[Federal Register: March 26, 2004 (Volume 69, Number 59)]
[Proposed Rules]
[Page 15755-15761]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26mr04-38]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 421
[CMS-1219-P]
RIN 0938-AL76
Medicare Program; Durable Medical Equipment Regional Carrier
(DMERC) Service Areas and Related Matters
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would allow us to change the geographical
boundaries served by the regional contractors that process durable
medical equipment claims and to make other minor changes in the
contract administration of the durable medical equipment regional
carriers (DMERCs). It would allow us to increase or decrease the number
of DMERCs, to change the boundaries of DMERCs based on criteria other
than the boundaries of the Common Working File, and to name new
contractors to perform statistical analysis or maintain the national
supplier clearinghouse. We would publish the changes and their
justifications in a Federal Register notice, rather than through notice
and comment rulemaking.
Although we are proposing to allow changes to the number and
configuration of regional carriers, we are not proposing to alter the
criteria and factors that we use in awarding contracts.
The intent of this proposed rule would be to improve the contract
process by swiftly meeting the challenges of the changing healthcare
industry, addressing the changing needs of beneficiaries, suppliers,
and the Medicare program, and facilitating our efforts to provide
interested parties with the best value Medicare claims processing
services. While we are not proposing to reconfigure the DMERC service
boundaries at this time, the changes set forth in this proposed rule
would provide a mechanism to swiftly make these kinds of changes
without repeatedly invoking full rulemaking.
DATES: We will consider comments if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on May 25, 2004.
ADDRESSES: In commenting, please refer to file code CMS-1219-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit electronic comments to http://www.cms.hhs.gov/regulations/ecomments or to http://www.regulations.gov; or you may mail
u may mail
written comments (one original and two copies) to the following address
ONLY: Centers for Medicare & Medicaid Services, Department of Health
and Human Services, Attention: CMS-1219-P, P.O. Box 8016, Baltimore, MD
21244-8016.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) to one of
[[Page 15756]]
the following addresses: Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue, SW., Washington, DC 20201, or Room C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late.
All comments received before the close of the comment period are
available for viewing by the public, including any personally
identifiable or confidential business information that is included in a
comment. After the close of the comment period, CMS posts all
electronic comments received before the close of the comment period on
its public Web site.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Kimberly Nyland, (410) 786-2289.
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-1219-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: Comments received timely will be
available for public inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, at the
headquarters of the Centers for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view
public comments, phone (410) 786-7195.
This Federal Register document is available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html
.
I. Background
A. Legislative Overview of Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) Claims Administration Covering 1966
Through 1992
[If you choose to comment on issues in this section, please include the
caption ``Background'' at the beginning of your comments.]
Medicare has covered medically necessary items of durable medical
equipment, prosthetics, orthotics, and supplies (DMEPOS) under Part B
since the inception of the program in 1966. In the original authorizing
legislation for the Medicare program, coverage was provided under
sections 1832 and 1861(s) of the Social Security Act (the Act) (Pub. L.
89-97). Since that time, the coverage and payment rules for DMEPOS,
which may now be found in sections 1832, 1834, and 1861 of the Act and
their implementing regulations have changed significantly.
From 1986 to 1992, the number of complaints about fraud and abuse
in the DMEPOS benefit began to increase markedly, and a variety of
government investigations identified specific weaknesses in the
program. We sought solutions to known claims processing problems,
including the increasing level of fraud and abuse in billing.
Subsequently, the Omnibus Budget Reconciliation Act of 1987 (OBRA 1987)
Pub. L. 100-203, enacted on December 22, 1987, authorized the Secretary
to designate, by regulation, regional carriers to process DMEPOS
claims. (See sections 1834(a)(12) and 1834(h)(3) of the Act.)
Before 1993, Medicare Part B claims for DMEPOS items and services
were assigned to each of the more than 30 local Medicare carriers and
represented, on average, only 5 percent of each carrier's overall
workload. After much review, we concluded that this structure was not
the most effective one for administering DMEPOS claims under Medicare.
It was difficult for carriers to devote significant administrative
review resources to this small percentage of claims.
