment rules for these items and 
services are located in 42 CFR part 414, subparts C and D, so we 
proposed to include these procedures under both subparts C and D. We 
proposed that the public consultation on BCDs and payment 
determinations would be heard at the same public meetings where 
consultation is provided on preliminary coding determinations for new 
items and services the requestor of the code believes are: DME as 
described in sections 1861(n) and (s)(6) of the Act; surgical 
dressings, splints, casts, and other devices as described in section 
1861(s)(5) of the Act; prosthetic devices as described in section 
1861(s)(8) of the Act; leg, arm, back, and neck braces (orthotics), and 
artificial legs, arms, and eyes (prosthetics) as described in section 
1861(s)(9) of the Act; or therapeutic shoes and inserts as described in 
section 1861(s)(12) of the Act. The proposal generally reflected the 
procedures that have been used by CMS since 2005, however, we proposed 
to specifically solicit or invite consultation on preliminary BCDs for 
each item or service in addition to the consultation on preliminary 
payment and coding determinations for new items and services.
    Accordingly, we proposed procedures under new Sec.  414.114 for 
determining whether new items and services meet the Medicare definition 
of items and services subject to the payment rules at 42 CFR part 414 
subpart C (85 FR 70397). This would include determinations regarding 
whether the items and services are parenteral and enteral nutrition 
(PEN), which are nutrients, equipment, and supplies that are 
categorized under the prosthetic device benefit, as defined at section 
1861(s)(8) of the Act and covered in accordance with section 180.2 of 
Chapter 1, Part 3 of the Medicare National Coverage Determinations 
Manual (Pub 100-03). This would also include determinations regarding 
whether items and services are intraocular lenses (IOLs) inserted in a 
physician's office, which are also categorized under the prosthetic 
device benefit at section 1861(s)(8) of the Act. We stated we would 
also use the proposed procedures to determine whether items and 
services are splints, casts, and other devices used for reduction of 
fractures and dislocations at section 1861(s)(5) of the Act. For 
purposes of the proposed procedures and Sec.  414.114, we proposed to 
establish the following definition:
    Benefit category determination means a national determination 
regarding whether an item or service meets the Medicare definition of a 
prosthetic device at section 1861(s)(8) of the Act or is a splint, 
cast, or device used for reduction of fractures or dislocations subject 
to section 1842(s) of the Act and the rules of this subpart and is not 
otherwise excluded from coverage by statute.
    We proposed procedures under new Sec.  414.240 for determining 
whether new items and services meet the Medicare definition of items 
and services subject to the payment rules at 42 CFR part 414 subpart D 
(85 FR 70398). This would include determinations regarding whether the 
items and services are in the DME benefit category as defined at 
section 1861(n) of the Act and under 42 CFR 414.202. This would also 
include determinations regarding whether the items and services are in 
the benefit category for prosthetic devices that fall under section 
1861(s)(8) of the Act other than PEN nutrients, equipment and supplies 
or IOLs inserted in a physician's office. This would also include 
determinations regarding whether the items and services are in the 
benefit category for leg, arm, neck, and back braces (orthotics), and 
artificial legs, arms, and eyes (prosthetics) under section 1861(s)(9) 
of the Act. This would also include determinations regarding whether 
the items and services are in the benefit category for surgical 
dressings under section 1861(s)(5) of the Act or custom molded shoes or 
extra-depth shoes with inserts for an individual with diabetes under 
section 1861(s)(12) of the Act. For purposes of these proposed 
procedures and new Sec.  414.240, we proposed to establish the 
following definition:
    Benefit category determination means a national determination 
regarding whether an item or service meets the Medicare definition of 
durable medical equipment at section 1861(n) of the Act, a prosthetic 
device at section 1861(s)(8) of the Act, an orthotic or leg, arm, back 
or neck brace, a prosthetic or artificial leg, arm or eye at section 
1861(s)(9) of the Act, is a surgical dressing, or is a therapeutic shoe 
or insert subject to sections 1834(a), (h), or (i) of the Act and the 
rules of this subpart and is not otherwise excluded from coverage by 
statute.
    We proposed that if a preliminary determination is made that a new 
item or service falls under one of the benefit categories for items and 
services paid in accordance with subpart C or D of 42 CFR part 414, 
then CMS will make a preliminary payment determination regarding how 
the fee schedule amounts for the item or services would be established 
in accordance with these subparts, and, for items and services 
identified as DME, under which of the payment classes under sections 
1834(a)(2) through (7) of the Act the item or service falls (85 FR 
70398). We proposed that the procedures for making BCDs and payment 
determinations for new items and services subject to the payment rules 
under subpart C or D of

[[Page 73894]]

42 CFR part 414 would be made by CMS during each bi-annual coding cycle 
and the proposed procedures under new Sec. Sec.  414.114 and 414.240 
would include the following steps.
    First, at the start of the coding cycle, CMS performs an analysis 
to determine if the item or service is statutorily excluded from 
Medicare coverage under any of the provisions at section 1862 of the 
Act, and, if not excluded by statute, CMS determines if the item or 
service falls under a Medicare benefit category defined in the statute 
and regulations for any of the items or services subject to the payment 
rules under subparts C or D of 42 CFR part 414. Information such as the 
description of the item or service in the HCPCS application, HCPCS 
codes used to bill for the item or service in the past, product 
brochures and literature, information on the manufacturer's website, 
information related to the FDA clearance or approval of the item or 
service for marketing or related to items that are exempted from the 
510(k) requirements or otherwise approved or cleared by the FDA is 
considered as part of this analysis. This step could generally take 
anywhere from 1 week to 2 months. For more complex items or services, 
the process may take several months, in which case public consultation 
on the benefit category and payment determinations would slip to a 
subsequent coding cycle.
    Second, if a preliminary determination is made by CMS that the item 
or service is an item or service falling under a benefit category for 
items and services paid for in accordance with subpart C or D of 42 CFR 
part 414, a preliminary payment determination is made by CMS regarding 
how the fee schedule amounts will be established for the item or 
service and what payment class the item falls under if the item meets 
the definition of DME. This step could also generally take anywhere 
from 1 week to 2 months. For more complex items or services, the 
process may take several months, in which case public consultation on 
the benefit category and payment determinations would slip to a 
subsequent coding cycle.
    Third, approximately 4 months into the coding cycle, the 
preliminary benefit category and payment determinations are posted on 
CMS.gov 2 weeks prior to the public meeting described under proposed 
Sec.  414.8(d) in which CMS receives consultation from the public on 
the preliminary benefit category and payment determinations made for 
the item or service. After consideration of public consultation on any 
preliminary benefit category and payment determinations made for the 
item or service, the benefit category and payment determinations are 
established through program instructions issued to the MACs.
    We noted that even though a determination may be made that an item 
or service meets the Medicare definition of a benefit category, and fee 
schedule amounts may be established for the item or service, this does 
not mean that the item or service would be covered for a particular 
beneficiary. After a BCD and payment determination has been made for an 
item or service, a determination must still be made by CMS or the 
relevant local MAC that the item or service is reasonable and necessary 
for the treatment of illness or injury or to improve the functioning of 
a malformed body member, as required by section 1862(a)(1)(A) of the 
Act.
    We sought public comment on our proposed process and procedures for 
making BCDs and payment determinations for new items and services paid 
for in accordance with subpart C or D of 42 CFR part 414. We noted that 
our proposed approach does not affect or change our existing process 
for developing National Coverage Determinations (NCDs), which we can 
continue to use to develop NCDs both in response to external requests 
and internally-generated reviews. We further noted that we are not 
limited to only addressing benefit categories in response to external 
HCPCS code applications and could decide to use the proposed process to 
address benefit categories in response to internally generated HCPCS 
coding changes as well. As aforementioned, requests for BCDs that are 
not associated with a HCPCS code application will also be addressed 
through the preliminary benefit category and payment determination 
process established in this final rule.
    Comment: A few commenters supported the codification of formal BCD 
procedures including stakeholder input, noting this proposal is a step 
in the right direction.
    Response: For the reasons we articulated previously as well as 
later in this section, we intend to finalize these procedures as 
proposed with a technical modification. At proposed Sec. Sec.  
414.114(b)(3) and (4), 414.240(b)(3) and (4), we included the language 
``a public meeting described under Sec.  414.8(d)'' to identify the 
existing bi-annual public meetings used to review new DME items and 
services and the other items and services. We intend to keep using the 
same public meetings for BCD purposes, but as discussed in section X. 
of this final rule, we are not finalizing the proposed HCPCS Level II 
code application process, and we are not finalizing the proposed 
regulation text for Sec.  414.8(d). Therefore, we are finalizing in the 
regulation text at Sec. Sec.  414.114(b)(3) and (4), as well as 
414.240(b)(3) and (4), a reference to a ``public meeting'' without a 
cross-reference to Sec.  414.8(d). We emphasize that this change is 
technical only, and both the final regulation text and BCD procedures 
are functionally the same as what we proposed in the November 2020 
proposed rule.
    Comment: A few commenters from associations and consultants 
representing manufacturers and suppliers of DMEPOS noted that there was 
no mention of the minimum qualifications for the individuals who will 
be making the preliminary determinations, claiming that this differs 
from the Coverage and Analysis Group (CAG) or by Medicare 
Administrative Contractors processes that affect both coverage and 
coding, where the process is either supervised or conducted by 
individuals with the appropriate professional credentialing and 
experience, such as licensed health care professionals or individuals 
with graduate-level training in related fields such as epidemiology. 
Commenters further stated that as many innovations rely on more complex 
technology and clinical factors, and rely on clinical trial evidence 
and interpretation of that evidence, it was incumbent on CMS to ensure 
that the reviewers making the preliminary determinations are familiar 
with current developments and have the technical skills necessary to 
conduct a thorough evaluation of the item and the related clinical 
information. Commenters recommended either having the applicant 
indicate the minimum and preferred credentials of a proposed reviewer 
or lengthening the current 40-page limit to allow relevant technical 
data and published papers that describe the innovation, its mechanism 
of action, and how it differs from other items and services that are 
described in existing HCPCS code.
    Response: CMS has years of experience making benefit category 
determinations and our initial and final determinations are formulated 
in conjunction with experts such as medical officers, certified 
orthotists and prosthetists, nurses and other allied health 
professionals, and biomedical engineers. We are not adopting the 
commenters' suggestion that we adopt specific qualifications for the 
specific group of CMS reviewers that makes initial benefit category 
determinations. Moreover, we note our initial determinations are 
preliminary, giving the public an opportunity to provide additional 
feedback at the public

[[Page 73895]]

