[Federal Register Volume 60, Number 131 (Monday, July 10, 1995)]
[Rules and Regulations]
[Pages 35492-35498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16805]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Part 414
[BPD-494-F]
RIN 0938-AD65
Medicare Program; Payment for Durable Medical Equipment and
Orthotic and Prosthetic Devices
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule.
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SUMMARY: This final rule addresses comments received on an interim
final rule with comment period published on December 7, 1992. The
interim final rule implemented section 4062(b) of the Omnibus Budget
Reconciliation Act of 1987. It specified that payment under the
Medicare program for durable medical equipment (DME), prosthetics, and
orthotics furnished on or after January 1, 1989 is limited to the lower
of the actual charge for the equipment or the fee schedule amount
established by the carrier. This final rule describes amendments to the
methods for computing fee schedules covering the six classes of DME and
how they are updated in subsequent years in accordance with sections
13542 through 13546 of the Omnibus Budget Reconciliation Act of 1993.
DATES: These final regulations are effective August 9, 1995.
FOR FURTHER INFORMATION CONTACT:
Sharon Hippler--(410) 966-4633 (Coverage Issues)
William Long--(410) 966-5655 (Payment Issues)
SUPPLEMENTARY INFORMATION:
I. Background
The provisions of sections 1833 and 1842 of the Social Security Act
(the Act) set forth the general payment authority for most physician
and other medical and health services furnished under Part B of the
Medicare program. Section 1834 sets forth the 6 classes of DME and
specifies that payment for these items is limited to 80 percent of the
lesser of the actual charge or a fee schedule amount established by
each Medicare carrier.
We published an interim final rule on December 7, 1992 (57 FR
57675) that set forth the methods for computing fee schedules for the
six classes of DME effective for services furnished on or after January
6, 1993. The interim rule also described how the fee schedules are
updated. The December 1992 rule explained in detail the various
legislative changes that led to its publication (57 FR 57676).
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993
(OBRA 93, Public Law 103-66), revised the statutory provisions upon
which the DME payment rules that appeared in the December 1992 final
rule were based. We are including these provisions in this final rule
since the revisions are not discretionary but follow the explicit
language contained in sections 13542 through 13546.
A summary of the provisions of these sections of OBRA 93 follows :
Section 13542 amends sections 1834(a)(2), (a)(3), (a)(8),
and (a)(9) of the
[[Page 35493]]
Act by providing that for 1994 and subsequent years, the national
limited payment amount for (1) inexpensive or routinely purchased DME,
(2) items requiring frequent and substantial servicing, (3) oxygen, and
(4) other DME (capped rental) is equal to one of the following amounts:
If the local payment amount is not in excess of the
median, nor less than 85 percent of the median, of all local payment
amounts--100 percent of the local payment amount.
If the local payment amount exceeds the median--100
percent of the median of all local payment amounts.
If the local payment amount is less than 85 percent of the
median--85 percent of the median of all local payment amounts.
Section 13543(a) amends section 1834(a)(3)(A) of the Act
by deleting nebulizers and aspirators from the statutory list of items
that require frequent and substantial servicing. It also clarifies that
ventilators that are either continuous airway pressure devices or
intermittent assist devices with continuous airway pressure devices are
excluded from the frequent and substantial servicing class.
Section 13543(b) amends section 1834(a)(2)(A) of the Act
by specifying that accessories used in conjunction with a nebulizer,
aspirator, or ventilator excluded from the frequent and substantial
servicing class are included in the inexpensive or routinely purchased
equipment class.
Section 13544(a) amends section 1834(h)(1) of the Act by
providing that payment for ostomy supplies, tracheostomy supplies, and
urologicals be made using the methodology for inexpensive or routinely
purchased equipment.
Section 13544(b) adds a new paragraph (i) to section 1834
of the Act to provide that payment for surgical dressings must be made
using the methodology for inexpensive or routinely purchased equipment.
It further specifies the national limited payment amount for surgical
dressings must be based on local payment amounts using average
reasonable charges for the 12-month period ending December 31, 1992
increased by the covered item updates for 1993 and 1994.
Section 13545 amends section 1834(a)(1)(D) of the Act by
providing that the reduced payment amount for transcutaneous electrical
nerve stimulator (TENS) devices, furnished on or after January 1, 1994,
be based on the payment amount effective April 1, 1990, reduced by 45
percent.