In addition, DMEPOS claims were generally complex and time-
consuming to process. The protocol for suppliers to obtain a Medicare
billing number was ill-defined and required little identifying
information or compliance with any particular business or operational
standards.
Furthermore, carriers' medical review policies varied significantly
and contributed to inconsistent claims processing decisions. Finally,
certain DMEPOS suppliers who engaged in unethical practices were able
to exploit our local Medicare carriers by electing to submit claims to
carriers that provided more generous coverage, paid more than other
carriers, or both. As documented in program audits and congressional
hearings, fraudulent suppliers could do this easily by manipulating our
then existing ``point of sale'' claims jurisdiction rule; these
suppliers could simply locate their business offices where conditions
were most favorable. The collective impact of these issues resulted in
significant abuse of the Medicare program by a subset of the DMEPOS
supplier community, without any measurable improvement in patient care
and outcomes.
B. Agency and Congressional Efforts To Reform DMEPOS Claims
Administration, 1987 Through 1994
To address the problem of fraud and abuse in the supplier
community, we initiated an effort to reform the administration of the
DMEPOS benefit category using several strategies. On November 6, 1991,
we published a proposed rule (56 FR 56612) setting forth a new
framework for DMEPOS claims processing. In that rule, we proposed to
limit the number of carriers handling DMEPOS claims by establishing
regional carriers who would be expert processors of DMEPOS claims. The
rule also proposed to change the requirement for assigning DMEPOS
claims to carriers (that is, the DMEPOS claim jurisdiction rule) from a
``point of sale'' framework to a framework based on ``beneficiary
residence.'' In addition, the rule proposed to establish supplier
business standards and information disclosure requirements. We expected
that these changes, taken together, would make Medicare's DMEPOS claim
administration apparatus less susceptible to supplier manipulation.
On June 18, 1992, we published a final rule with comment period (57
FR 27307) to implement this revised statutory authority. The rule
provided the following:
Established four regional carriers (known as DME
Regional Carriers or DMERCS) to standardize the coverage and payment of
DMEPOS.
Designated the States and territories to be
served by each DMERC.
Consolidated and focused efforts to curb fraud
and abuse.
Controlled the enrollment of all DMEPOS
suppliers through a National Supplier Clearinghouse (NSC) (a contractor
that reviews and approves supplier applications for Medicare program
billing numbers).
[[Page 15757]]
Introduced the concept of a Statistical Analysis
DME Regional Carrier (SADMERC) to review supplier billing patterns.
Established minimum business standards for all
suppliers wishing to enroll in the Medicare Program.
Required that regional carriers administer
DMEPOS' claims based on the location (State) of the beneficiary's
primary residence. The regulations for DMERC contracts, in accordance
with these authorities are set forth at 42 CFR 405.874, 421.210,
421.212, and 424.57.
Finally, on October 31, 1994, the Congress enacted the Social
Security Amendments of 1994, Public Law 103-432. Among other matters,
this statute established section 1834(j)(1) of the Act, which
incorporated and augmented the supplier business and operational
standards established in the final rule of June 18, 1992. Paragraph (E)
of this provision ratified the concept of using the NSC. However, this
provision restricts the type of entity that may perform the NSC
function exclusively to Medicare carriers holding contracts under
section 1842 of the Act.
C. Provisions of the Existing DMERC Regulations (Especially Sec.
421.210)
As noted above, there are several regulatory provisions pertaining
to the operation of the DMERCs and related functions. Section 405.874
establishes a process by which the NSC makes determinations on whether
to issue a Medicare billing number to a supplier applicant and
specifies an administrative appeals process if we make an adverse
determination. Section 421.212 specifies that the Railroad Retirement
Board will use the CMS-contracted DMERCs to make DMEPOS claim
determinations for Medicare-eligible railroad retirees. Section 424.57
provides special payment rules for DMEPOS suppliers and requirements
for the issuance of DMEPOS supplier billing numbers, including a series
of business and operational standards that DMEPOS suppliers must meet
in order to qualify for Medicare billing privileges.
Section 421.210 could be viewed as the cornerstone regulation for
the DMERC carrier structure. As we are proposing to amend this
regulation, it is important to discuss its content in some detail.
We published and implemented the current regulations at Sec.