meeting. Accordingly, we find it is unnecessary for the applicant to 
request preferred or minimal credentials for the group that makes 
initial benefit category determinations.
    We also find it is unnecessary to adjust the HCPCS application 
because a BCD is a separate process that is not limited to the 
information in the HCPCS application. For the BCD recommendation, we 
conduct research, as needed, and also may request information from the 
manufacturer or industry. We recognize that a HCPCS application often 
triggers a BCD, but the determination of a BCD can be a separate and 
distinct process from the HCPCS review.
    Comment: Commenters suggested that CMS allow applicants to request 
either a BCD, a HCPCS code, or both. The rationale being some 
applicants may need a BCD alone at one stage of commercialization and 
do not want or need to invest in the costs of a complete HCPCS 
application. The commenters claimed that many applicants would not 
invest in the resources needed to apply for a new code if they knew 
they would receive a determination that the item or service did not 
fall under a Medicare benefit category.
    Response: We want to clarify that the BCD process is separate and 
distinct from the HCPCS application, and an interested party can make a 
request for a BCD independent from any associated HCPCS code request. 
Any party can request a BCD for an item or service without requesting a 
change to the HCPCS. Once the BCD request is received, we would follow 
the same process which includes discussing the BCD at a public meeting. 
We also note that interested parties can request a national BCD through 
the NCD process or in some cases we could make a BCD through 
rulemaking; however, we believe these procedures we are finalizing 
under the regulations will allow us to make BCDs for these new items 
and services more quickly.
    Comment: A few commenters recommended that the BCD coverage and the 
coding process should remain separate.
    Response: We did not propose to integrate the two processes, but we 
reiterate that a HCPCS code application often triggers a BCD. We 
proposed to discuss the BCD requests during the bi-annual public 
meetings for new items and services, as this is an efficient and 
effective way to address coding, benefit category, and payment issues 
for these new items and services and will prevent delays in access to 
new items and services.
    With regard to the use of the term ``BCD coverage,'' we want to 
clarify that BCDs and coverage determinations are two distinct 
processes with separate statutory authorities. A BCD is a determination 
regarding whether or not an item or service falls under a Medicare 
benefit category (for example, DME as defined in section 1861(n) of the 
Act). A coverage determination, on the other hand, is a decision by a 
Medicare contractor regarding whether to cover a particular item or 
service in accordance with section 1862(a)(1)(A) of the Act (see 42 CFR 
400.202). We note that stakeholders can still request a BCD through the 
NCD process, as an alternative to these procedures.
    Comment: A few commenters expressed concern that the timeframe of 
publishing the preliminary BCD decisions 2 weeks prior to a public 
meeting is too brief. The commenters were concerned that this proposal 
shortens the time necessary for an applicant to bring forth an expert 
or health care professional.
    Response: We understand commenters' concern on the timing of the 
preliminary decisions; however, we must balance the time needed to 
assess and make a preliminary decision and issuing it within the 
specified timeframes. We believe that giving 2 weeks' notice of the 
meeting and announcing the dates of the public meetings in advance 
provides stability to stakeholders on the expected meeting times while 
also ensuring we have sufficient time necessary to make preliminary 
determinations for as many new items and services as possible. The 
HCPCS cycle was shortened from a 12-month cycle to two 6-month cycles 
to allow for more opportunities for the public to request HCPCS codes, 
but one tradeoff is that this can compress all stages of the coding 
process, including the time for developing preliminary coding, benefit 
category, and payment determinations, as well as the time allowed for 
the public to react to these preliminary determinations and prepare for 
the public meetings.
    Comment: Some commenters expressed interest in expanding the DME 
definition in 42 CFR 414.202 to cover items such as software and vision 
aids or to clarify the definition of prosthetic device in 42 CFR 
414.202.
    Response: We did not propose to expand the scope of the DME or 
prosthetic device benefits in these BCD provisions, and therefore these 
comments fall outside the scope of this section of the rule.
    Comment: A commenter requested that CMS allow the HCPCS process to 
serve as an appeal process for the BCD and payment decisions.
    Response: We do not believe a further appeals process is necessary. 
There is already an appeals process in the claims appeals process under 
which a party could challenge the amount of payment if the party with 
standing was dissatisfied with the amount of payment. In light of the 
available appeal process, there would seem to be no need to establish a 
further appeals process.
    Comment: A commenter recommended that CMS provide details regarding 
the basis and data used to make any preliminary BCD and payment 
decision, stating that this information should be included in the 
letters to the applicants as well as in the information for the 
relevant public meetings.
    Response: We do not agree with the commenter that details on 
preliminary BCDs need to be included in a letter to the requestor of 
the HCPCS code. The HCPCS is a coding system for the public in general 
and is not a coding system for specific manufacturers or specific 
products. We will provide enough information so the public, which 
includes the manufacturer, individual, or entity that submitted the 
HCPCS request, can meaningfully comment on the preliminary BCD and 
payment decisions and also understand our underlying rationale for such 
decisions.
    Comment: A commenter representing manufacturers and beneficiaries 
stated that they do not prefer that BCDs be made through public notice 
and comment rulemaking, which they believe would dramatically reduce 
the timeliness of approval of benefit category determinations for new 
devices and technologies, and consequently, access to care.
    Response: We agree with the commenter that solely using notice and 
comment rulemaking would significantly extend the time it takes to make 
a BCD and could negatively impact beneficiaries' access to new item and 
services. The BCD procedures we are finalizing allow for multiple 
determinations within 1 year and build on the statutory process 
outlined in BIPA. We also note that stakeholders can still request a 
BCD through the NCD process, as an alternative to these procedures.
    Comment: A commenter expressed their opinion that CMS has not been 
following the BCD process and that CMS did not make these 
determinations for a number of DME items assigned new HCPCS codes since 
2019. The commenter stated their opinion that the lack of BCDs for new 
items assigned HCPCS codes since 2019 continues to

[[Page 73896]]

impede beneficiary access to these new, clinically proven technologies.
    Response: We acknowledge BCDs reviews have been slowed down the 
past few years because this process was not formalized. We believe 
there is a benefit to finalizing these procedures and anticipate being 
able to make decisions more quickly and on a consistent timeframe 
outlined under the final regulation. However, we note that in 
situations where CMS has not established a BCD for an item or service, 
the BCD can be made by the MACs on a case-by-case basis as they 
adjudicate claims.
    After consideration of the public comments we received and for the 
reasons we articulated, we are finalizing at Sec. Sec.  414.114 and 
414.240 the definitions related to and procedures for making BCDs and 
payment determinations for new items and services subject to the 
payment rules under subparts C or D of 42 CFR part 414 as proposed with 
a technical modification to remove a cross-reference to a HCPCS-related 
regulation we are not finalizing.

VI. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B

    This section addresses classification and payment for CGMs under 
the Medicare Part B benefit for DME. We proposed to replace a CMS 
Ruling issued in January 12, 2017 titled Classification of Therapeutic 
Continuous Glucose Monitors as ``Durable Medical Equipment'' under 
Medicare Part B [Ruling] (CMS-1682-R) with this new rule.

A. General Background

    DME is a benefit category under Medicare Part B. Section 1861(n) of 
the Act defines ``durable medical equipment'' as including ``iron 
lungs, oxygen tents, hospital beds, and wheelchairs (which may include 
a power-operated vehicle that may be appropriately used as a 
wheelchair, but only where the use of such a vehicle is determined to 
be necessary on the basis of the individual's medical and physical 
condition and the vehicle meets such safety requirements as the 
Secretary may prescribe) used in the patient's home (including an 
institution used as his home other than an institution that meets the 
requirements of subsection (e)(1) of this section or section 
1819(a)(1)) of the Act, whether furnished on a rental basis or 
purchased, and includes blood-testing strips and blood glucose monitors 
for individuals with diabetes without regard to whether the individual 
has Type I or Type II diabetes or to the individual's use of insulin 
(as determined under standards established by the Secretary in 
consultation with the appropriate organizations) and eye tracking and 
gaze interaction accessories for speech generating devices furnished to 
individuals with a demonstrated medical need for such accessories; 
except that such term does not include such equipment furnished by a 
supplier who has used, for the demonstration and use of specific 
equipment, an individual who has not met such minimum training 
standards as the Secretary may establish with respect to the 
demonstration and use of such specific equipment. With respect to a 
seat-lift chair, such term includes only the seat-lift mechanism and 
does not include the chair.''
    In addition to this provision, in most cases, an item must also 
meet the requirements of section 1862(a)(1)(A) of the Act, which 
precludes payment for an item or service that is not reasonable and 
necessary for the diagnosis or treatment of illness or injury or to 
improve the functioning of a malformed body member, and section 
1862(a)(6) of the Act, which precludes payment for personal comfort 
items.
    The Medicare program was created as part of the Social Security 
Amendments of 1965 (Pub. L. 89-97), and the Part B benefit payments for 
DME were initially limited to ``rental of durable medical equipment, 
including iron lungs, oxygen tents, hospital beds, and wheelchairs used 
in the patient's home (including an institution used as his home)'' in 
accordance with the definition of DME at section 1861(s)(6) of the Act. 
The Social Security Amendments of 1967 (Pub. L. 90-248) amended the 
statute to allow for payment on a purchase basis for DME in lieu of 
rental for items furnished on or after January 1, 1968. Section 144(d) 
of the Social Security Amendments of 1967 changed the language under 
section 1861(s) of the Act to ``durable medical equipment, including 
iron lungs, oxygen tents, hospital beds, and wheelchairs used in the 
patient's home (including an institution used as his home), whether 
furnished on a rental basis or purchased.'' Payments for purchase of 
expensive items of DME were limited to monthly installments equivalent 
to what would have otherwise been made on a rental basis, limited to 
the period of medical need and not to exceed the purchase price of the 
equipment.
    In 1975, Medicare program instructions in section 2100 of chapter 2 
of part 3 of the Medicare Carrier's Manual (HCFA Pub. 14-3) indicated 
that expenses incurred by a beneficiary for the rental or purchase of 
DME are reimbursable if the following three requirements are met: The 
equipment meets the definition of DME in this section; and the 
equipment is necessary and reasonable for the treatment of the 
patient's illness or injury or to improve the functioning of his 
malformed body member; and the equipment is used in the patient's home. 
The instructions also indicated that payment may also be made under the 
DME benefit category for repairs and maintenance of equipment owned by 
the beneficiary as well as expendable and non-reusable supplies and 
accessories essential to the effective use of the equipment. DME was 
defined under these program instructions from 1975 as equipment meeting 
four requirements (quoted later in the section verbatim and with text 
underscored as in the original instructions):
    Durable medical equipment is equipment which (a) can withstand 
repeated use, and (b) is primarily and customarily used to serve a 
medical purpose, and (c) generally is not useful to a person in the 
absence of an illness or injury; and (d) is appropriate for use in the 
home.
    All requirements of the definition must be met before an item can 
be considered to be durable medical equipment.
    Additional detailed instructions were provided in 1975 describing 
the underlying policies for determining whether an item meets the 
definition of DME and specifically addressed what the terms ``durable'' 
and ``medical equipment'' mean. The instructions indicated that an item 
is considered durable if it can withstand repeated use, that is, it is 
the type of item that could normally be rented, and that medical 
supplies of an expendable nature are not considered ``durable'' within 
the meaning of the definition. To be considered DME, the item must be 
able to be rented out to multiple patients and thus withstand repeated 
use. The instructions indicated that medical equipment is equipment 
primarily and customarily used for medical purposes and is not 
generally useful in the absence of illness or injury. The instructions 
indicated that in some cases information from medical specialists and 
the manufacturer or supplier of products new to the market may be 
necessary to determine whether equipment is medical in nature. 
Additional instructions provide examples of equipment which 
presumptively constitutes medical equipment, such as canes, crutches, 
and walkers, and equipment that is

[[Page 73897]]

primarily and customarily used for a nonmedical purpose and cannot be 
considered DME even when the item has some remote medically related 
use, such as air conditioners. Equipment that basically serves comfort 
or convenience functions or is primarily for the convenience of a 
person caring for the patient, such as elevators, and posture chairs, 
do not constitute medical equipment. Similarly, physical fitness 
equipment, first-aid or precautionary-type equipment, self-help 
equipment, and training equipment are considered nonmedical in nature. 
These program instructions from 1975 are still in effect and are now 
located in section 110 of chapter 15 of the Medicare Benefits Policy 
Manual (CMS Pub. 100-02).
    The Social Security Amendments of 1977 (Pub. L. 95-142) amended the 
statute to mandate a ``rent/purchase'' program or payment methodology 
for DME; CMS would pay for each item furnished to each beneficiary on 
either a rental or purchase basis depending on which method was 
considered more economical. The decision regarding whether payment for 
DME was made on a rental or purchase basis was made by the Medicare 
Part B carrier (Medicare contractor) processing the claim. The rent/
purchase program was implemented from February 1985 through December 
1988.
    Section 2321 of the Deficit Reduction Act of 1984 (Pub. L. 98-369) 
moved the definition of DME from section 1861(s)(6) of the Act to 
section 1861(n) of the Act and included a more detailed definition of 
DME.
    Section 4062(b) of the Omnibus Budget Reconciliation Act (OBRA) of 
1987 (Pub. L. 100-203) amended the statute to terminate the rent/
purchase program and add section 1834(a) to the Act with special 
payment rules for DME furnished on or after January 1, 1989. DME items 
were to be classified into different classes under paragraphs (2) 
through (7) of section 1834(a) of the Act, with specific payment rules 
for each class of DME. Section 1834(a) of the Act still governs payment 
for items and services furnished in areas that are not included in the 
competitive bidding program mandated by section 1847(a) of the Act. 
Section 1834(a)(2) of Act indicates that payment is made on a rental 
basis or in a lump sum amount for the purchase of an item the purchase 
price of which does not exceed $150 (inexpensive equipment) or which 
the Secretary determines is acquired at least 75 percent of the time by 
purchase (routinely purchased equipment) or which is an item specified 
under sections 1834(a)(2)(A)(iii) and (iv) of the Act. The term 
``routinely purchased equipment'' is defined in regulations at 42 CFR 
414.220(a)(2) as equipment that was acquired by purchase on a national 
basis at least 75 percent of the time during the period July 1986 
through June 1987.
    Medicare began covering blood glucose monitors under the DME 
benefit in the early 1980s and the test strips and other supplies 
essential for the effective use of the glucose monitor were also 
covered. Blood glucose monitors were expensive equipment within the 
meaning of section 1834(a)(2) of the Act but were routinely purchased 
(more than 75 percent of the time on a national basis) during the 
period July 1986 through June 1987. Therefore, payment was made on a 
fee schedule basis for blood glucose monitors based on the lower of the 
supplier's actual charge for the item or a statewide fee schedule 
amount calculated for the item based on the average rental or purchase 
payment for the item in the State for the 12-month period ending on 
June 30, 1987. The rental and purchase fee schedule amounts are 
increased on an annual basis based on the provisions set forth in 
section 1834(a)(14) of the Act.
    The special payment rules for DME mandated by section 1834(a) of 
the Act were implemented via program instructions for all DME items 
other than oxygen and oxygen equipment on January 1, 1989. CMS 
established and implemented fee schedule amounts for inexpensive or 
routinely purchased items, for payment on a rental basis, payment on a 
lump sum purchase basis when the item is new, and payment on a lump sum 
purchase basis when the item is used. We also promulgated rules 
implementing the special payment rules for DME mandated by section 
1834(a) of the Act. For more information, see the October 9, 1991 and 
December 7, 1992 Federal Registers (56 FR 50821 and 57 FR 57675, 
respectively), and a July 10, 1995, final rule (60 FR 35492).
    We established a definition for DME items and services during this 
time at 42 CFR 414.202, which simply mirrored the general definition of 
DME established in 1975 via program instructions.
    Section 1861(n) of the Act was revised by section 4105(b)(1) of the 
Balanced Budget Act of 1997 (Pub. L. 105-33) to expand coverage of 
blood glucose monitors and test strips to patients with type II 
diabetes. As noted, these items had already been covered as DME 
(glucose monitoring equipment) and disposable supplies (test strips) 
since the early 1980s, but coverage was limited to patients with type I 
diabetes.
    We added to the definition of DME at 42 CFR 414.202 effective for 
items furnished after January 1, 2012, to require that the item have a 
minimum lifetime of 3 years to be considered DME. This 3-year minimum 
lifetime requirement was established in a final rule published in the 
November 10, 2011 Federal Register titled ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System and Quality Incentive Program; 
Ambulance Fee Schedule; Durable Medical Equipment; and Competitive 
Acquisition of Certain Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies'' (76 FR 70228 and 70314). This final rule 
included a discussion of how the 3-year minimum lifetime requirement 
(MLR) is applied to multicomponent devices or systems consisting of 
durable and nondurable components (76 FR 70291). In this rule, we noted 
that a device may be a system consisting of durable and nondurable 
components that together serve a medical purpose, and that we consider 
a multicomponent device consisting of durable and nondurable components 
nondurable if the component that performs the medically necessary 
function of the device is nondurable, even if other components of the 
device are durable. In regards to the 3-year MLR, the component(s) of a 
multicomponent device that performs the medically necessary function of 
the device must meet the 3-year MLR (76 FR 70291).
    In summary, DME is covered under Medicare Part B. DME is defined 
under section 1861(n) of the Act and Medicare claims for DME are paid 
in accordance with the special payment rules under section 1834(a) of 
the Act or under the competitive bidding program mandated by sections 
1847(a) and (b) of the Act. Rules related to the scope and conditions 
of the benefit are addressed at 42 CFR 410.38. Under Sec.  414.202, 
durable medical equipment means equipment which--
     Can withstand repeated use;
     Effective with respect to items classified as DME after 
January 1, 2012, has an expected life of at least 3years;
     Is primarily and customarily used to serve a medical 
purpose;
     Generally is not useful to a person in the absence of an 
illness or injury; and
     Is appropriate for use in the home.
    All requirements of the definition must be met before an item can 
be considered to be DME.