Section 13546 amends section 1834(h)(4)(A) of the Act by
specifying that the term ``applicable percentage increase'' used for
computing the local purchase price for prosthetic and orthotic devices
is ``0'' percent for 1994 and 1995. It also specifies that for
subsequent years that term means the percentage increase in the
consumer price index for all urban consumers for the 12-month period
ending with June of the previous year.
II. Summary of Public Comments and Responses for the December 1992
Final Rule
We received comments from seven groups representing the industry
and one State agency. We have summarized the comments related to the
fee schedule payment methodology and have presented them below along
with our responses.
Several comments were received that concerned other issues related
to medical equipment (for example, refining the coverage definitions of
medical equipment and updating the HCFA Common Procedure Coding System
(HCPCS)) but did not pertain to the subject matter of the interim final
rule, which dealt only with the six classes of DME and the
corresponding fee schedule methodologies. We are not responding in this
final rule to any comments unrelated to the fee schedule payment
methodologies.
Inexpensive and Routinely Purchased DME (Section 414.220(a))
Comment: One commenter suggested that we not change to a State-by-
State methodology for classifying an item as inexpensive even if the
local submitted purchase price is less than $150. The commenter stated
that changing the status of an item from State to State would be
hopelessly confusing to suppliers and would contribute to increased
claims processing costs.
Response: We agree with the commenter. Classifying items by State
would create inconsistencies among carrier jurisdictions and would be
inconsistent with the thrust of the national limited payment amounts
that went into effect in 1991. For example, a capped rental item in one
jurisdiction could be considered inexpensive in an adjacent
jurisdiction. Therefore, we intend to continue using the national
weighted mean submitted charge for purchase of an item (whose price did
not exceed $150 during the period from July 1, 1986 through June 30,
1987) for classifying the item as inexpensive.
Frequently Serviced DME (Section 414.222(a))
Comment: One commenter agreed that we should add or delete items in
the frequently serviced class by making modifications to this class on
a simplified basis. Another commenter suggested that we not change the
methodology for adding or deleting items in the frequently serviced
class. The commenter argued that, since some items in this class are
mandated by the Act, any attempt by us to administratively restructure
this class would violate congressional intent.
Response: We believe that the second commenter may have
misunderstood our intent in this matter. Section 1834(a)(3) of the Act
specifically mandates that certain DME be included in the class of
items that require frequent and substantial servicing. In
Sec. 414.222(a) of the interim final rule, we announced our intention
to specify other items requiring frequent and substantial servicing. It
was, and continues to be, our intention to delete only those items that
we previously added administratively. Section 414.222(a) permits us and
the carriers to define those items needing frequent and substantial
servicing.
We will not delete any of the statutorily mandated items from this
class of items absent a change in the Act. However, we will add or
delete items we previously added in this class by announcing additions
and deletions in an administrative instruction rather than in the
regulations.
Comment: One commenter suggested that the following items belong in
the frequently serviced class: continuous passive motion machines,
memory monitors, powered air flotation beds, air fluidized beds, and
alternating pressure mattresses. Conversely, the commenter believed
that nebulizers and aspirators do not belong in the frequently serviced
class. Two commenters suggested that infusion pumps should be placed in
the frequently and substantially serviced class. The commenters stated
that few infusion pumps last 5 years without major servicing and that
pumps more than a few years old may not be serviceable because of a
lack of replacement parts. They also stated that infusion pump
manufacturers often stop producing cassettes once the pumps are no
longer in production and the Food and Drug Administration believes that
infusion pumps should be tracked because the risk of failure presents
the potential for serious adverse health consequences.
Response: Continuous passive motion machines currently appear in
the class of items that require frequent and substantial servicing
(Sec. 414.222(a)). We will consider whether memory monitors, powered
air flotation beds, air fluidized beds, alternating pressure
[[Page 35494]]
mattresses, and infusion pumps should also be added. If after our
review, we agree that these items belong in this class, we will add
them through an administrative instruction.