421.210 under the authority of sections 1842, 1834(a), and 1834(h) of
the Act. The current regulation, which augments and expands on the
underlying statutory provisions, provides for the following:
Paragraph (a) identifies the statutory basis for the rule and
indicates that the purpose of the rule is to designate one or more
carriers ``by specific regions'' to process DMEPOS claims.
Paragraph (b) identifies the types of claims for DMEPOS items and
services that are processed by the DMEPOS carrier.
Paragraph (c) defines four specific regions for the processing of
DMEPOS claims by naming the States and territories to be included in
each region. This section also states that the DMERC regions coincide
with the ``sector'' boundaries of our Common Working File System.
Paragraph (d) specifies criteria that we use in designating
entities to serve as regional carriers for DMEPOS claims.
Paragraph (e)(1) requires that the DMERCs process DMEPOS claims
only for beneficiaries whose permanent residence falls within their
designated regional areas (as established by paragraph (c)). Paragraph
(e)(1) also specifies that in processing DMEPOS claims, the DMERCs will
apply the payment rates applicable to the State of residence of the
beneficiary. In addition, the rule makes clear that the ``beneficiary
residence'' jurisdiction rule applies to qualified Railroad Retirement
beneficiaries and defines ``permanent residence'' for the purpose of
the rule.
Paragraph (e)(2) identifies by name the initial DMERCs; paragraph
(e)(3) identifies by name the initial NSC and SADMERC; paragraph (e)(4)
commits us to periodically re-compete the four DME regional carrier
contracts.
Paragraph (f) requires the DMERCs to collect ownership and control
information, as well as supplier standard certifications, from each
DMEPOS supplier that they service.
In section II of the preamble, we will discuss several changes we
propose to make to paragraphs (a), (c), (d), and (e) of Sec. 421.210.
D. Establishment and Operation of the DMERCs, 1993 Through 2003
We issued a Request for Proposal in May 1992 for the four regional
DMERC contracts. We also solicited offers for two DMEPOS-related
national contracts, the above-mentioned NSC and the SADMERC. In
December 1992, the contracts, designed around Common Working File
sectors, were awarded as follows:
Region A: Travelers Insurance Company for 10 States in the Northeast.
\1\
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\1\ The contract was initially awarded to Travelers Insurance
Company and the regulations use this name. Through a series of
corporate transactions, United Healthcare became the successor-in-
interest to Travelers and served as the DMERC until September 2000,
when HealthNow was awarded the DMERC contract for Region A.
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Region B: AdminaStar Federal for 9 States in the Midwest and the
District of Columbia.
Region C: Palmetto Government Benefits Administrators (GBA) for 14
States and 2 territories in the South.
Region D: CIGNA for 17 States and 3 territories in the West.
NSC: Palmetto GBA.
SADMERC: Palmetto GBA.
Initially, the DMERC and SADMERC contracts were 2-year contracts
with two 1-year renewal options. The NSC was given two 1-year contracts
and two 1-year renewal options. The contracts were modeled, to a
significant extent, after requirements in the Federal Acquisition
Regulations (FAR).
One of the biggest challenges and accomplishments of the transition
to the DMERC processing arrangement was the consolidation of diverse
carrier medical policies for DMEPOS. The agency's initiative to
configure geographical regions to process DMEPOS claims by
consolidating DME workloads from the 34 carriers to 4 DMERCs greatly
improved the rigor and consistency of medical review. Formerly, each
carrier developed its own local medical review policies for DMEPOS
claims under loose guidelines and oversight from us. During the
transition period, our coverage and medical review staff worked closely
with the DMERC medical directors to streamline and standardize medical
policy within and across the DMERC regions. Regionalization allowed the
DMERCs to have a consistent uniform interpretation of coverage
policies, local medical review policies, and pricing for similar items
and services. Today, the DMERCs share essentially one approach to
coverage and medical review for all DMEPOS items.
II. Provisions of This Proposed Rule
[If you choose to comment on issues in this section, please include the
caption ``Provisions of This Proposed Rule'' at the beginning of your
comments.]