B. Continuous Glucose Monitors

    On January 12, 2017, we issued a CMS Ruling (CMS-1682-R) 
articulating the CMS policy concerning the classification of 
therapeutic continuous

[[Page 73898]]

glucose monitoring systems as DME under Part B of the Medicare program. 
CMS-1682-R is available on the CMS.gov website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Rulings/CMS-Rulings.
    CMS-1682-R classified continuous glucose monitoring systems as 
``therapeutic continuous glucose monitors (CGMs)'' that meet the 
definition of DME if the equipment--
     Is approved [or cleared] by the FDA for use in place of a 
blood glucose monitor for making diabetes treatment decisions (for 
example, changes in diet and insulin dosage);
     Generally is not useful to the individual in the absence 
of an illness or injury;
     Is appropriate for use in the home; and
     Includes a durable component (a component that CMS 
determines can withstand repeated use and has an expected lifetime of 
at least 3 years) that is capable of displaying the trending of the 
continuous glucose measurements.
    Under CMS-1682-R, in all other cases in which a CGM does not 
replace a blood glucose monitor for making diabetes treatment 
decisions, a CGM is not considered DME. We reasoned that enabling a 
beneficiary to make diabetes treatment decisions was the medical 
purpose of a glucose monitor, that non-therapeutic CGMs did not serve 
that medical purpose, and that non-therapeutic CGMs therefore were not 
DME. CMS-1682-R also addressed the calculation of the fee schedule 
amounts for therapeutic CGMs in accordance with the rules at section 
1834(a) of the Act and under regulations at 42 CFR part 414, subpart D.
    CGMs are systems that use disposable glucose sensors attached to 
the patient to monitor a patient's interstitial fluid glucose level on 
a continuous basis by either automatically transmitting the glucose 
readings from the sensor via a transmitter to a device that displays 
the readings (``automatic'' CGMs), or by displaying the glucose 
readings from the sensor on a device that the patient manually holds 
over the sensor (``manual'' CGMs). Some CGMs are class III devices and 
require premarket approval by the FDA, while some newer CGM models are 
class II devices that do not require premarket approval and may go 
through FDA's 510(k) premarket process, whereby devices can obtain 
clearance by demonstrating substantial equivalence to a predicate 
device. The glucose sensor continuously measures glucose values in the 
interstitial fluid, the fluid around the cells (in contrast to blood 
glucose monitors which measure glucose values using fingertip blood 
samples). The sensor is a small flexible metal probe or wire that is 
inserted under the skin and has a coating that prevents the body's 
immune system from detecting and attacking the foreign probe. Once the 
coating wears off, which in current models takes place in 7 to 14 days, 
the sensor must be replaced for safety reasons. The glucose sensor 
generates small electrical signal in response to the amount of sugar 
that is present (interstitial glucose). This electrical signal is 
converted into a glucose reading that is received/displayed on a 
dedicated continuous glucose monitor (the CGM). Insulin pumps covered 
as DME or a compatible mobile device (smart phone, smart watch, tablet, 
etc.) and app that are not covered as DME may also perform the function 
of a CGM, which receives and displays the glucose measurements in the 
form of a graph so that the patient can visualize how their glucose 
measurements are trending. CMS-1682-R only addressed whether CGMs meet 
the Medicare definition of DME and did not address whether insulin 
pumps that can also perform the function of a CGM are DME since insulin 
pumps are already classified as DME under an NCD (section 280.14 of 
Chapter 1, Part 4 of the Medicare National Coverage Determinations 
Manual, Pub. 100-03).
    CMS-1682-R classifies CGM display devices as DME if they have been 
approved [or cleared] by the FDA for use in making diabetes treatment 
decisions, such as changing one's diet or insulin dosage based solely 
on the readings of the CGM, that is, without verifying the CGM readings 
with readings from a blood glucose monitor. These CGMs are referred to 
as ``non-adjunctive'' or ``therapeutic'' CGMs in CMS-1682-R. In 
contrast, CGMs that patients use to check their glucose levels and 
trends that must be verified by use of a blood glucose monitor to make 
diabetes treatment decisions are not currently classified as DME. These 
CGMs are referred to as ``adjunctive'' or ``non-therapeutic'' CGMs in 
CMS-1682-R. It is important to note that there were no ``adjunctive'' 
or ``non-therapeutic'' CGM receivers being manufactured and sold on the 
market as of the time this rule was drafted. This fact was brought to 
light by comments submitted on the proposed rule and discussed in more 
detail later in this final rule.

C. Current Issues

    As indicated previously, there are currently no adjunctive CGM 
receivers being manufactured and sold on the market. However, 
beneficiaries are currently using disposable continuous glucose sensors 
and transmitters that have not been approved or cleared by the FDA to 
replace a blood glucose monitor for use in making diabetes treatment 
decisions with insulin infusion pumps that also function as 
``adjunctive'' or ``non-therapeutic'' CGM receivers. Beneficiaries are 
using the readings from these disposable sensors that are received and 
displayed by the insulin pump to help manage their diabetes. Claims 
submitted for CGM sensors and transmitters used with insulin pumps are 
being denied inappropriately based on CMS-1682-R even though this 
Ruling only addressed the classification of CGM receivers as DME and 
did not address coverage of CGM sensors and transmitters used with 
insulin pumps. This final rule addresses whether adjunctive or ``non-
therapeutic'' CGMs meet the five requirements or prongs of the 
definition of DME at 42 CFR 414.202 and how the fee schedule amounts 
should be calculated for CGM supplies and accessories.
1. Requirements of DME Definition
(a) Ability To Withstand Repeated Use
    This criterion under 42 CFR 414.202 addresses the issue of whether 
an item of medical equipment can withstand repeated use, which means it 
is an item that can be rented and used by successive patients. 
Equipment must be able to withstand repeated use to fall within the 
scope of the Medicare Part B benefit for DME. The continuous glucose 
monitor's receiver component is durable equipment that can be rented 
and used by successive patients to monitor the trending of glucose 
levels that are either transmitted to the device using disposable 
sensors or are read or received by the device when the patient holds 
the device near the sensor. Therefore, we believe this equipment meets 
the requirement to withstand repeated use; that is, equipment that 
could normally be rented and used by successive patients.
(b) Expected Life of at Least 3 Years
    This criterion under 42 CFR 414.202 further addresses the issue of 
``durability'' and provides a clear minimum timeframe for how long an 
item must last to meet the definition of DME. We believe the continuous 
glucose monitor or receiver meets the 3-year minimum lifetime 
requirement. In the case of one manufacturer, reliability analysis data 
from an engineering firm that evaluated their CGM product predicted a 
lifetime of greater than 3 years for the receiver. Because the CGM 
sensors and transmitters only have a

[[Page 73899]]

predicted life of days (for the sensors) or several months (for the 
transmitters), the receiver is the only durable component of a CGM 
system.
(c) Primarily and Customarily Used To Serve a Medical Purpose
    We proposed that CGMs that have not been approved or cleared by the 
FDA for use in making diabetes treatment decisions without the use of a 
blood glucose monitor but can be used to alert the patient about 
potentially dangerous glucose levels while they sleep, are primarily 
and customarily used to serve a medical purpose. Likewise, we believe 
that disposable continuous glucose sensors and transmitters that work 
in conjunction with an insulin pump that also operates as a continuous 
glucose monitor's receiver component to alert the patient about 
potentially dangerous glucose levels while they sleep are primarily and 
customarily used to serve a medical purpose. We now believe that 
because adjunctive CGMs or adjunctive continuous glucose sensors and 
transmitters used with insulin pumps can provide information about 
potential changes in glucose levels while a beneficiary is sleeping and 
is not using a blood glucose monitor, these CGMs or CGM functions on 
insulin pumps are primarily and customarily used to serve a medical 
purpose.
(d) Generally Not Useful to a Person in the Absence of an Illness or 
Injury
    CMS has determined that both adjunctive and non-adjunctive/
therapeutic CGM systems are generally not useful to a person in the 
absence of an illness or injury because people who do not have diabetes 
generally would not find a monitor that tracks their glucose levels to 
be useful. Thus far, Medicare's coverage policy for CGMs has supported 
the use of therapeutic CGMs in conjunction with a smartphone (with the 
durable receiver as backup), including the important data sharing 
function they provide for patients and their families.\26\ CMS 
previously concluded that therapeutic CGMs, when used in conjunction 
with a smartphone, still satisfied the definition of DME because the 
durable receiver, used as a backup, was generally not useful to a 
person in the absence of an illness or injury, even if the smartphone 
might be. We are not changing this policy. We proposed that both 
therapeutic and non-therapeutic CGMs, when used in conjunction with a 
smartphone, satisfy the definition of DME because the durable receiver, 
used as a backup, is not generally useful to a person in the absence of 
an illness or injury. Medicare does not cover or provide payment for 
smartphones under the DME benefit. In order for Medicare to cover 
disposable glucose sensors, transmitters and other non-durable 
components of a CGM system, these disposable items must be used with 
durable CGM equipment that meets the Medicare definition of DME, which 
smartphones do not. If a Medicare beneficiary is using durable CGM 
equipment or an insulin pump with a CGM feature that meets the Medicare 
definition of DME as a backup, but primarily uses a smartphone or other 
non-DME device to display their glucose readings in conjunction with 
the covered DME item as described previously, Medicare will cover the 
disposable items since the beneficiary is using their covered DME item 
as a backup to display their glucose readings. However, if the 
beneficiary is exclusively using a non-DME item like a smartphone to 
display glucose readings from disposable sensors, transmitters or other 
disposable CGM supplies, these disposable supplies cannot be covered 
since there is no covered item of DME in this scenario, even as a 
backup.
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    \26\ https://www.cms.gov/Center/Provider-Type/Durable-Medical-Equipment-DME-Center.
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(e) Appropriate for Use in the Home
    The FDA has cleared or approved CGM systems as safe and effective 
for use by the patient in their homes similar to how blood glucose 
monitoring systems have been used in the home for many years. Both 
adjunctive and non-adjunctive CGMs are appropriate for use in the home 
for the same purpose that a blood glucose monitor is used in the home.
    Comment: With regard to the proposal to expand classification of 
durable medical equipment (DME) to all types of CGMs (``adjunctive'' as 
well as ``non-adjunctive''), most commenters agreed with the proposal 
but multiple commenters pointed out that the only adjunctive CGM system 
on the market today does not include a dedicated durable CGM receiver. 
Some commenters recommended classifying the software application (App) 
that allows smart phones to function as CGM receivers as DME.
    Response: We have confirmed with the FDA that the one adjunctive 
CGM product on the market today, the Guardian\TM\ Connect System, 
consists of disposable glucose sensors and transmitters that work in 
conjunction with the patient's smart phone and App or with certain 
MiniMed insulin infusion pumps instead of a dedicated durable receiver. 
Software applications do not meet the definition of DME, nor do phones 
or computers. To cover the software application under the Medicare Part 
B benefit for DME, the equipment that the software is added to, or some 
part of the CGM system used with the software, must meet the Medicare 
definition of DME at 42 CFR 414.202, including the requirement that the 
equipment or system component not be useful in the absence of illness 
or injury. Smart phones are useful in the absence of illness or injury 
and therefore do not meet the definition of DME. Therefore, a CGM 
system that consists of a software application added to a smart phone 
and disposable supplies is not covered under the Medicare Part B 
benefit for DME. However, smart devices (watch, smartphone, tablet, 
laptop computer, etc.) can be used in conjunction with a continuous 
glucose monitor.
    In contrast, durable insulin infusion pumps have been classified 
and covered as DME since the mid-1990s. Therefore, in accordance with 
this final rule, an insulin pump that also performs the functions of an 
adjunctive CGM would also be classified and covered as DME.
    After consideration of the public comments we received, we are 
finalizing the proposed rule to expand classification of DME to both 
adjunctive and non-adjunctive CGMs as long as all requirements of the 
definition of DME at 42 CFR 414.202 are met. There are adjunctive 
continuous glucose monitoring sensors and transmitters that do not meet 
the durability requirement and are used exclusively in conjunction with 
devices such as smart phones, which are not DME for the previously 
stated reasons; neither the sensors and transmitters nor the smart 
phones meet the Medicare definition of DME. In situations where these 
adjunctive continuous glucose monitoring sensors and transmitters are 
used in conjunction with an insulin infusion pump that also functions 
as a CGM receiver, the sensors and transmitters can be covered under 
the DME benefit, subject to other requirements and criteria. We note 
that if the beneficiary does not meet the medical necessity criteria 
for an insulin pump, then the insulin pump would not be covered and 
therefore any supplies used with the insulin pump would also not be 
covered.
2. Fee Schedule Amounts for CGM Receivers/Monitors and Related 
Accessories
    Medicare payment for DME was made on a reasonable charge basis 
prior to 1989. The regulations related to implementation of the 
reasonable charge payment methodology are found at 42 CFR part 405, 
subpart E. The current Medicare payment rules for glucose