Section 1834(a)(3) of the Act specifically mandated that
aspirators, nebulizers and ventilators be included in the frequent and
substantial servicing class. However, section 13543 of OBRA 93 deleted
aspirators, nebulizers and some ventilators from this class effective
January 1, 1994. Consequently, we have revised Sec. 414.222(a) to
remove aspirators, nebulizers, and certain ventilators from the
frequent and substantial servicing class. (Depending on changes in the
data, items may be moved into any of the other classes, for example,
inexpensive or routinely purchased, or capped rental).
Capped Rental DME (Section 414.229)
Comment: Three commenters suggested that we provide a new 15-month
rental period if a beneficiary moves outside the supplier's service
area or changes suppliers, even though there would be additional cost
and a potential for abuse. One commenter suggested giving the second
supplier a 12-month rental period.
Response: We agree that these proposals would result in additional
program cost and have the potential for abuse. We also believe that we
are precluded by section 1834(a)(7)(A) of the Act from providing a new
rental period beyond the original 15-month rental period. This section
provides that ``* * * payments under this clause may not extend over a
period of continuous use of longer than 15 months * * *.'' Therefore,
if the beneficiary changes suppliers during or after the 15-month
rental period, that change would not result in a new rental period.
In asking for comments regarding this provision, we specifically
requested comments on which supplier would be responsible for
furnishing the capped rental equipment to the beneficiary if the
beneficiary changes suppliers during or after the 15-month rental
period. In the December 1992 rule (57 FR 57683), we indicated our
initial position that the supplier that provided the item in the
fifteenth month of the rental period would be responsible for supplying
the equipment and for maintenance and servicing after the 15-month
period.
We mentioned that, as an alternative position, we considered
requiring the supplier that had furnished the item for the longest
portion of the rental period to be responsible for the period of
continuous use of the equipment after the 15-month period expired.
However, we were concerned about the possible inconveniences to the
beneficiary and the initial supplier; for example, the longest term
supplier may be located some distance from the beneficiary's residence
at the end of the 15-month period. In addition, we did not believe it
was appropriate to require a supplier to service equipment that it did
not furnish and with which it may not be familiar.
We also mentioned that we considered requiring the last supplier of
an item to be responsible for a period of continuous use after the 15-
month period but only if the supplier furnished the item for 3
consecutive months. However, based on advice received from the DME
industry, we rejected this option because of the possible
inconveniences similar to those discussed in the option set forth
above.
Other than the comments suggesting that we provide for an
additional rental period if the beneficiary changes suppliers, which is
precluded by the Act, we received no comments regarding this provision.
Further, since this provision became effective on January 1, 1989, we
received no significant correspondence from Medicare beneficiaries or
the DME industry indicating that this rule presents a problem. This
corroborates what representatives of the DME industry indicated to us
after the passage of section 4062 of the Omnibus Budget Reconciliation
Act of 1987 (Public Law 100-203) (OBRA 1987). At that time, they
indicated that suppliers would be able to accommodate beneficiaries who
change suppliers (for example, because of a change of residence or
dissatisfaction with a supplier). They further indicated that the DME
industry preferred making the supplier that rents the item in the last
(that is, fifteenth) month of the rental period responsible for
supplying the equipment after the last month of rental payments and for
continued maintenance and servicing of the equipment.
Therefore, the rules governing this class of equipment will remain
the same. Responsibility for supplying equipment in the capped-rental
class that has been rented for 15-consecutive months remains with the
supplier that rented the item in the last month of the rental period.
Responsibility for maintenance and service of the item also remains
with that supplier. A move by the Medicare beneficiary does not relieve
the supplier that rented the item in the last rental month of either
responsibility.
Of course, we will not object to the responsible supplier
establishing an arrangement with a supplier located nearer to the
beneficiary's new residence to furnish the actual maintenance and
service of the equipment.
Reasonable Useful Life (Section 414.229(f))
Comment: One commenter suggested that we should establish
reasonable useful lifetime guidelines for equipment but did not offer
specific suggestions for these guidelines. Other commenters suggested
that a 5-year useful life was too long and that the useful life should
be considered to end 12 months after the period identified in the
manufacturer's warranty. Another commenter suggested that we meet with
manufacturers of medical equipment, especially manufacturers of
orthotic devices, to develop specific standards regarding the useful
life of equipment.