We are proposing to make a number of changes to Sec. 421.210,
which concern the designation of regional carriers to process claims
for DMEPOS. Broadly speaking, we are seeking greater future flexibility
to revise the number and boundaries of DMERC regional areas. We also
desire greater flexibility in contracting for DMERC, NSC, and SADMERC
functions. We have examined the statutory framework (section
1834(a)(12) of the Act, as set forth below at paragraph (a), ``Basis'')
for
[[Page 15758]]
the current regulation and have concluded that the current regulation
is more restrictive on the Secretary's contracting discretion than
required either by statute or the program's interest.
Specifically, we are proposing to make the following changes to
Sec. 421.210 ``Designations of regional carriers to process claims for
durable medical equipment, prosthetics, orthotics, and supplies'':
Paragraph (a), ``Basis.''
We are proposing to revise paragraph (a) to more closely follow the
actual language of section 1834(a)(12) of the Act that authorizes the
Secretary to ``designate, by regulation under section 1842 of the Act,
one carrier for one or more entire regions to process all claims within
the region for covered items under this section.'' We are therefore
revising paragraph (a) to state that the Secretary is authorized to
designate carriers for ``one or more entire regions'' rather than to
designate carriers by ``specific'' regions.
Paragraph (c), ``Region designation.''
We are proposing to revise the language in paragraph (c), designate
the current paragraph (c) as (c)(1), and add a new paragraph (c)(2).
In paragraph (c), we are proposing to clarify the Secretary's
authority to revise the number or configuration of DMEPOS regional
areas in the future, based on appropriate factors and criteria.
The current regulations in Sec. 421.210(c) specify that there are
four regional areas for DMEPOS claims and further specify that these
areas be drawn to coincide with the Common Working File sectors. The
regulations also specify, by name, which States and territories are
assigned to each region for DMEPOS claims. To allow greater
flexibility, in paragraph (c)(1), we are proposing to add the word
``initial'' in front of the listing of the current DMERC service areas,
to make clear that this configuration could change in the future.
In addition, we would revise paragraph (c)(1) to remove a specific
reference to the Common Working File sector framework as a determinant
for the DMERC regions. Advances in technology have greatly diminished
the importance of this consideration and, therefore, its inclusion in
regulation is unnecessary.
The existing reference to Common Working File sectors in paragraph
(c)(1), as a constraint for the DMERC region boundaries, illustrates
the approach of the original rule. The June 18, 1992 rule acknowledged
a technical Medicare claims processing system constraint that was
significant at the time. Since that time, advances in our claims
processing system have greatly reduced the impact of ``out of the
area'' processing, and it is no longer necessary to structure the
DMERCs around the Common Working File sectors.
New paragraph (c)(2) would allow us to revise the number and
boundaries of DMERC regional service areas in the future based on
appropriate factors and criteria. Our goal is to constantly strive to
improve beneficiary and supplier satisfaction. Therefore, we would
consider the effect of any service area changes on beneficiaries and
suppliers in our decisions. Examples of factors and criteria include
population shifts or natural disasters that require a reallocation of
workload, and workforce conditions that may make it difficult for
DMERCs in certain areas to recruit and retain qualified employees. We
specify in paragraph (c)(2) that this change would allow us future
discretion to identify which States and territories are assigned to
various DMERC regions by publication of a Federal Register notice. The
Federal Register notice would identify the nature of any changes in the
DMERC service areas, as well as our rationale for the changes.
Absent the proposed changes to these regulations, we would have to
maintain the current DMERC configuration even if our administrative and
program needs change. Currently, the only existing mechanism for
changing the structure of the DMERC regions is to undertake notice and
comment rulemaking for each change. We believe that it is not the
intent of the statute to constrain the Secretary's administrative
discretion to this extent. Although we are not now proposing to alter
the number or configuration of the four areas for DMEPOS claims, we
anticipate that new program circumstances may arise that may require
alterations in the number or configuration of DMERC service areas. We
believe that we have a definite need for the capability to move swiftly
and make DMERC service area changes without going through notice and
comment rulemaking whenever administrative issues arise. Just as
critical, we believe it is important to consider the effects of these
kinds of changes on beneficiaries and suppliers and to provide the
public with an explanation of changes when they are made.