[[Page 73900]]

monitors and other DME are located at section 1834(a) of the Act and 
mandate payment on the basis of fee schedule amounts beginning in 1989. 
Blood glucose monitors are classified as routinely purchased items 
subject to the payment rules for inexpensive and routinely purchased 
DME at section 1834(a)(2) of the Act, which mandate payment for 
routinely purchased items on a purchase or rental basis using fee 
schedule amounts based on average reasonable charges for the purchase 
or rental of the item for the 12-month period ending on June 30, 1987, 
increased by the percentage increase in the consumer price index for 
all urban consumers (U.S. city average) for the 6-month period ending 
with December 1987. These base fee schedule amounts are increased on an 
annual basis based on the update factors located in section 1834(a)(14) 
of the Act, which includes specific update factors for 2004 through 
2008 for class III devices described in section 513(a)(1)(C) of the 
Federal Food, Drug, and Cosmetic Act. Routinely purchased equipment is 
defined in the regulations at 42 CFR 414.220(a)(2) as equipment that 
was acquired by purchase on a national basis at least 75 percent of the 
time during the period July 1986 through June 1987. Section 
1834(a)(1)(C) of the Act states that subject to subparagraph (F)(ii), 
this subsection must constitute the exclusive provision of this title 
[Title XVIII of the Act] for payment for covered items under this part 
[Medicare Part B] or under Part A to a home health agency. The fee 
schedule amounts for blood glucose monitors were revised in 1995 using 
special payment limits established in accordance with the ``inherent 
reasonableness'' authority at section 1842(s)(8) of the Act. The final 
notice (BPD-778-FN) establishing special payment limits for blood 
glucose monitors was published in the January 17, 1995 Federal Register 
(60 FR 3405), with the payment limits updated on an annual basis using 
the DME fee schedule update factors in section 1834(a)(14) of the Act.
    Because certain CGMs have been approved or cleared by the FDA to 
replace blood glucose monitors for use in making diabetes treatment 
decisions, we believe that CGMs represent a newer technology version of 
glucose monitors paid for by Medicare in 1986 and 1987. In addition, 
the CGM systems function similar to the blood glucose monitors in using 
disposable supplies or accessories, such as test strips or sensors, to 
measure glucose levels in a patient's body, either from the patient's 
blood or interstitial fluid, and using durable equipment to convert 
these glucose measurements in a way that they can be displayed on a 
screen on the equipment. Therefore, we believe that the CGM receivers/
monitors must be classified as routinely purchased DME since they are a 
technological refinement of glucose monitors routinely purchased from 
July 1986 through June 1987. The alternative would be to classify CGM 
receivers/monitors as other items of DME under section 1834(a)(7) of 
the Act and pay for the equipment on a capped rental basis. We also 
believe the average reasonable charge data for blood glucose monitors 
from 1986 and 1987 can be used to establish the fee schedule amounts 
for CGM receivers/monitors in accordance with our regulations 42 CFR 
414.238(b) since CGM receivers/monitors are comparable to blood glucose 
monitors.
    We do not believe that the special payment limits established in 
1995 for blood glucose monitors must apply to CGM receivers/monitors 
because these special payment limits were based on specific pricing 
information on the cost of blood glucose monitors. We therefore 
proposed to continue using the fee schedule amounts established in CMS-
1682-R based on the updated 1986/87 average reasonable charges for 
blood glucose monitors as the fee schedule amounts for CGM receivers/
monitors. As noted, section 1834(a)(14) of the Act provides different 
annual update factors for class III DME versus other DME items and so 
the fee schedule amounts for class III CGM receivers are slightly 
higher (from $231.77 to $272.63 in 2020) than the fee schedule amounts 
for class II CGM receivers (from $208.76 to $245.59 in 2020).
    With regard to the fee schedule amounts for supplies and 
accessories for CGMs, we proposed to separate payment for CGM supplies 
and accessories into three separate categories of supplies and 
accessories with different fee schedule amounts for each category. The 
current 2020 monthly fee schedule amounts of $222.77 and $259.20 for 
supplies and accessories for CGM systems apply to all types of class II 
or class III therapeutic CGMs, respectively, but were established based 
on supplier price lists for only one type of CGM system approved by FDA 
for use in making diabetes treatment decisions without the need to use 
a blood glucose monitor to verify the results (non-adjunctive CGMs). 
The supplier prices used to establish these fee schedule amounts were 
for non-adjunctive CGM systems that use a combination of sensors and 
transmitters to automatically send glucose measurements to the CGM 
receiver without manual intervention by the patient. We refer to this 
type of CGM system as a non-adjunctive system, or a system that both 
replaces a blood glucose monitor for use in making diabetes treatment 
decisions, and can alert the patient about dangerous glucose levels 
while they sleep based on the automatic transmission of the glucose 
readings to the receiver on a 24-hour basis. The fee schedule amounts 
of $222.77 and $259.20 for supplies and accessories for class II and 
class III CGMs, respectively, increased by the fee schedule update 
factor for 2021, would continue to apply to the supplies and 
accessories for automatic, non-adjunctive CGMs effective the effective 
date specified in the DATES section of this final rule.
    If a beneficiary uses disposable ``adjunctive'' or ``non-
therapeutic'' continuous glucose sensors and transmitters with an 
insulin infusion pump, the beneficiary and Medicare program would still 
incur expenses associated with use of blood glucose monitors and 
supplies. To avoid a situation where the beneficiary and program would 
pay twice for glucose monitoring supplies needed to accurately assess 
glucose levels, we proposed to establish the fee schedule amounts for 
supplies and accessories for adjunctive CGMs based on supplier prices 
for the sensors and transmitters minus the fee schedule amounts for the 
average quantity and types of blood glucose monitoring supplies used by 
insulin-treated beneficiaries who would be more likely to qualify for 
coverage of a CGM system based on a need to more closely monitor 
changes in their glucose levels. The adjunctive CGM system is not 
replacing the function of the blood glucose monitor and related 
supplies and therefore only provides an adjunctive or added benefit of 
alerting the beneficiary when their glucose levels might be dangerously 
high or low. Since the adjunctive CGM system cannot function alone as a 
glucose monitor for use in making diabetes treatment decisions, we 
proposed to reduce the payment for the adjunctive CGM system by the 
amount that is paid separately for the blood glucose monitor and 
supplies that are needed in addition to the adjunctive CGM system and 
are not needed in addition to the non-adjunctive CGM systems. 
Currently, Medicare is allowing coverage and payment for 135 test 
strips and lancets per month for insulin-treated beneficiaries using 
blood glucose monitors. Using the 2020 mail order fee schedule amounts 
for 50 test strips, divided by 50 and multiplied by 135,

[[Page 73901]]

plus the 2020 mail order fee schedule amounts for 100 lancets, divided 
by 100 and multiplied by 135, plus the 2020 mail order fee schedule 
amounts for a monthly supply of batteries, calibration solution, and 
lancet device, plus the 2020 fee schedule amount for the blood glucose 
monitor divided by 60 months (5-year lifetime) results in a 2020 
monthly allowance of $34.35, which reflects what Medicare currently 
pays per month for an insulin-treated diabetic beneficiary. Based on 
supplier invoices and other prices, a 2020 monthly price for supplies 
and accessories used with class II or class III adjunctive CGMs would 
be calculated to be $209.97 and $233.12 respectively. Subtracting the 
monthly cost of the blood glucose monitor and supplies of $34.35 from 
the monthly cost of the supplies and accessories for class II 
adjunctive CGMs results in a net price of $175.62 ($209.97-$34.35 = 
$175.62) for the monthly supplies and accessories used with a class II 
adjunctive CGM after backing out the cost of the separately paid blood 
glucose supplies. Subtracting the monthly cost of the blood glucose 
monitor and supplies of $34.35 from the monthly cost of the supplies 
and accessories for class III adjunctive CGMs results in a net price of 
$198.77 ($233.12-$34.35 = $198.77) for the monthly supplies and 
accessories used with a class III adjunctive CGM after backing out the 
cost of the separately paid blood glucose supplies. Thus, we proposed 
2020 fee schedule amounts of $175.62 and $198.77 (to be increased by 
the 2021 fee schedule update factor yet to be determined) for use in 
paying claims in 2021 for the monthly supplies and accessories for use 
with class II and class III adjunctive CGMs respectively. Reducing the 
payment amount for supplies and accessories used with adjunctive CGMs 
by the average monthly payment for the blood glucose monitor and 
supplies that Medicare and the beneficiary will still have to pay for 
avoids a situation where the beneficiary and the program pay twice for 
glucose testing supplies and equipment.
    Finally, a third type of CGM system currently on the market is non-
adjunctive but does not automatically transmit glucose readings to the 
CGM receiver and therefore does not alert the patient about dangerous 
glucose levels while they sleep. We refer to this as a manual, non-
adjunctive CGM system. We proposed to establish 2020 fee schedule 
amounts of $46.86 (for class II devices) and $52.01 (for class III 
devices) for the monthly supplies and accessories for this third 
category, which only uses disposable batteries and sensors, based on 
supplier prices for the supplies and accessories for this category of 
CGMs.
    Comment: Many commenters did not agree with the proposal to 
establish separate codes and pricing for supplies for three types of 
CGM systems on the market today. They strongly believe that linking 
coding and payment to the specific types of CGMs on the market today 
was not wise given the rapid pace in changes in technology for CGMs and 
diabetic equipment in general. Many commenters specifically objected to 
establishing separate codes and fee schedule amounts for automatic 
versus manual non-adjunctive CGMs. They recommended that the continuity 
of pricing regulations should be observed and that the initial prices 
established based on automatic non-adjunctive CGMs alone should apply 
to manual non-adjunctive CGMs as well. The manufacturer of the manual 
non-adjunctive CGM pointed out that their new product line for CGMs 
offers continuous data transmission from sensor to receiver, enabling 
customizable, real-time alarms and alerts that can automatically alert 
users when their glucose is high or low, including while they sleep, 
without any patient intervention. Therefore, it appears that the manual 
non-adjunctive CGM systems and classification are already becoming 
obsolete.
    Response: We agree with the commenters that glucose monitoring 
technology is changing rapidly, and the Medicare fee schedule amounts 
for this equipment should not be limited solely to the technology that 
is currently on the market. We believe that the existing fee schedule 
amounts for non-adjunctive CGMs and supplies and accessories necessary 
for the effective use of non-adjunctive CGMs should continue to be used 
in paying claims for these items. However, the utility offered by 
adjunctive CGMs is not the same as the utility offered by non-
adjunctive CGMs and so we do not believe that the existing fee schedule 
amounts established for the non-adjunctive CGMs and supplies and 
accessories necessary for the effective use of non-adjunctive CGMs 
should be used in paying claims for adjunctive CGMs and supplies and 
accessories necessary for the effective use of adjunctive CGMs, which 
clearly are different types of CGMs because they cannot be used in 
place of a blood glucose monitor. As explained further later in this 
section, we believe that separate fee schedule amounts are needed for 
adjunctive CGMs and supplies and related accessories versus non-
adjunctive CGMs and related supplies and accessories.
    Comment: Many commenters stated that more details were needed on 
how the proposed fee schedule amounts were established for the separate 
codes for supplies used with the three types of CGM systems on the 
market today.
    Response: We are not finalizing the proposed fee schedule amounts 
for the monthly supplies and accessories associated with three 
different types of CGMs. Although we will continue using existing fee 
schedule amounts established for non-adjunctive CGMs, these are not fee 
schedule amounts for adjunctive CGMs and therefore do not apply to 
adjunctive CGMs.
    Comment: Many commenters believe the proposed fee schedule amounts 
for supplies for CGMs were not sufficient to cover the cost of these 
items. A commenter stated that the proposed fee schedule amounts are 
below internet retail prices while other commenters simply stated that 
the proposed fee schedule amounts are below the cost of the products.
    Response: The fee schedule amounts for supplies necessary for the 
effective use of CGMs is required to be established in accordance with 
the rules of the statute at section 1834(a) of the Act. In establishing 
Medicare fee schedule amounts for DME items, section 1834(a) of the Act 
requires that CMS base payment amounts on average reasonable charges in 
1986 and 1987.
    After consideration of the public comments we received, we are not 
finalizing the proposed fee schedule amounts for supplies and 
accessories used in conjunction with three types of CGMs. We believe 
the technology associated with the manual, non-adjunctive category is 
already becoming obsolete as more CGM products that automatically 
transmit sensor readings to the receiver and provide night time alarms 
come on the market. As the commenters pointed out, the technology is 
evolving quickly and establishing categories based on the different 
variations of CGMs on the market at any one time does not seem prudent 
or necessary. However, we do note that there is a substantial 
difference in the utility and capabilities of adjunctive CGMs versus 
non-adjunctive CGMs in that while both are able to alert the patient 
about dangerous or potentially dangerous glucose levels while they 
sleep, the non-adjunctive CGMs are also able to replace the use of a 
blood glucose monitor for accurate glucose measuring/testing purposes, 
while the adjunctive CGMs are not.
    A blood glucose monitor and related supplies are necessary for 
patients using