Response: While we specifically solicited comments regarding the
useful life of DME, prosthetics, orthotics, and supplies (DMEPOS), we
received only one comment indicating what that useful life should be
(which was 12 months after the date indicated in the manufacturer's
warranty) for any item of medical equipment. We selected a 5-year
useful life because that is the useful life of capped rental DME
established in section 1834(a)(7)(C)(iii) of the Act. We continue to
believe that a minimum useful life of 5 years is reasonable for payment
purposes and should be applied to other items of DME, prosthetics, and
orthotics.
We believe that establishing a useful life of 12 months beyond a
manufacturer's warranty is unsupported and arbitrary. We would welcome
meeting with manufacturers of medical equipment to discuss information
that supports considering an alternative to the 5-year useful lifetime
of equipment. We will maintain the minimum 5-year useful lifetime
provision for payment purposes for all medical equipment unless we
receive evidence that supports some other timeframe.
Implementation of the Fee Schedule Methodology Through Program
Instructions
Comment: One commenter suggested that implementation of the fee
schedule payment methodology has decreased payments and increased
regulatory and paperwork burdens, significantly affecting small
suppliers of medical equipment. The commenter asserted that since we
have implemented the fee schedule methodology through Medicare Carrier
Manual issuances, the industry's opportunity to present its case in the
public forum of rulemaking has been denied.
[[Page 35495]]
Response: We disagree with the commenter. While the December 1992
interim final rule became effective 30 days after it was published, it
provided an opportunity for public comment and potential
reconsideration of the policies it set forth. We usually implement
legislation by following the rulemaking process that affords all
parties an opportunity to comment before we implement the legislation.
The Congress, in mandating the OBRA 87 changes establishing the DME fee
schedule methodology, expressly authorized the Secretary to issue the
implementing regulations on an interim basis. However, because of the
need to implement the fee schedule as soon as possible, it was
necessary that we issue instructions in the Medicare Carriers Manual
while developing the interim rule.
Access to Common Working File
Comment: Two commenters suggested that suppliers need access to our
Common Working File to determine if a beneficiary has previously rented
a piece of equipment and, if so, for what period of time.
Response: There are always privacy considerations concerning the
release of beneficiary information contained in the Common Working File
systems. However, we intend to investigate the effects of disclosing
beneficiary information to DME suppliers. Nevertheless, the option to
furnish equipment rests with the supplier. Since the supplier is able
to communicate with the beneficiary before furnishing medical
equipment, we believe that the supplier should be responsible for
determining whether a beneficiary has ever rented equipment. We are
responsible for ensuring that we do not pay for services furnished to a
patient who is not entitled to Medicare benefits and that we do not pay
for equipment after the appropriate rental period.
Budget Savings Resulting From the DME Fee Schedule Methodology
Comment: Two commenters noted that budget savings associated with
the interim rule continue to remain elusive, noting that while the fee
schedule methodology was estimated to save Medicare more than $2
billion, a study by the General Accounting Office (GAO) issued in July
1992 found that the fee schedule methodology actually cost more than
the reasonable charge system it replaced.
Response: The GAO found that for the first 2 years after
implementation of the fee schedule methodology, Medicare program
expenditures increased by 16 percent compared to what the costs would
have been under the reasonable charge system. The GAO also projected
that when fully implemented in 1993, the Omnibus Budget Reconciliation
Act of 1990 (Public Law 101-508, enacted on November 5, 1990) (OBRA 90)
would offset the program cost increases that occurred when the fee
schedule methodology was implemented. The savings generated would save
the Medicare program more than $2 billion over 5 years beginning in
1992.
Uniform Payment, Coverage, and Utilization Criteria
Comment: One commenter suggested that we adopt national uniform
payment, coverage, and utilization criteria for prosthetic and orthotic
devices. The commenter also suggested that the term ``region'' should
encompass geographic areas as large as possible, preferably dividing
the nation into four areas that comport with the four new regions of
the DMEPOS regional carriers.
Response: The December 1992 interim rule defined ``region'' as
those carrier service areas administered by the ten HCFA regional
offices (57 FR 57689). This was the longstanding definition of
``region'' in use when legislation established a fee schedule
methodology for prosthetic and orthotic devices that was to be
calculated on a regional basis.
We believe it was the intent of the Congress that we recognize
differences in the costs of supplying prosthetic and orthotic devices
among the ten geographic regions then in use. Since this was the
definition of region that we used when the Congress passed the fee
schedule methodology, we will continue to group States together by the
ten HCFA regions for pricing purposes.