Under our proposed rules, we would not be required to administer
four DMEPOS areas, would not be required to determine these DMEPOS
areas based on the sector areas of the Common Working File, and would
not be required to go through rulemaking to modify the assignment of
the States and territories to revised DMEPOS areas.
We are providing a fictitious (but plausible) example of a
situation, which cannot be addressed very well under the current
regulation. In this example, DMERC X, which has historically performed
well, is having difficulty serving all beneficiaries and suppliers in
all of its assigned States, due to difficulties in recruiting a
sufficient number of qualified personnel. At present, the regulations
would seem to limit our options to--(1) hoping that DMERC X improves
its performance; or (2) terminating DMERC X's contract for the entire
service area and procuring and installing a replacement. We do not have
the third option of removing a limited number of States from DMERC X's
contract and attaching these service areas to another DMERC's service
area (or setting up a fifth DMERC jurisdiction). However, under the
proposed regulation, this kind of contract management action could
yield many benefits, in that DMERC X could focus its resources on its
remaining workload. Under the current regulation, moving a State to
another area, or setting up a fifth jurisdiction, would require an
extended rulemaking process unless the rules take a more general
approach, as we are proposing.
Paragraph (d), ``Criteria for designating
regional carriers.''
Paragraph (d) under this section currently discusses our
``designation'' of regional carriers in a manner that does not
explicitly acknowledge the fact that these designations must be
premised on the awarding of Medicare carrier contracts in accordance
with applicable law.
We are proposing to revise paragraph (d) under this section to make
clear that we will designate regional carriers to process DMEPOS claims
by awarding DMERC contracts in accordance with applicable law. We are
not proposing any changes to the current criteria under paragraphs
(d)(1) through (d)(5) of this section, which we use in our procurement
evaluation processes for this particular kind of contract.
Paragraph (e), ``Carrier designation.''
In paragraph (e)(1), we are also proposing to make minor revisions
to conform the language to the changes made in Sec. 421.210(c).
We are also proposing to revise paragraph (e) to provide that we
have flexibility and discretion with respect to contracting for DMERC
and related functions. The current regulations in Sec. 421.210(e) name
the initial DMERC-contracting companies and also identify the
particular region each company
[[Page 15759]]
serves. The current regulations could be interpreted as requiring that
we constantly update our rules whenever our business partners change.
The proposed regulatory framework will clarify our discretion not
to name a contracting company in future regulations if we re-compete a
DMERC contract after its conclusion or termination. This proposed
change would potentially reduce the agency's administrative burden when
a DMERC contract is not renewed. We are proposing, however, to notify
affected beneficiaries and suppliers when we change contractors.
Specifically in paragraph (e)(2), we are proposing to remove the
names of the initial DMERCs from the regulation. This change would also
clarify our future discretion to award a DMERC contract to process
DMEPOS claims under the Medicare program (that is, designate a DMERC),
without any obligation to name the new DMERC(s) in regulations or by
Federal Register notice. We would, however, notify affected
beneficiaries and suppliers to the change in contractors. Therefore, we
are proposing to revise paragraph (e)(2) to add that we will notify
affected Medicare beneficiaries when we designate a regional carrier.
We are proposing to revise paragraphs (e)(3) and (e)(4) to allow us
discretion to contract for the performance of NSC functions through
either an amendment to a DMERC contract or through a non-DMERC Medicare
carrier contract. In paragraph (e)(4), the current regulations for NSC
functions limit the agency's selection of NSC contractors to one of the
DMERCs. However, section 1834(j)(1)(E) of the Act actually more broadly
permits any carrier with a contract under section 1842 of the Act to
perform NSC functions. We believe that our rules should reflect this
broader discretion under the statute. Therefore, in paragraph (e)(4),
we are proposing to remove the limitation that restricts our list of
contractors to only four DME regional carriers. This proposed revision
gives us greater flexibility when we re-compete a DMERC contract after
its conclusion or termination.
In addition, we are proposing to delete the references to the
SADMERC function in Sec. 421.210(e)(3) and Sec. 421.210(e)(4).
SADMERCS are responsible for storing national DMEPOS claims history
data, for distributing to the DMERCS national pricing files, and for
conducting data analysis. Although we recognize the importance of the
activities that the SADMERC provides to us and the DMERCS, these
activities are not identified elsewhere in the regulations, and we
believe that little purpose is served by naming an entity without any
reference to its functions. Therefore, we do not believe it necessary
to reference the SADMERC in our regulations.