[[Page 73902]]

adjunctive CGMs for accurate glucose measuring/testing purposes, while 
patients using a non-adjunctive CGM do not also need a blood glucose 
monitor. Existing fee schedule amounts for therapeutic or non-
adjunctive CGMs and related supplies and accessories were specifically 
established for those types of CGMs and do not apply to adjunctive CGMs 
and related supplies and accessories. Therefore, fee schedule amounts 
for adjunctive CGMs and related supplies and accessories will be 
established in accordance with existing regulations for gap-filling 
under 42 CFR 414.238(b).
    Summary of final provisions:
     We are finalizing our proposal to expand the 
classification of DME to a larger swath of CGMs, regardless of whether 
they are non-adjunctive (can alert patients when glucose levels are 
approaching dangerous levels, including while they sleep and also 
replace blood glucose monitors) or adjunctive (can alert patients when 
glucose levels are approaching dangerous levels, including while they 
sleep but do not replace blood glucose monitors), as long as such CGMs 
satisfy the regulatory definition of DME. For example, to be classified 
under the Medicare Part B benefit for DME, a potential CGM would need 
to have a durable component performing the medically necessary function 
of the device that can withstand repeated use for at least 3 years, and 
is not useful in the absence of illness or injury, in accordance with 
42 CFR 414.202.
     We are not finalizing the proposed fee schedule amounts 
for CGMs and related supplies and accessories.
     Therefore, the fee schedule amounts for adjunctive CGM and 
related supplies and accessories will be established in accordance with 
existing regulations for gap-filling under 42 CFR 414.238(b).

VII. DME Interim Pricing in the CARES Act

    In this final rule, we are finalizing the DME provisions of an IFC 
(May 2020 COVID-19 IFC) which made conforming changes to the DME 
payment regulations to reflect the CARES Act. The CARES Act (Pub. L. 
116-136) was enacted on March 27, 2020. Section 3712 of the CARES Act 
specifies the payment rates for certain DME and enteral nutrients, 
supplies, and equipment furnished in non-CBAs through the duration of 
the emergency period described in section 1135(g)(1)(B) of the Act. 
Section 3712(a) of the CARES Act continues our policy of paying the 50/
50 blended rates for items furnished in rural and non-contiguous non-
CBAs through December 31, 2020, or through the duration of the 
emergency period, if longer. Section 3712(b) of the CARES Act increased 
the payment rates for DME and enteral nutrients, supplies, and 
equipment furnished in areas other than rural and non-contiguous non-
CBAs through the duration of the emergency period. Beginning March 6, 
2020, the payment rates for DME and enteral nutrients, supplies, and 
equipment furnished in these areas are based on 75 percent of the 
adjusted fee schedule amount and 25 percent of the historic, unadjusted 
fee schedule amount, which results in higher payment rates as compared 
to the full fee schedule adjustments that were previously required 
under Sec.  414.210(g)(9)(iv). We made changes to the regulation text 
at Sec.  414.210(g)(9), consistent with section 3712 of the CARES Act, 
in an IFC that we published in the May 8, 2020 Federal Register titled 
``Medicare and Medicaid Programs; Additional Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency.''
    We received six timely pieces of correspondence in response to the 
May 2020 COVID-19 IFC provision titled ``DME Interim Pricing in the 
CARES Act''.
    Comment: Many of the commenters appreciated that CMS modified the 
regulations consistent with section 3712 of the CARES Act.
    Response: We thank the commenters for their support.
    Comment: Many of the commenters cited reasons why the increased 
payments rates for DME are needed during the PHE. A commenter stated 
that ensuring access to personal protective equipment (PPE) and other 
DME for beneficiaries is essential to preventing the spread of COVID-
19. Another commenter stated that this provision is in the overall 
interest to everyone--suppliers, health care professionals and 
beneficiaries--as suppliers will be able to maintain their inventory 
and be paid for items when there may be lags in care and beneficiaries 
may not be able to meet required visits due to the current PHE. Another 
commenter stated that there have been broad-based increases in the 
acquisition costs of certain home medical equipment (for example, 
ventilators, oxygen concentrators) as well as an increase in various 
overhead expenses (for example, requisite personal protective equipment 
and a more labor-intensive delivery/instruction methodology). The 
commenter stated that this has created financial hardships for many 
suppliers servicing the PHE patients.
    Response: We believe that section 3712 of the CARES Act addresses 
these concerns about the need for payment increases during the PHE.
    Comment: A commenter suggested that the adjustment for the 75/25 
blend in the non-rural and contiguous non-CBAs should be maintained--at 
a minimum--to the end of 2020. The commenter also stated that if Round 
2021 of the CBP is delayed, then the 75/25 blended rates should be 
extended from 2020 and subsequent years and maintained until the 
program is implemented. The commenter also stated that if Round 2021 is 
delayed, the 75/25 blended rates should be extended to all non-rural 
providers, including the former CBAs, until the next CBP can be 
implemented. The commenter then stated that if there is a delay in 
Round 2021, the 50/50 blended rates for rural areas should be extended 
until the next Round of the CBP is implemented.
    Response: This provision implements section 3712 of the CARES Act. 
Section 3712(a) of the CARES Act continues our policy of paying the 50/
50 blended rates for items furnished in rural and non-contiguous non-
CBAs through December 31, 2020, or through the duration of the 
emergency period, if longer. Section 3712(b) of the CARES Act increased 
the payment rates for DME and enteral nutrients, supplies, and 
equipment furnished in areas other than rural and non-contiguous non-
CBAs through the duration of the emergency period. As such, and because 
the PHE has continued into 2021, the 50/50 blended rates in rural and 
non-contiguous non-CBAs and the 75/25 blended rates in the non-rural 
contiguous non-CBAs have remained in effect. This provision does not 
address fee schedule adjustments after the PHE. We proposed a fee 
schedule adjustment rule for after the PHE in the November 2020 
proposed rule.
    After consideration of the public comments received, we are 
finalizing the following changes to Sec.  414.210(g)(9):
     We are finalizing conforming changes to Sec.  
414.210(g)(9) as proposed, consistent with section 3712(a) and (b) of 
the CARES Act, but we are omitting the language in section 3712(b) of 
the CARES Act that references an effective date that is 30 days after 
the date of enactment of the law.
     We are finalizing our proposed revision to Sec.  
414.210(g)(9)(iii), which describes the 50/50 fee schedule adjustment 
blend for items and services furnished in rural and non-contiguous 
areas, to address dates of service from June 1, 2018, through December 
31, 2020, or through the duration of the emergency period described in 
section

[[Page 73903]]

1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)), whichever is 
later.
     We are finalizing our proposed addition to Sec.  
414.210(g)(9)(v) which states that, for items and services furnished in 
areas other than rural or noncontiguous areas with dates of service 
from March 6, 2020, through the remainder of the duration of the 
emergency period described in section 1135(g)(1)(B) of the Act (42 
U.S.C. 1320b-5(g)(1)(B)), based on the fee schedule amount for the area 
is equal to 75 percent of the adjusted payment amount established under 
``this section'' (by which we mean Sec.  414.210(g)(1) through (8)), 
and 25 percent of the unadjusted fee schedule amount. For items and 
services furnished in areas other than rural or noncontiguous areas 
with dates of service from the expiration date of the emergency period 
described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)) through December 31, 2020, based on the fee schedule amount 
for the area is equal to 100 percent of the adjusted payment amount 
established under Sec.  414.210(g)(1) through (8) (referred to as 
``this section'' in the regulation text).
     Finally, we are finalizing our revision of Sec.  
414.210(g)(9)(iv) to specify for items and services furnished in areas 
other than rural and noncontiguous areas with dates of service from 
June 1, 2018 through March 5, 2020, based on the fee schedule amount 
for the area is equal to 100 percent of the adjusted payment amount 
established under Sec.  414.210(g)(1) through (8) (``this section'' in 
the regulation text).

VIII. Collection of Information Requirements

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

IX. Regulatory Impact Analysis

A. Statement of Need

    We are finalizing provisions that were included in the November 
2020 proposed rule, as well as provisions that were in two IFCs--the 
May 2018 IFC and the May 2020 COVID-19 IFC.
    The May 2018 IFC, finalized in this rule, with the exception of the 
wheelchair provisions, amended the regulations to revise the date that 
the initial fee schedule adjustment transition period ended and resumed 
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 (83 FR 21912). The May 2018 IFC also made technical amendments 
to existing regulations for DMEPOS items and services to note the 
exclusion of infusion drugs used with DME from the DMEPOS CBP and 
reflected 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. Additionally, on April 
26, 2021, we announced the continuation of effectiveness of the 2018 
IFC and the extension of the timeline for publication of the final rule 
(86 FR 21949).
    Specifically, this IFC resumed the blended adjusted Medicare fee 
schedule amounts for certain items and services that were furnished in 
rural and non-contiguous areas not subject to the CBP beginning June 1, 
2018 in response to input from suppliers that the fully adjusted fee 
schedule amounts were not sufficient to cover the cost of furnishing 
items and services in remote areas of the country. Stakeholders and 
others posited that the increased fee schedule adjustments would ensure 
access to items and services in these areas to protect the health, 
safety, and well being of beneficiaries who needed these items and 
services. It was estimated that these adjustments 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. The goal of this IFC was to ensure beneficiary access to DME 
items and services in rural and non-contiguous areas not subject to the 
CBP during the transition period. CMS continued to study the impact of 
these change in payment rates on access to items and services in these 
areas. We believed that resuming the fee schedule adjustment transition 
period in rural and non-contiguous areas will promote stability in the 
DMEPOS market, and will enable CMS to work with stakeholders to 
preserve beneficiary access to DMEPOS.
    The DMEPOS provisions included in the May 2020 COVID-19 IFC amended 
Sec.  414.210 to temporarily increase the DME fee schedule amounts in 
certain areas during the PHE, as required by section 3712 of the CARES 
Act (85 FR 27569). The May 2020 IFC made several changes to payment and 
coverage policies, in an effort to allow health care providers maximum 
flexibility to minimize the spread of COVID-19 among Medicare and 
Medicaid beneficiaries, health care personnel, and the community at 
large, and increased their capacity to address the needs of their 
patients. The estimated Medicare gross benefit costs against the FY 
2021 President's Budget baseline for the May 2020 IFC provision was 
$140 million (85 FR 27614). We also estimated that the May 2020 IFC 
provision also costs $30 million in Medicare beneficiary cost sharing 
at that time.
    In addition, we are finalizing certain provisions that were 
included in the November 2020 proposed rule (85 FR 70358). This final 
rule establishes a fee schedule adjustment methodology for certain 
DMEPOS items and services furnished in non-competitive bidding areas 
(non-CBAs) on or after the effective date specified in the DATES 
section of this final rule, or the date immediately following the 
duration of the emergency period described in section 1135(g)(1)(B) of 
the Act (42 U.S.C. 1320b-5(g)(1)(B)), whichever is later. This policy 
continues higher fee schedule amounts for certain items and services 
furnished in rural and non-contiguous areas of the country. This fee 
schedule adjustment methodology is responsive to stakeholders such as 
DMEPOS suppliers, who are of the view that fully adjusted fee schedule 
amounts are not sufficient to cover the costs of furnishing DMEPOS 
items and services in remote areas of the country.
    Section 1834(a)(1)(G) of the Act specifically mandates that we take 
into account the average volume of items and services furnished by 
suppliers in CBAs compared to the average volume of items and services 
furnished by suppliers in non-CBAs when adjusting fee schedule amounts 
for DMEPOS items and services. As noted elsewhere in this rule, the 
average volume of items and services furnished by suppliers in many 
non-CBAs that are rural and non-contiguous areas is lower than the 
average volume of items and services furnished by suppliers in many 
CBAs. We believe that different payments are necessary to ensure access 
to items and services for beneficiaries in these rural and non-
contiguous areas to protect their health, safety, and well-being.
    This final rule also establishes procedures for making benefit 
category and payment determinations for new items and services that are 
durable medical equipment (DME), prosthetic devices, orthotics and 
prosthetics, therapeutic shoes and inserts, surgical dressings, or 
splints, casts, and other devices used for reductions of fractures and 
dislocations under Medicare Part B.