Effective October 1, 1993, we contracted with four ``regional''
carriers that process all DMEPOS claims nationally. We expect that
having the four carriers will result in more uniform payment, coverage,
and utilization of Medicare services. However, we continue to believe
that using a ten region structure for pricing of services is
appropriate. We believe that a larger number of regions gives more
recognition to local variations in the cost of providing equipment.
Reducing the number of regions to four rather than the current ten
would give less emphasis to local variation. If we based the pricing of
services on a four region system, each region would cover a greater
number of suppliers, which could produce greater disparity in
suppliers' costs throughout the region. Having a larger supplier pool
could dilute the impact of outlying suppliers whose labor, material,
and overhead costs are significantly higher than the median.
By retaining a pricing system based on ten regions, we expect that,
for any item of DME, the costs of suppliers within each region would be
more similar to each other and the resulting fee schedule more
reflective of costs in the local supplier population.
Comment: One commenter asked if we intend that the regional
purchase price be determined State-by-State.
Response: As described in the interim final rule (57 FR 57691),
regional pricing is based on local prices within a carrier area, which
usually is an entire State. Specifically, our methodology for computing
the regional purchase price is to first calculate a local purchase
price, then calculate a regional purchase price by averaging the local
purchase prices for the region (weighted by the relative volume of all
claims among the carriers in the region).
Use of the Term ``Durable Medical Equipment''
Comment: One commenter suggested using the term ``home'' to define
medical equipment used in the home rather than the term ``durable.''
Another commenter suggested that we expand the definition of DME in
Sec. 414.202 to include coverage of equipment not used in the home and
provide for coverage of additional items of disposable equipment.
Response: Section 1861(n) of the Act defines ``durable medical
equipment.'' We are bound by the definition of DME contained in the
law.
Applicability to Medicaid
Comment: One commenter suggested that the Medicare payment
methodology should also be applicable to State Medicaid programs.
Response: The statute does not authorize us to impose the Medicare
payment methodology on States, therefore, the Congress must pass
legislation to authorize us to do so.
Fraud and Abuse
Comment: One commenter noted that the rules regarding TENS, seat
lift mechanisms, and electric wheelchairs should help eliminate fraud
and abuse.
Response: We agree.
III. Provisions of This Final Rule
To implement the requirements of sections 13542 through 13546 of
OBRA 93, we are revising part 414, subpart D.
We expand the list of inexpensive or routinely purchased items in
Sec. 414.220(a) to include, effective January 1, 1994--
[[Page 35496]]
Accessories used in conjunction with a nebulizer,
aspirator, or ventilator excluded from Sec. 414.222.
Ostomy supplies, tracheostomy supplies, urologicals, and
surgical dressings not furnished as incident to a physician's
professional service or furnished by a home health agency.
We add a new paragraph (f)(4) to Sec. 414.220 to reflect that, for
1994 and subsequent years, the national limited payment amounts are
calculated using the median rather than the weighted average. We make
conforming changes to paragraph (f)(3).
We add a new paragraph (g) to Sec. 414.220 to state that payment
for surgical dressings effective January 1, 1994 is based on the
national limited payment amount increased by the covered item updates
for 1993 and 1994.
We revise Sec. 414.222(a) to delete aspirators, nebulizers, and
certain ventilators from the list of items requiring frequent and
substantial servicing.
We add a new paragraph (e) to Sec. 414.222 to set forth the
following transition rules that apply to rental of DME that was paid
for under the frequent and substantial servicing class but is no longer
paid for under that payment class. For purposes of calculating the 15-
month rental period, beginning January 1, 1994, if payment is
subsequently made under the other DME (capped rental) payment class for
an item that formerly required frequent and substantial servicing, the
period begins with the first month of continuous rental, even if that
rental period began before January 1, 1994.
For example, if the rental period began on July 1, 1993, the
carrier must use this date as beginning the first month of rental.
Section 1834(a)(7)(A)(i) limits total rental payments to 15 months (or
13 months if the beneficiary elects the purchase option). If we
calculated the 15-month period beginning on January 1, 1994 instead of
July 1, 1993 (the first month of rental), rental payments would be made
for an additional 6 months beyond the 15-month limit. We do not believe
that this would be consistent with the law. Thus, under this final
rule, if the beneficiary reached the purchase price limitation on a
rental claim before January 1, 1994, no further rental or purchase
payments would be made.