By removing the current reference to the SADMERC, including the
constraint that this activity be included in a DMERC's contract, we
will have the flexibility to include this function in a DMERC contract
or to contract for the SADMERC activity through some other vehicle.
In summary, this proposed rule would allow us to change the
geographical boundaries served by the regional contractors that process
DME claims and to make other minor changes in contract administration
of the DMERCS. We would be able to increase or decrease the number of
DMERCS or change the boundaries of the DMERCs through a Federal
Register notice. Further, we would name new contractors to perform the
functions of the DMERC and NSC without going through notice and comment
rulemaking. Instead, we would notify affected beneficiaries and
suppliers of contractor changes through our outreach and education
initiative.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its
usefulness in carrying out the proper functions of our agency.
The accuracy of our estimate of the information
collection burden.
The quality, utility, and clarity of the
information to be collected.
Recommendations to minimize the information
collection burden on the affected public, including automated
collection techniques.
This document does not impose any new 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 1995.
IV. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, when we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
V. Regulatory Impact
A. Overall Impact
[If you choose to comment on issues in this section, please include the
caption ``Regulatory Impact'' at the beginning of your comments.]
We have examined the impacts of this rule as required by Executive
Order (E.O.) 12866 (September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of
1995 (Pub. L. 104-4), and E.O. 13132.
E.O. 12866 (as amended by E.O. 13258, which merely reassigns
responsibility of duties) directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This rule
does not reach the economic threshold and thus is not considered a
major rule. This rule only provides the Secretary with greater
contracting flexibility consistent with the statute and would not have
any direct economic impact. Because this proposed rule would only
affect our administrative structures and does not change in any way the
Medicare DMEPOS benefit (that is, neither coverage nor payment is
changed), this rule would not affect the amount or distribution of the
Medicare benefit payment for DMEPOS. Further, any possible
restructuring of the DMERC regions in the future would not remotely
approach a net economic impact of $100 million on either CMS's
administrative costs or the administrative costs of DMEPOS suppliers.
Therefore, we do not believe that a regulatory impact analysis is
necessary under E.O. 12866.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and
[[Page 15760]]
government agencies. Most hospitals and most other providers and
suppliers are small entities, either by nonprofit status or by having
revenues of $6 million to $29 million in any 1 year. Individuals and
States are not included in the definition of a small entity. This
proposed rule, as noted above, would not have any direct economic
impact on DMEPOS suppliers, because it would not affect the scope of
benefits, coverage, or payment rules for DMEPOS, nor would it affect
the billing requirements for these services. This rule would not commit
us to any particular reconfiguration of the DMERC areas. However, we
agree to consider any effects on DMEPOS suppliers in any future
reconfigurations of the DMERC regions. We are not preparing an analysis
for the RFA because we have determined that this rule would 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 a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. The changes that this
rule proposes pertain to our processes for configuring and designating
contractors to process DMEPOS claims and would not have a significant
impact on the operations of a substantial number of small rural
hospitals. Therefore, we are not preparing an analysis for section
1102(b) of the Act.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditure in any 1 year by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $110 million. This rule would not have a consequential
effect on the governments mentioned or on the private sector.
E.O. 13132 establishes certain requirements that an agency must
meet when it promulgates a proposed rule (and subsequent final rule)
that imposes substantial direct requirement costs on State and local
governments, preempts State law, or otherwise has Federalism
implications. Since this regulation would not impose any costs on local
governments, the requirements of E.O. 13132 are not applicable.
B. Conclusion
For these reasons, we are not preparing analyses for either the RFA
or section 1102(b) of the Act because we have determined that this rule
would 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.
C. Alternatives Considered
We could have chosen to continue to operate under the constraints
of our current regulations. This option would require that we
periodically undertake notice and comment rulemaking to update the
regulations with the names of new contractors. We have provided
additional discussion in the preamble describing why we believe this is
not the optimal solution. We believe our proposal to make modest
changes to our regulations would offer us greater flexibility in
contracting with DMERCs and allow us to be more responsive to the needs
of all key stakeholders.