[[Page 73904]]

This policy would help to prevent delays in making benefit category and 
payment determinations for new and innovative DMEPOS technologies that 
could improve the health and safety of Medicare beneficiaries. This 
final rule also classifies continuous glucose monitors (CGMs) as DME 
under Medicare Part B. This policy increases the number and types of 
CGMs classified under the Medicare Part B benefit for DME, so that 
beneficiaries and their physicians have more treatment options 
available.

B. Overall Impact

    We have examined the impact of the three provisions covered in this 
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 Act, section 202 of the Unfunded Mandates Reform Act of 
1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
801-808).
    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 significant regulatory action/s and/or with economically 
significant effects ($100 million or more in any 1 year). This rule is 
economically significant. The aggregated transfer costs are estimated 
to be approximately $6.030 billion during the period CY 2022 through CY 
2026. This aggregate transfer cost is the sum of transfers from the 
Federal Government, the beneficiaries, and the State governments to the 
DME suppliers. Based on our estimates, OMB's Office of Information and 
Regulatory Affairs has determined this rulemaking is ``economically 
significant'' as measured by the $100 million threshold, and hence also 
a major rule under Subtitle E of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (also known as the Congressional 
Review Act). 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 these proposed regulations, and 
the Departments have provided the following assessment of their impact.

C. Detailed Economic Analysis

    Our baseline assumption assumes that in the absence of this final 
rule, the fee schedule amounts for certain DMEPOS items furnished in 
non-CBAs on the effective date specified in the DATES section of this 
final rule or after the end of the PHE, whichever is later, would be 
fully adjusted based on information from the CBP. In addition, our 
baseline assumption assumes that in the absence of this final rule, 
benefit category determinations would continue to only be made through 
the NCD process, notice and comment rulemaking, or by the MACs on an 
individual, claim-by-claim basis. Also, the baseline assumption assumes 
that in the absence of this final rule, adjunctive CGMs would continue 
to be considered items that are not primarily and customarily used to 
serve a medical purpose and would not be classified as DME. Finally, it 
assumes that in the absence of this final rule, the DMEPOS provisions 
included in the 2018 and 2020 IFCs would not be finalized, and CMS 
would need to finalize these provisions at some other time. CMS has 
calculated a baseline based on predicted Medicare costs if CMS were to 
not finalize the provisions of this final rule noted previously.
    For purposes of this detailed economic analysis, CMS established a 
baseline, as described previously, to measure the impacts of certain 
provisions of this final rule. CMS makes certain assumptions as part of 
this analysis. For example, this analysis assumes that nothing would 
arise or occur (for example, new legislation) to prevent CMS from fully 
adjusting the fee schedule amounts for certain DME items and services 
furnished in non-competitive bidding areas on or after the effective 
date of this final rule. Note that for the economic analysis in the 
November 2020 proposed rule, CMS used the FY 2021 President's budget as 
a baseline, which resulted in a proposed rule that was deemed primarily 
designated as not economically significant. However, as a result of the 
new baseline described previously, we have determined that this final 
rule is economically significant. We have determined the following 
impacts on benefits, costs, and transfers for this economically 
significant rule as follows:
1. Benefits
a. May 2018 IFC
    This rule finalizes certain provisions of the May 2018 IFC, thereby 
benefitting DMEPOS suppliers. We assume that certain suppliers might 
have chosen not to furnish items and services in rural and non-
contiguous areas in the absence of these higher payments.
b. May 2020 COVID-19 IFC
    This rule finalizes certain provisions of May 2020 COVID-19 IFC, 
thereby benefitting DMEPOS suppliers that furnish items in certain non-
CBAs. Such suppliers receive higher payments for furnishing DMEPOS 
items and services.
c. November 2020 Proposed Rule
    This rule finalizes certain provisions of the November 2020 
proposed rule. As a result of this final rule, access to DMEPOS items 
and services in rural and non-contiguous areas will be improved. In 
addition, this final rule establishes a BCD and payment determination 
process for DME, prosthetic devices, orthotics and prosthetics, 
therapeutic shoes and inserts, surgical dressings, or splints, casts, 
and other devices used for reductions of fractures and dislocations and 
classifies adjunctive CGMs as DME. These provisions will benefit 
Medicare beneficiaries and the DMEPOS industry by providing a clear, 
predictable process for benefit category and payment determinations, 
and will make more CGMs eligible for coverage and payment under the 
Medicare Part B benefit for DME.
2. Costs
    The only cost that will be incurred is a one-time cost to private 
entities for reviewing and reading this final rule.

[[Page 73905]]

3. Transfers
a. May 2018 IFC
    As a result of the provisions of this IFC, DME suppliers received 
increased payments for furnishing items in remote rural and non-
contiguous areas in 2018. Medicare beneficiaries, on the other hand, 
incurred higher copayments, which resulted in higher transfer costs 
from the Federal Government and Medicare beneficiaries to DMEPOS 
suppliers. The provisions of the May 2018 IFC that CMS is finalizing in 
this final rule affected payment rates for DMEPOS items and services 
furnished from June through December of 2018. Therefore, finalizing 
these provisions of this IFC in this rule has no economic impact on 
payment or cost sharing for these items.
    The May 2018 IFC resumed the transitional adjusted Medicare fee 
schedule amounts for certain items and services that were furnished in 
rural and non-contiguous non-competitive bidding areas beginning June 
1, 2018 through December 31, 2018. The May 2018 IFC also made technical 
amendments to the regulation to reflect the extension of the fee 
schedule adjustment transition period from June 30, 2016 to December 
31, 2016 that was mandated by the CURES Act. In addition, the May 2018 
IFC also made technical amendments to existing regulations for DMEPOS 
items and services to reflect the exclusion of infusion drugs used with 
DME from the DMEPOS CBP. The May 2018 IFC also contained provisions 
related to wheelchair payment, which we further discuss in the FY 2022 
IRF final rule (86 FR 42362).
    In the May 2018 IFC, CMS estimated that the transitional adjusted 
Medicare fee schedule amounts for certain items and services that were 
furnished in rural and non-contiguous areas beginning June 1, 2018 
through December 31, 2018, cost over $290 million in Medicare Part B 
benefit payments and $70 million in Medicare beneficiary cost sharing 
(83 FR 21923). These fee schedule adjustment costs--both to the 
Medicare program and to beneficiaries--were incurred during 2018 and 
will have no further financial impact at this time. Similarly, for 
dually eligible beneficiaries, the Medicaid Federal and States' costs 
for this May 2018 IFC were $10 million and $10 million, respectively. 
The portions of the May 2018 IFC that CMS is finalizing in this final 
rule are estimated to have no impact after the effective date of the 
final rule because all of the costs and financial impacts of the IFC 
happened in the past, and this IFC will not have an impact going 
forward.
    Comment: A few commenters did not agree with CMS using the cost of 
the rule to determine how extensive the payment increases should have 
been. The commenters stated CMS used the budget implications as a 
primary determinant in choosing to extend payment increases only to the 
rural and non-contiguous non-CBAs. The commenters recommended that CMS 
instead base its policy decision primarily on ensuring appropriate 
beneficiary access, and that any budgetary impacts should be secondary 
to CMS establishing a policy that ensures that beneficiaries have 
appropriate access to medically necessary DMEPOS items. Another 
commenter stated that the cost of the rule is far less than costs to 
other health care entities and Medicare beneficiaries due to the lack 
of access to DME. Finally, a commenter stated the rule will increase 
costs for certain Medicare beneficiaries, potentially impacting those 
on the margin, but they believe increased access to quality DME and 
supplier/brand name choice is a reasonable trade-off. The commenter 
claimed that the true impact of the forecasted cost-sharing is unclear 
due to secondary insurance. The commenter also stated that for 
beneficiaries who are dually eligible for both Medicare and Medicaid, 
Medicaid will typically pay the cost sharing, offsetting this total 
amount. The commenter stated that many beneficiaries who do not qualify 
for Medicaid but cannot afford secondary insurance do not end up paying 
for DME cost sharing out of pocket, and that it is common for DME 
suppliers to write off co-payments when beneficiaries cannot afford to 
pay after the supplier has made reasonable attempts to collect the 
balance. The commenter encouraged CMS to monitor how this cost increase 
impacts beneficiaries.
    Response: We believe that we considered beneficiary access to 
DMEPOS items in our analysis and that the policy was implemented, to a 
large degree, based on improved access.
    In the May 2018 IFC, we summarized the feedback we received from 
the March 23, 2017 stakeholder call and related written comments (83 FR 
21916). The majority of these comments were from the DMEPOS industry 
and focused on rural and non-contiguous areas of the country. For 
instance, commenters stressed that rural and non-contiguous areas of 
the country face unique costs, 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 in rural and non-contiguous areas, and 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. These comments 
factored into our decision to only apply the 50/50 blended rates to 
rural and non-contiguous non-CBAs. We also further explain in our CY 
2019 ESRD PPS DMEPOS final rule our reasons for only applying the 50/50 
blended rates to rural and non-contiguous areas (83 FR 57030).
b. May 2020 COVID-19 IFC
    As a result of the provisions of this finalized May 2020 COVID-19 
IFC, even though DME suppliers received increased payments for 
furnishing items in remote rural and non-contiguous areas, Medicare 
beneficiaries, on the other hand, incurred higher cost-sharing, which 
resulted in higher transfer costs from the Federal Government and 
Medicare beneficiaries to the DMEPOS suppliers. The provisions of the 
May 2020 COVID-19 IFC that CMS is finalizing in this final rule affect 
payment rates for DMEPOS items and services furnished from March 6, 
2020 through the end of the PHE, which is assumed to end after the 
effective date of this rule in April 2022. Finalizing these provisions 
of this IFC in this rule has a negligible economic impact on payment or 
cost sharing for these items.
    CMS's Office of the Actuary determined that this provision against 
the FY 2021 President's Budget baseline increased payments in the 
estimated amount of $140 million from the Federal Government to DMEPOS 
suppliers (85 FR 27614). Additionally, the Medicare beneficiary 
transfer was $30 million to DME suppliers. This provision also impacts 
the federal portion of the Medicaid increased payments: The federal 
cost is $5 million for dually eligible beneficiaries, while the State 
portion of the Medicaid increased payments is $5 million.
    This section finalizes a temporary increase to certain DME payment 
rates, as required by section 3712 of the CARES Act. Section 3712 of 
the CARES Act increases Medicare expenditures, as well as beneficiary 
cost-sharing by increasing Medicare payment rates for certain DMEPOS 
items furnished in non-rural and contiguous non-competitively bid 
areas. The increase is a result of paying a blend of 75 percent of the 
fully adjusted payment rates and 25 percent of the unadjusted payment

[[Page 73906]]

rates for items and services furnished in non-rural and contiguous non-
CBAs throughout the United States and is estimated to increase affected 
rates, averaging 33 percent.
    Comment: A commenter referenced the impact of this provision, which 
states that ``this change may also affect the federal financial 
participation limit for DMEPOS items and services furnished to Medicaid 
beneficiaries, but we are unable to quantify the effect.'' The 
commenter stated that despite the potential effects this provision may 
have on the federal financial participation limit, they strongly 
believe that these DMEPOS items and services remain critical for 
beneficiaries. Therefore, they expressed their support for this 
provision.
    Response: We agree Medicaid rates are affected due to the 
interaction between the federal financial participation limit and 
Medicare rate changes, although the amount of the change is currently 
not quantifiable.
c. November 2020 Proposed Rule
    The fee schedule adjustment methodology that CMS is finalizing in 
this final rule involves three transfers of monies: (1) Federal 
Government to DMEPOS suppliers; (2) beneficiaries to DME suppliers; and 
(3) State governments to DME suppliers. The amounts of these transfers 
are explained later in this section. CMS's Office of the Actuary has 
determined that the fee schedule adjustment methodology will increase 
Medicare gross benefit payments in the estimated amount of $4.55 
billion from CY 2022 to CY 2026 as compared to the baseline discussed 
previously. During the years CY 2022 to CY 2026, the estimated gross 
payments will be as follows: $200 million, $770 million, $1.110 
billion, $1.190 billion and $1.280 billion, respectively.