Likewise, for purposes of calculating the 10-month purchase option,
the rental period also begins with the first month of continuous rental
without regard to when that period started. For example, if the rental
period began in August of 1993, the 10-month purchase option must be
offered to the beneficiary in May of 1994, the 10th month of continuous
rental.
Likewise, for purposes of calculating the purchase ceiling, if an
item that is paid under the frequent and substantial servicing class is
subsequently paid under the inexpensive or routinely purchased payment
class, the rental period begins with the first month of continuous
rental under the frequent and substantial servicing class, even if that
period began before January 1, 1994.
The transition rules for items previously in the frequent and
substantial servicing class are the same as those (Sec. 414.229(f))
that were promulgated for use in computing the 10- and 15-month periods
for capped rental DME. We believe that these transitional requirements
are necessary to carry out the statutory intent, to limit capped rental
equipment payments to 15 months, or 13 months if the beneficiary elects
the purchase option, and to limit rental payments, for inexpensive and
routinely purchased items to the purchase price. For example, if we
were to begin calculating the 15-month period on January 1, 1994
instead of the first month of rental, payments would be incurred for up
to 15 additional months beyond the 15-month limit. For inexpensive or
routinely purchased DME, if we were to begin calculating the purchase
price limitation on January 1, 1994 instead of the first month of
rental, we could pay twice the purchase price. We believe that such a
result would be contrary to the direction of the law.
We revise Sec. 414.228(b)(2) to reflect that the applicable
percentage increase in the purchase price for prosthetic and orthotic
devices is 0 percent for 1994 and 1995.
We revise Sec. 414.232(a) to reflect that the payment amount for
TENS computed under Sec. 414.220 was reduced by 15 percent by OBRA 87,
effective April 1, 1990. The payment amount originally reduced by 15
percent was further reduced by an additional 15 percent, effective
January 1, 1991, by OBRA 90. Effective January 1, 1994, OBRA 93 changed
the percent of reduction mandated by OBRA 90 from 15 percent to 45
percent.
IV. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).
V. Regulatory Impact Statement
A. Introduction
This final rule implements changes required by sections 13542
through 13546 of OBRA 93. Section 13543 removed aspirators and
nebulizers and certain ventilators from the class of DME items
requiring frequent and substantial servicing. These aspirators,
nebulizers, and ventilators are now considered to be either capped
rental or inexpensive/routinely purchased items. Also, section 13545
provides that the payment amount for TENS devices furnished on or after
January 1, 1994 be based on the payment amount effective April 1, 1990,
reduced by 45 percent. The Medicare program had expenditures of
approximately $5.6 million for an estimated 34,000 TENS units furnished
in calendar year (CY) 1993.
Section 13546 provides that there will be no percentage increase in
payment in CYs 1994 and 1995 for orthotics, prosthetics, and prosthetic
devices. The percentage increase in the consumer price index is
expected to resume for payment in subsequent years.
Listed below is a table showing the estimated savings as a result
of the various OBRA 93 changes.
Estimate of Medicare Savings OBRA 93 (In millions)*
------------------------------------------------------------------------
FY 1995 FY 1996 FY 1997 FY 1998 FY 1999
------------------------------------------------------------------------
$45.......... $75 $85 $90 $100
------------------------------------------------------------------------
* Rounded to the nearest $5 million.
B. Regulatory Flexibility Act
Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612), we prepare a regulatory flexibility analysis unless the
Secretary certifies that a rule will not have a significant economic
impact on a substantial number of small entities. For purposes of the
RFA, most manufacturers and suppliers of DME and orthotic and
prosthetic devices are considered to be small entities. Some
manufacturers and suppliers, however, clearly have substantial regional
or national sales, and do not, therefore, meet the definition of a
small entity. Individuals and States are not included in the definition
of a small entity.
Also, section 1102(b) of the Act requires the Secretary to prepare
a regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section
[[Page 35497]]
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a Metropolitan Statistical Area and has fewer
than 50 beds.