In accordance with the provisions of E.O. 12866, the Office of
Management and Budget reviewed this regulation.
List of Subjects in 42 CFR Part 421
Administrative practice and procedure, Health facilities, Health
professions, Medicare, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV, part 421 as
set forth below:
PART 421--INTERMEDIARIES AND CARRIERS
1. The authority citation for part 421 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart C--Carriers
2. Amend Sec. 421.210 as follows:
A. Revise paragraph (a).
B. Revise paragraph (c).
C. Revise the introductory text of paragraph (d).
D. Revise paragraph (e).
The revisions read as follows:
Sec. 421.210 Designations of regional carriers to process claims for
durable medical equipment, prosthetics, orthotics, and supplies.
(a) Basis. This section is based on sections 1834(a)(12) and
1834(h) of the Act, which authorize the Secretary to designate one
carrier for one or more entire regions to process claims for durable
medical equipment, prosthetic devices, prosthetics, orthotics, and
other supplies (DMEPOS). This authority has been delegated to CMS.
* * * * *
(c) Region designation. (1) The boundaries of the initial four
regions for processing claims described in paragraph (b) of this
section contain the following States and territories:
(i) Region A: Maine, New Hampshire, Vermont, Massachusetts,
Connecticut, Rhode Island, New York, New Jersey, Pennsylvania, and
Delaware.
(ii) Region B: Maryland, the District of Columbia, Virginia, West
Virginia, Ohio, Michigan, Indiana, Illinois, Wisconsin, and Minnesota.
(iii) Region C: North Carolina, South Carolina, Kentucky,
Tennessee, Georgia, Florida, Alabama, Mississippi, Louisiana, Texas,
Arkansas, Oklahoma, New Mexico, Colorado, Puerto Rico, and the Virgin
Islands.
(iv) Region D: Alaska, Hawaii, American Samoa, Guam, the Northern
Mariana Islands, California, Nevada, Arizona, Washington, Oregon,
Montana, Idaho, Utah, Wyoming, North Dakota, South Dakota, Nebraska,
Kansas, Iowa, and Missouri.
(2) CMS may modify the number and boundaries of the regions
established in paragraph (c)(1) of this section based on appropriate
criteria and considerations including the effect of the change on
beneficiaries and DMEPOS suppliers. To announce changes, CMS will
publish a notice in the Federal Register that delineates the regional
boundary or boundaries changed, the States and territories affected,
and supporting criteria or considerations.
(d) Criteria for designating regional carriers. CMS designates
regional carriers to achieve a greater degree of effectiveness and
efficiency in the administration of the Medicare program. In making
this designation, CMS will award regional carrier contracts in
accordance with applicable law and will consider some or all of the
following criteria--
* * * * *
(e) Carrier designation. (1) Each carrier designated a regional
carrier must process claims for items listed in paragraph (b) of this
section for beneficiaries whose permanent residence is within that
carrier's area as designated under paragraph (c) of this section. When
processing the claims, the carrier must use the payment rates
applicable for the State of residence of the beneficiary, including a
qualified Railroad Retirement beneficiary. A beneficiary's permanent
residence is the address at which he or she intends to
[[Page 15761]]
spend 6 months or more of the calendar year.
(2) CMS will notify affected Medicare beneficiaries and suppliers
when it designates a regional carrier (in accordance with paragraph (d)
of this section) to process DMEPOS claims (as defined in paragraph (b)
of this section) for all Medicare beneficiaries residing in their
respective regions (as designated under paragraph (c) of this section).
(3) CMS may contract for the performance of National Supplier
Clearinghouse functions through a contract amendment to one of the DME
regional carrier contracts or through a contract amendment to any
Medicare carrier contract under Sec. 421.200.
(4) CMS will periodically recompete the contracts for the DME
regional carriers. CMS will also periodically recompete the National
Supplier Clearinghouse function.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.774,
Medicare--Supplementary Medical Insurance Program)
Dated: September 29, 2003.
Thomas A Scully,
Administrator, Centers for Medicare & Medicaid Services.
Approved: December 31, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-6833 Filed 3-25-04; 8:45 am]
BILLING CODE 4120-01-P