        Table 3--Impact of Changing the Adjusted Fee Methodology
------------------------------------------------------------------------
                                                           Impact on
                                    Impact on benefit   beneficiary cost
                                      gross payments      sharing (in
                CY                    (in dollars to     dollars to the
                                      the nearest 10       nearest 10
                                         million)           million)
------------------------------------------------------------------------
2022..............................                200                 50
2023..............................                770                190
2024..............................              1,110                280
2025..............................              1.190                300
2026..............................              1,280                320
------------------------------------------------------------------------

    Payments increase each year as a result of annual fee schedule 
updates and increases in utilization of items and services. As stated 
before, the increased payments result from paying a 50/50 blended rate 
for certain DME items furnished in rural and non-contiguous non-
competitive bidding areas. This will increase the beneficiary 
copayments by $1.14 billion from CY 2022 to CY 2026. In addition, the 
federal portion of the Medicaid increased payments during this period 
is $195 million for the dually eligible beneficiaries, and the State 
portion of the Medicaid increased payments is $145 million during CY 
2022 to CY 2026 ($10 million, $25 million, $35 million, $40 million, 
and $40 million, respectively, during CY 2022 through CY 2026). Note, 
the federal financial participation limit for DME in Medicaid, as 
discussed in section 1903(i)(27) of the Act, adds an indeterminable 
cost to the federal share of the Medicaid payments to States.
    Comment: A commenter stated that a blind spot is the impact of the 
trickle down of rates to Medicaid, Medicare Advantage, and private 
insurances who base their rates on Medicare rates.
    Response: We thank the commenter for commenting on the impact of 
this particular provision. Impact analyses consider the impact of 
policies on the MA rates and on private insurances (as they provide 
supplemental insurance that pays copayments on behalf of Medicare 
beneficiaries). So, supplemental insurers pay more or less depending on 
whether fees increase or decrease. Regarding Medicaid, we note that we 
provided details regarding the impact this particular provision has on 
Medicaid in the November 2020 proposed rule (85 FR 70406) and this 
final rule.
d. Benefit Category and Payment Determinations for DME, Prosthetic 
Devices, Orthotics and Prosthetics, Therapeutic Shoes and Inserts, 
Surgical Dressings, Splints, Casts, and Other Devices Used for 
Reductions of Fractures and Dislocations
    We are finalizing the procedures for BCDs and payment 
determinations for new items and services that are DME, prosthetic 
devices, orthotics and prosthetics, therapeutic shoes and inserts, 
surgical dressings, or splints, casts, and other devices used for 
reductions of fractures and dislocations with no additional 
administrative costs to CMS and no fiscal impact when measured against 
the baseline. We do not expect that the BCD and payment determination 
procedures that CMS is finalizing in this rule will affect the ability 
of manufacturers to make new items and services. We note that this 
final rule continues our use of an already established process (public 
meetings) to make BCD and payment determinations for new items and 
services that are durable medical equipment (DME), prosthetic devices, 
orthotics and prosthetics, therapeutic shoes and inserts, surgical 
dressings, or splints, casts, and other devices used for reductions of 
fractures and dislocations.
e. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B
    This final rule classifies certain CGMs as DME. This will result in 
an increase in the number of CGM products beneficiaries and physicians 
can choose that would be classified as DME. We do not anticipate that 
this change will impact overall utilization of CGMs covered under the 
DME benefit and Medicare payment because beneficiaries have had access 
to some types of CGMs since 2017. Because we do not anticipate changes 
in CGM utilization or payments for glucose monitoring equipment as a 
result of this final rule, this final rule will not result in any 
transfers.
4. Regulatory Review Cost Estimation
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this final rule, we 
should estimate the cost associated with regulatory review. Thus, using 
the 2020 wage information from the Bureau of Labor Statistics (BLS) 
https://www.bls.gov/oes/current/oes119111.htm for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this

[[Page 73907]]

rule is $114.24 per hour, including overhead and fringe benefits. For 
manufacturers of DMEPOS products, DMEPOS suppliers, and other DMEPOS 
industry representatives, we assume the same cost for reviewing this 
rule. Assuming an average reading speed for those very familiar with 
the topic matter, we estimate that it would take approximately 5 hours 
for the medical and health service managers or industry representatives 
to review this final rule. For each entity that reviews this final 
rule, the estimated cost is $571.20 (5 hours x $114.24 per hour). 
Therefore, we estimate that the total cost of closely reviewing this 
final rule is a one-time cost of $1,005,312 ($571.20 x 1,760 
reviewers). Note the 1,760 reviewers represent about 2 percent of the 
current number of DME suppliers. Two percent was chosen based on the 
assumption that most entities would use trade industry summaries to 
inform themselves on the contents of the rule.

D. Alternatives Considered

    This section addresses the alternatives considered only for the fee 
schedule adjustment methodology provisions from the November 2020 
proposed rule. This section does not consider alternatives to the BCD 
provisions, CGM provisions, May 2020 COVID-19 IFC DMEPOS provisions (no 
alternatives were contained in the IFC) or the May 2018 IFC (the 
effects of which were limited to 2018). In the case of the CGM 
provisions, we are not finalizing the proposed fee schedule amounts for 
CGMs and related accessories and supplies. We do not believe that the 
decision not to finalize the proposed fee schedule amounts results in 
any costs or savings for the program or beneficiaries since one of the 
proposed categories of CGM supplies and accessories is being phased out 
and the fee schedule amounts for another category of adjunctive CGMs 
and supplies and accessories will be established in accordance with 42 
CFR 414.238, which reflects our longstanding policies and procedures 
for gap-filling fee schedule amounts in accordance with the rules of 
the statute. Therefore, the impacts of all three alternatives for the 
November 2020 proposed rule discussed later in this section, are 
considered against the previously discussed baseline (that is, the 
baseline calculations assume that CMS would fully adjust the fee 
schedule amounts for DME items and services furnished all non-CBAs, 
including rural and non-contiguous non-CBAs).
    Therefore, in regards to the November 2020 proposed rule, the first 
alternative was to pay fully adjusted fee schedule rates in all areas 
except super rural areas or non-contiguous areas and pay 120 percent of 
national average of the single payment amounts in super rural areas and 
non-contiguous areas. The Office of the Actuary estimated that this 
alternative would increase Medicare gross payments from CY 2022 to CY 
2026 by $380 million. This would increase beneficiary copayments by $80 
million from CY 2022 to CY 2026. In addition, the federal portion of 
the Medicaid would increase payments during this period to $20 million 
for the dually eligible beneficiaries, and the State portion of the 
Medicaid would also increase payments to $20 million.
    The second alternative was to adjust fee schedule amounts for items 
and services furnished in non-CBAs between 2022 and 2023 based on a 75/
25 blend of adjusted and unadjusted rates and phase in the full fee 
schedule adjustments beginning January 1, 2024. The Office of the 
Actuary estimates that this alternative would increase Medicare gross 
payments by $1.13 billion and increase beneficiary copayments by $280 
million from CY 2022 to CY 2026. In addition, the federal portion of 
the Medicaid would increase payments during this period to $50 million 
for the dually eligible beneficiaries, and the State portion of the 
Medicaid would increase payments to $35 million.
    Finally, the third alternative was to extend the transition period 
for phasing in fully adjusted fee schedule rates at 42 CFR 
414.210(g)(9), which would result in the same payment amounts as the 
proposed rule for just a 2-year period. The Office of the Actuary 
estimated that this alternative would increase Medicare gross payments 
from CY 2022 to CY 2026 by $1.41 billion for items and services 
furnished in non-CBAs between 2022 and 2023. As a result, this would 
increase beneficiary copayments by $350 million from CY 2022 to CY 
2026. In addition, the federal portion of Medicaid payments would 
increase during this period from CY 2022 to CY 2026 by $60 million for 
dually eligible beneficiaries, and the State portion of Medicaid 
payments would increase by $45 million.
    The three alternatives, which were estimated to cost less than the 
policy that CMS is finalizing in this rule, were not considered 
primarily due to the assumption that maintaining the current fee 
schedule adjustment methodology would provide for better access to 
DMEPOS items and services in rural and non-contiguous areas than two of 
the alternatives, and would provide such access for a longer period of 
time than the three alternatives.

E. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), we have prepared an 
accounting statement in Table 4, showing the classification of the 
impacts associated with the fee schedule adjustment methodologies 
included in the November 2020 proposed rule in this final rule. The 
November 2020 proposed rule, which is being finalized in this rule, is 
estimated to increase payments ($912 million annualized at 7 percent) 
from the Federal Government to DMEPOS suppliers by $4.550 billion from 
CY 2022 to CY 2026, as compared to a baseline that assumes that as of 
the effective date, CMS would pay fully adjusted fee schedule amounts 
in all non-competitive bidding areas for DMEPOS items subject to 
competitive bidding. In addition, the accounting statement considers 
the transfer amounts from beneficiaries to DME suppliers of $1.14 
billion ($219 million annualized at 7 percent) from CY 2022 to CY 2026. 
Finally, the accounting statement accounts for the cost of the States' 
portion of the Medicaid payments for dually eligible beneficiaries, 
costing approximately $150 million from CY 2022 to CY 2026 ($28 million 
annualized at 7 percent. The annual costs increase over time because of 
annual updates to adjusted fee schedule amounts and Medicare enrollment 
increases.

                 Table 4--Accounting Statement: Classification of Estimated Transfers and Costs
----------------------------------------------------------------------------------------------------------------
                                                                                       Units
                                                                 -----------------------------------------------
                    Category                         Estimates                     Discount rate
                                                                    Year dollar         (%)       Period covered
----------------------------------------------------------------------------------------------------------------
Costs:

[[Page 73908]]

 
    Annualized Monetized ($million/year)........            0.20            2021               7       2022-2026
                                                            0.20            2021               3       2022-2026
----------------------------------------------------------------------------------------------------------------
                                             Regulatory Review Costs
----------------------------------------------------------------------------------------------------------------
Transfers:
    Annualized Monetized ($million/year)........             912            2021               7       2022-2026
                                                             933            2021               3       2022-2026
----------------------------------------------------------------------------------------------------------------
From Whom to Whom...............................        Transfers from Federal Government to DME Suppliers
                                                 ---------------------------------------------------------------
    Annualized Monetized($million/year).........             219            2021               7       2022-2026
                                                             224            2021               3       2022-2026
----------------------------------------------------------------------------------------------------------------
From Whom to Whom...............................      Transfers from Medicare Beneficiaries to DME Suppliers
                                                 ---------------------------------------------------------------
    Annualized Monetized ($million/year)........              28            2021               7       2022-2026
                                                              28            2021               3       2022-2026
----------------------------------------------------------------------------------------------------------------
From Whom to Whom...............................         Transfers from State Government to Beneficiaries
----------------------------------------------------------------------------------------------------------------

F. Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) imposes 
certain requirements with respect to federal rules that are (1) 
required to be published as a notice of proposed rulemaking subject to 
the notice and comment requirements of the Administrative Procedure Act 
(5 U.S.C. 553(b)); and (2) likely to have a significant economic impact 
on a substantial number of small entities.
    Note that the finalized provisions of the May 2018 IFC and the 
finalized May 2020 COVID-19 IFC impose no burden on a substantial 
number of small entities. However, the provisions of this final rule 
that were proposed in the November 2020 proposed rule will have a 
positive impact on DMEPOS suppliers. This rule will increase DMEPOS 
supplier revenues for furnishing DMEPOS items and services subject to 
the fee schedule adjustments in rural and non-contiguous areas. As 
compared to the baseline, the revenues for DMEPOS suppliers will be 
higher due to the 50/50 blended fee schedule adjustments in rural and 
non-contiguous areas.
    The 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, we estimate that 
almost all DMEPOS suppliers are small entities, as that term is used in 
the RFA (including small businesses, nonprofit organizations, and small 
governmental jurisdictions). The great majority of hospitals and most 
other health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the Small Business 
Administration (SBA) definition of a small business (having revenues of 
less than $8.0 million to $41.5 million in any 1 year).
    According to the SBA's website at http://www.sba.gov/content/small-business-size-standards, DME suppliers may fall into either the North 
American Industrial Classification System (NAICS) code 532291 and Home 
Health Equipment Rental code 44610, Pharmacies and Drug Stores. The SBA 
defines Pharmacies and Drug Stores as businesses having less than $30 
million and Home Health Equipment Rental as businesses having less than 
$35 million in annual receipts.

                                    Table 5--DMEPOS Suppliers Size Standards
----------------------------------------------------------------------------------------------------------------
                                                                SBA size standard/small
       NAICS (6-digit)          Industry subsector description      entity threshold      Total small businesses
                                                                       (million)
----------------------------------------------------------------------------------------------------------------
446110.......................  Pharmacies and Drug Stores.....                      $30                   18,503
532291.......................  Home Health Equipment Rental...                       35                      673
----------------------------------------------------------------------------------------------------------------
Source: 2012 Economic Census.

    Since we are uncertain of the DMEPOS suppliers' composition, we 
sought comments from the public to aid in understanding the various 
industries that supply DMEPOS products. So far, we have identified only 
the two industries in Table 5.

[[Page 73909]]



                                 Table 6--DMEPOS Suppliers Concentration Ratios
                                  [(NAICS 532292) home health equipment rental]
----------------------------------------------------------------------------------------------------------------
                                                                                                      Average
                                                                                                    revenue per
             Firm size (by receipts)                Firm count      % of small     Total average   firm to total
                                                                     firms (%)        revenue         average
                                                                                                    revenue (%)
----------------------------------------------------------------------------------------------------------------
SMALL FIRMS.....................................             673           100.0     $42,468,578             100
    <100,000....................................              57            8.47         $45,912            0.11
    100,000-499,999.............................             207           30.76        $287,647            0.68
    500,000-999,999.............................             137           20.36        $722,080            1.70
    1,000,000-2,499,999.........................             148           21.99      $1,599,811            3.77
    2,500,000-4,999,999.........................              64            9.51      $3,430,781            8.08
    5,000,000-7,499,999.........................              16            2.38      $5,599,563           13.19
    7,500,000-9,999,999.........................              15            2.23      $8,909,267           20.98
    10,000,000-14,999,999.......................              12            1.78     $10,715,917           25.23
    15,000,000-19,999,999.......................              10            1.49     $11,157,600           26.27
    20,000,000-24,999,999.......................               3            0.45              NA              NA
    25,000,000-29,999,999.......................               2            0.30              NA              NA
    30,000,000-34,999,999.......................               2            0.30              NA              NA
LARGE FIRMS:
    Receipts >$35 Million.......................              46              NA              NA              NA
----------------------------------------------------------------------------------------------------------------
Source: 2012 County Business Patterns and 2012 Economic Census.
Average revenue data are not included for the Home Health Equipment Rentals (NAICS 532291) for firms greater
  than 20,000,000 in receipts. Moreover, no revenue data are available for large firms in Home Heath Equipment
  Rentals Industry.