C. General Effects
Since beneficiary copayments are linked to the level of allowed
payments for DME, the reduction in fee schedule amounts will reduce
costs to beneficiaries. The magnitude of savings to beneficiaries will
coincide with the reduction in payment levels for DME. Section 13543 of
OBRA '93 limited payment for aspirators, nebulizers, and certain
ventilators by deleting them from the group for items requiring
frequent and substantial servicing. Beneficiaries who had been renting
these items for an unlimited period will in the future be required to
pay copayment fees on payment up to only the allowed purchase price or
rental cap amount of the device.
Section 13545 reduces the payment amount for TENS devices furnished
on or after January 1, 1994 by 45 percent from the payment amount
effective April 1, 1990. As the payment for the TENS device will be
reduced, the beneficiaries copayment portion will also be reduced.
From the perspective of manufacturers and distributors, the
reductions in Medicare payments for certain DME, nebulizers and
aspirators, TENS devices, and orthotics, prosthetics, and prosthetic
devices will result in some revenue losses. Manufacturers and suppliers
that do not specialize in these items may see minimal reductions in
their revenues. We do not have detailed data that will enable us to
predict the economic impact on individual suppliers and manufacturers.
Considering that the total DME sales in CY 1993 equaled an estimated
$2.4 billion and the limited reductions we are making at this time, we
do not believe the impact on DME manufacturers and suppliers will
significantly affect the quantity or quality of DME available to
Medicare beneficiaries.
The provisions of this rule conform the regulations to legislative
provisions. Therefore, we are not preparing analyses for either the RFA
or section 1102(b) of the Act because we have determined, and the
Secretary certifies, that this rule will not have a significant
economic impact on a substantial number of small entities or a
significant impact on the operations of a substantial number of small
rural hospitals.
In accordance with the provisions of Executive Order 12866, this
rule was not reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 414
Durable medical equipment, Medicare, Prosthetic and orthotic
devices.
42 CFR part 414, subpart D, is amended as set forth below:
PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES
1. The authority citation for part 414 is revised to read as
follows:
Authority: Secs. 1102, 1833(a), 1834 (a) and (h), 1848, 1871,
and 1881 of the Social Security Act (42 U.S.C. 1302, 1395l(a), 1395m
(a) and (h), 1395w-4, 1395hh, and 1395rr).
2. In Sec. 414.220, the introductory text for paragraph (f) is
republished, paragraphs (a), (b), and (f)(3) introductory text,
(f)(3)(i), and (f)(3)(ii) are revised, and new paragraphs (f)(4) and
(g) are added, to read as follows:
Sec. 414.220 Inexpensive or routinely purchased items.
(a) Definitions--(1) Inexpensive equipment means equipment the
average purchase price of which did not exceed $150 during the period
July 1986 through June 1987.
(2) Routinely purchased equipment means 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.
(3) Accessories. Effective January 1, 1994, accessories used in
conjunction with a nebulizer, aspirator, or ventilator excluded from
Sec. 414.222 meet the definitions of ``inexpensive equipment'' and
``routinely purchased equipment'' in paragraphs (a)(1) and (a)(2) of
this section, respectively.
(b) Payment rules. (1) Subject to the limitation in paragraph
(b)(3) of this section, payment for inexpensive and routinely purchased
items is made on a rental basis or in a lump sum amount for purchase of
the item based on the applicable fee schedule amount.
(2) Effective January 1, 1994, payment for ostomy supplies,
tracheostomy supplies, urologicals, and surgical dressings not
furnished as incident to a physician's professional service or
furnished by an HHA is made using the methodology for the inexpensive
and routinely purchased class.
(3) The total amount of payments made for an item may not exceed
the fee schedule amount recognized for the purchase of that item.
* * * * *
(f) Calculating the national limited payment amount. The national
limited payment amount is computed as follows:
* * * * *
(3) For 1993, the national limited payment amount is equal to one
of the following:
(i) 100 percent of the local payment amount if the local payment
amount is neither greater than the weighted average nor less than 85
percent of the weighted average of all local payment amounts.
(ii) 100 percent of the weighted average of all local payment
amounts if the local payment amount exceeds the weighted average of all
local payment amounts.
* * * * *
(4) For 1994 and subsequent years, the national limited payment
amount is equal to one of the following:
(i) If the local payment amount is not in excess of the median, nor
less than 85 percent of the median, of all local payment amounts--100
percent of the local payment amount.