                                                     Table 7--DMEPOS Suppliers Concentration Ratios
                                                        [NAICS 446110 pharmacies and drug stores]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                     Average revenue per
                     Firm size (by receipts)                           Firm count       % of small firms (%)      Total average         firm to total
                                                                                                                     revenue         average revenue (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
SMALL FIRMS.....................................................                18,503                 100.0        $89,692,509.68                   100
    <100,000....................................................                   751                  0.04            $48,023.97                  0.05
    100,000-499,999.............................................                 2,060                  0.11           $283,085.44                  0.32
    500,000-999,999.............................................                 1,919                  0.10           $740,942.68                  0.83
    1,000,000-2,499,999.........................................                 5,767                  0.31         $1,742,084.10                  1.94
    2,500,000-4,999,999.........................................                 5,094                  0.27         $3,556,077.54                  3.96
    5,000,000-7,499,999.........................................                 1,638                  0.09         $6,068,161.78                  6.77
    7,500,000-9,999,999.........................................                   583                  0.03         $8,544,548.89                  9.53
    10,000,000-14,999,999.......................................                   432                  0.02        $11,705,081.02                 13.05
    15,000,000-19,999,999.......................................                   147                  0.01        $16,415,476.19                 18.30
    20,000,000-24,999,999.......................................                    68                  0.00        $20,211,073.53                 22.53
    25,000,000-29,999,999.......................................                    44                  0.00        $20,377,954.55                 22.72
LARGE FIRMS:
    Receipts >$30 Million.......................................                   349                    NA                    NA                    NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: 2012 County Business Patterns and 2012 Economic Census.

    Tables 6 and 7 show that the economic impacts are disproportionate 
for small firms. Moreover, these tables show the revenues for each of 
the size categories, and the revenue impact per small entity. For 
example, in table 6, 57 of the smallest firms earn only 0.11 percent of 
the revenue in its industry; while, in table 7, 751 of the smallest 
firm earn only 0.05 percent of the revenue in its industry.
    Therefore, as can be seen in Tables 6 and 7, almost all DMEPOS 
suppliers are small entities as that term is used in the RFA.\27\ 
Additionally, Tables 6 and 7 show the disproportionate impacts among 
firms, and between small and large firms. In Table 6 and 7, each 
industry, Pharmacies and Drug Stores and Home Health Equipment, Rental 
firm size (by receipts), firm count, percentage of small firms, total 
average revenue, and percentage of average revenue to total revenue of 
small firms were estimated separately to determine the DMEPOS 
concentration ratios. Note, there are missing data. See footnotes in 
Table 6.
---------------------------------------------------------------------------

    \27\ Note, the entire population of DMEPOS suppliers is not 
known at this time. However, based on our experience, the majority 
of DMEPOS suppliers are covered in the two industries identified.
---------------------------------------------------------------------------

    For purposes of the RFA, approximately 98.15 percent of pharmacies 
and drugs stores (18,503/18,852) and 93.60 percent of home health 
equipment rental (673/719) firms are considered small businesses 
according to the SBA's size standards with total revenues of $30 and 
$35 million or less respectively in any 1 year. Individuals and states 
are not included in the definition of a small entity.
    This rule does not affect health care enterprises operated by small 
government entities such as counties or towns with populations 50,000 
or less. The Department of Health and Human Services generally uses a 
revenue impact of 3 to 5 percent as a significance threshold under the 
RFA. The RFA threshold analysis, therefore, indicates

[[Page 73910]]

that there is not a significant economic impact on a substantial number 
of small entities. As shown in Table 6, the average total revenue 
earned by the DMEPOS Home Health Equipment Rental industry is 
approximately $42,468,578 million and the total transfer costs amount 
to approximately $6.261 billion, which is only 0.67 percent. 
Additionally, as shown in Table 7, the average total revenue earned by 
DMEPOS Pharmacies and Drugs Stores is approximately $89,692,509.68 
million and the total transfer costs amount to approximately $6.030 
billion, which is 1.49 percent. As a result, we believe that this 3 
percent threshold (the threshold used by the Department of Health and 
Human Services to determine a significance threshold under the RFA) 
will not be reached for both the Home Health Equipment Rental industry 
and the Pharmacies and Drugs Stores industry mentioned in this rule. 
Furthermore, the regulation review costs mentioned previously, is de 
minimis and will not impose any additional burden on these small 
businesses.
    Even though a substantial number of small suppliers will benefit 
from the 50/50 blended fee schedule amounts in rural and non-contiguous 
non-CBAs, we do not believe that this regulation will result in a 
significant economic impact on a substantial number of small entities. 
Therefore, the Secretary certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area for Medicare 
payment regulations and has fewer than 100 beds. We are not preparing 
an analysis for section 1102(b) of the Act because we have determined, 
and the Secretary certifies, that this rule will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.

G. Unfunded Mandates Reform Act (UMRA)

    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, updated annually for inflation. In 2021, that 
threshold is approximately $158 million. This final rule imposes 
mandates that will result in anticipated costs to state, local and 
Tribal governments or private sector, but the transfer costs will be 
less than the threshold. As a result, this final rule would not impose 
a mandate that will result in the expenditure by State, local, and 
Tribal Governments, in the aggregate, or by the private sector, of more 
than $158 million in any one year.

H. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a 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 impose costs on state or local governments, the requirements of 
Executive Order 13132 are applicable.
    The State governments' Medicaid payments in aggregate for dual 
eligible beneficiaries will increase by an estimated $150 million from 
CY 2022 to CY 2026.

I. Congressional Review Act

    This final 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.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on November 22, 2021.

List of Subjects in 42 CFR Part 414

    Administrative practice and procedure, Biologics, Diseases, Drugs, 
Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR part 414 as set forth below:

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

0
1. The authority citation for part 414 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395hh, and 1395rr(b)(l).


0
2. Section 414.114 is added to subpart C to read as follows:


Sec.  414.114  Procedures for making benefit category determinations 
and payment determinations for new PEN items and services covered under 
the prosthetic device benefit; splints and casts; and IOLs inserted in 
a physician's office covered under the prosthetic device benefit.

    (a) Definitions. For the purpose of this subpart:
    Benefit category determination means a national determination 
regarding whether an item or service meets the Medicare definition of a 
prosthetic device at section 1861(s)(8) of the Act or is a splint, 
cast, or device used for reduction of fractures or dislocations subject 
to section 1842(s) of the Act and the rules of this subpart and is not 
otherwise excluded from coverage by statute.
    (b) General rule. The procedures for determining whether new items 
and services addressed in a request for a HCPCS Level II code(s) or by 
other means meet the definition of items and services that may be 
covered and paid for in accordance with this subpart are as follows:
    (1) At the start of a HCPCS coding cycle, CMS performs an analysis 
to determine if the item or service is statutorily excluded from 
coverage under Medicare under section 1862 of the Act, and, if not 
excluded by statute, whether the item or service is parenteral or 
enteral nutrients, supplies, and equipment covered under the prosthetic 
device benefit, splints and casts or other devices used for reductions 
of fractures or dislocations, or IOLs inserted in a physician's office 
covered under the prosthetic device benefit.
    (2) If a preliminary determination is made that the item or service 
is parenteral or enteral nutrients, supplies, and equipment covered 
under the prosthetic device benefit, splints and casts or other devices 
used for reductions of fractures or dislocations, or IOLs inserted in a 
physician's office covered under the prosthetic device benefit, CMS 
makes a preliminary payment determination for the item or service.
    (3) CMS posts preliminary benefit category determinations and 
payment determinations on CMS.gov approximately 2 weeks prior to a 
public meeting.
    (4) After consideration of public consultation provided at a public 
meeting on preliminary benefit category determinations and payment 
determinations for items and services, CMS establishes the benefit 
category determinations and payment determinations for items and 
services through program instructions.

[[Page 73911]]


0
3. Section 414.210 is amended by revising paragraphs (g)(1)(v) and 
(g)(2) and adding paragraph (g)(9)(vi) to read as follows:


Sec.  414.210  General payment rules.

* * * * *
    (g) * * *
    (1) * * *
    (v) For items and services furnished before February 28, 2022, the 
fee schedule amount for all areas within a state that are defined as 
rural areas for the purposes of this subpart is adjusted to 110 percent 
of the national average price determined under paragraph (g)(1)(ii) of 
this section.
    (2) Payment adjustments for areas outside the contiguous United 
States and for items furnished on or after February 28, 2022 in rural 
areas within the contiguous United States using information from 
competitive bidding programs.
    (i) For an item or service subject to the programs under subpart F, 
the fee schedule amounts for areas outside the contiguous United States 
(Alaska, Hawaii, and U.S. territories) for items and services furnished 
from January 1, 2016, through December 31, 2020 are reduced to the 
greater of--
    (A) The average of the single payment amounts for the item or 
service for CBAs outside the contiguous United States.
    (B) 110 percent of the national average price for the item or 
service determined under paragraph (g)(1)(ii) of this section.
    (ii) For an item or service subject to the programs under subpart F 
of this part, the fee schedule amounts for areas outside the contiguous 
United States for items and services furnished on or after February 28, 
2022, or the date immediately following the duration of the emergency 
period described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later, is adjusted to equal the sum of--
    (A) Fifty percent of the greater of the average of the single 
payment amounts for the item or service for CBAs outside the contiguous 
United States or 110 percent of the national average price for the item 
or service determined under paragraph (g)(1)(ii) of this section; and
    (B) Fifty percent of the fee schedule amount for the area in effect 
on December 31, 2015, increased for each subsequent year beginning in 
2016 by the annual update factors specified in sections 1834(a)(14), 
1834(h)(4), and 1842(s)(1)(B) of the Act, respectively, for durable 
medical equipment and supplies, off-the-shelf orthotics, and enteral 
nutrients, supplies, and equipment.
    (iii) For an item or service subject to the programs under subpart 
F of this part, the fee schedule amounts for rural areas within the 
contiguous United States for items and services furnished on or after 
, or the date immediately following the duration of the 
emergency period described in section 1135(g)(1)(B) of the Act (42 
U.S.C. 1320b-5(g)(1)(B)), whichever is later, is adjusted to equal the 
sum of--
    (A) Fifty percent of 110 percent of the national average price for 
the item or service determined under paragraph (g)(1)(ii) of this 
section; and
    (B) Fifty percent of the fee schedule amount for the area in effect 
on December 31, 2015, increased for each subsequent year beginning in 
2016 by the annual update factors specified in sections 1834(a)(14), 
1834(h)(4), and 1842(s)(1)(B) of the Act, respectively, for durable 
medical equipment and supplies, off-the-shelf orthotics, and enteral 
nutrients, supplies, and equipment.
* * * * *
    (9) * * *
    (vi) For items and services furnished in all areas with dates of 
service on or after February 28, 2022, or the date immediately 
following the duration of the emergency period described in section 
1135(g)(1)(B) of the Act, whichever is later, based on the fee schedule 
amount for the area is equal to the adjusted payment amount established 
under paragraph (g) of this section.
* * * * *

0
4. Section 414.240 is added to subpart D to read as follows:


Sec.  414.240  Procedures for making benefit category determinations 
and payment determinations for new durable medical equipment, 
prosthetic devices, orthotics and prosthetics, surgical dressings, and 
therapeutic shoes and inserts.

    (a) Definitions. For the purpose of this subpart--
    Benefit category determination means a national determination 
regarding whether an item or service meets the Medicare definition of 
durable medical equipment at section 1861(n) of the Act, a prosthetic 
device at section 1861(s)(8) of the Act and further defined under 
section 1834(h)(4) of the Act, an orthotic or leg, arm, back or neck 
brace, a prosthetic or artificial leg, arm or eye at section 1861(s)(9) 
of the Act, is a surgical dressing, or is a therapeutic shoe or insert 
subject to sections 1834(a), (h), or (i) of the Act and the rules of 
this subpart and is not otherwise excluded from coverage by statute.
    (b) General rule. The procedures for determining whether new items 
and services addressed in a request for a HCPCS Level II code(s) or by 
other means meet the definition of items and services paid for in 
accordance with this subpart are as follows:
    (1) At the start of a HCPCS coding cycle, CMS performs an analysis 
to determine if the item or service is statutorily excluded from 
coverage under Medicare under section 1862 of the Act, and, if not 
excluded by statute, whether the item or service is durable medical 
equipment, a prosthetic device as further defined under section 
1834(h)(4) of the Act, an orthotic or prosthetic, a surgical dressing, 
or a therapeutic shoe or insert.
    (2) If a preliminary determination is made that the item or service 
is durable medical equipment, a prosthetic device, an orthotic or 
prosthetic, a surgical dressing, or a therapeutic shoe or insert, CMS 
makes a preliminary payment determination for the item or service.
    (3) CMS posts preliminary benefit category determinations and 
payment determinations on CMS.gov approximately 2 weeks prior to a 
public meeting.
    (4) After consideration of public consultation provided at a public 
meeting on preliminary benefit category determinations and payment 
determinations for items and services, CMS establishes the benefit 
category determinations and payment determinations for items and 
services through program instructions.

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2021-27763 Filed 12-21-21; 4:15 pm]
BILLING CODE 4120-01-P