(ii) If the local payment amount exceeds the median--100 percent of
the median of all local payment amounts.
(iii) If the local payment amount is less than 85 percent of the
median--85 percent of the median of all local payment amounts.
(g) Payment for surgical dressings. For surgical dressings
furnished after December 31, 1993, the national limited payment amount
is computed based on local payment amounts using average reasonable
charges for the 12-month period ending December 31, 1992, increased by
the covered item updates for 1993 and 1994.
3. In Sec. 414.222, paragraph (a) is revised and paragraph (e) is
added to read as follows:
Sec. 414.222 Items requiring frequent and substantial servicing.
(a) Definition. Items requiring frequent and substantial servicing
in order to avoid risk to the beneficiary's health are the following:
(1) Ventilators (except those that are either continuous airway
pressure devices or intermittent assist devices with continuous airway
pressure devices).
(2) Continuous and intermittent positive pressure breathing
machines.
(3) Continuous passive motion machines.
(4) Other items specified in HCFA program instructions.
(5) Other items identified by the carrier.
* * * * *
(e) Transition to other payment classes. For purposes of
calculating the
[[Page 35498]]
15-month rental period, beginning January 1, 1994, if an item has been
paid for under the frequent and substantial servicing class and is
subsequently paid for under another payment class, the rental period
begins with the first month of continuous rental, even if that period
began before January 1, 1994. For example, if the rental period began
on July 1, 1993, the carrier must use this date as beginning the first
month of rental. Likewise, for purposes of calculating the 10-month
purchase option, the rental period begins with the first month of
continuous rental without regard to when that period started. For
example, if the rental period began in August 1993, the 10-month
purchase option must be offered to the beneficiary in May 1994, the
tenth month of continuous rental.
4. In Sec. 414.228, the introductory text for paragraphs (b) and
(b)(2) are republished, paragraph (b)(2)(ii) is revised, and new
paragraphs (b)(2)(iii) and (b)(2)(iv) are added, to read as follows:
Sec. 414.228 Prosthetic and orthotic devices.
* * * * *
(b) Fee schedule amounts. The fee schedule amount for prosthetic
and orthotic devices is determined as follows:
* * * * *
(2) The carrier determines a local purchase price equal to the
following:
* * * * *
(ii) For 1991 through 1993, the local purchase price for the
preceding year is adjusted by the applicable percentage increase for
the year. The applicable percentage increase is equal to 0 percent for
1991. For 1992 and 1993, the applicable percentage increase is equal to
the percentage increase in the CPI-U for the 12-month period ending
with June of the previous year.
(iii) For 1994 and 1995, the applicable percentage increase is 0
percent.
(iv) For all subsequent years the applicable percentage increase is
equal to the percentage increase in the CPI-U for the 12-month period
ending with June of the previous year.
* * * * *
5. In Sec. 414.229, the section heading is revised, the
introductory text for paragraph (c) is republished and paragraph (c)(3)
is revised, to read as follows:
Sec. 414.229 Other durable medical equipment--capped rental items.
* * * * *
(c) Determination of purchase price. The purchase price of other
covered durable medical equipment is determined as follows:
* * * * *
(3) For years after 1991. The purchase price is determined using
the methodology contained in paragraphs (d) through (f) of
Sec. 414.220.
* * * * *
6. In Sec. 414.232, paragraph (a) is revised to read as follows:
Sec. 414.232 Special payment rules for transcutaneous electrical nerve
stimulators (TENS).
(a) General payment rule. Except as provided in paragraph (b) of
this section, payment for TENS is made on a purchase basis with the
purchase price determined using the methodology for purchase of
inexpensive or routinely purchased items as described in Sec. 414.220.
The payment amount for TENS computed under Sec. 414.220(c)(2) is
reduced according to the following formula:
(1) Effective April 1, 1990--the original payment amount is reduced
by 15 percent.
(2) Effective January 1, 1991--the reduced payment amount in
paragraph (a)(1) is reduced by 15 percent.
(3) Effective January 1, 1994--the reduced payment amount in
paragraph (a)(1) is reduced by 45 percent.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: June 28, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 95-16805 Filed 7-7-95; 8:45 am]
BILLING CODE 4120-01-P
