[Federal Register: January 27, 2006 (Volume 71, Number 18)]
[Rules and Regulations]
[Page 4518-4525]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27ja06-11]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 414
[CMS-1167-F]
RIN 0938-AN02
Medicare Program; Payment for Respiratory Assist Devices With Bi-
Level Capability and a Backup Rate
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule clarifies that respiratory assist devices with
bi-level capability and a backup rate must be paid as capped rental
items of durable medical equipment (DME) under the Medicare program and
not paid as items requiring frequent and substantial servicing (FSS),
as defined in section 1834(a)(3) of the Social Security Act. Before
1999, respiratory assist devices with bi-level capability (with or
without a backup rate feature) were referred to as ``intermittent
assist devices with continuous positive airway pressure devices'' under
the Medicare program and in the Healthcare Common Procedure Coding
System (HCPCS). This final rule responds to public comments received on
a proposed rule published in the Federal Register on August 22, 2003,
and finalizes the policy in that proposed rule. The rule will ensure
that respiratory assist devices are consistently and properly paid
under Medicare as capped rental items.
DATES: The provisions of this final rule are effective on April 1,
2006.
FOR FURTHER INFORMATION CONTACT: Joel Kaiser, (410) 786-4499.
SUPPLEMENTARY INFORMATION:
I. Background
A. Legislative Authority for Payment for Durable Medical Equipment
(DME)
Section 1834(a) of the Social Security Act (the Act) sets forth the
payment methodology and requirements for payment for the purchase or
rental of new and used durable medical equipment (DME) for Medicare
beneficiaries under Medicare Part B (Supplementary Medical Insurance).
In accordance with section 1834(a) of the Act, payment for DME is made
on a fee schedule basis. Each item of DME that is paid under Medicare
Part B is classified into one of the following payment categories:
Inexpensive or other routinely purchased DME.
Items requiring frequent and substantial servicing (FSS).
Customized items.
Oxygen and oxygen equipment.
Other covered items (other than DME).
Other items of DME (capped rental (CR) items).
Each category has its own unique payment rules. With the exception
of customized items, for each item of DME that is identified by a code
in the Healthcare Common Procedure Coding System (HCPCS), a fee
schedule amount is calculated. The Medicare payment amount for a
customized item of DME is based on the Medicare carrier's individual
consideration of that item.
Section 1834(a) of the Act provides that Medicare payment for DME
is equal
[[Page 4519]]
to 80 percent of the lesser of the actual charge for the item or the
fee schedule amount for the item. In general, the fee schedule amounts
for DME are calculated on a statewide basis using average Medicare
payments made in each State from 1986 and 1987 under the former
reasonable charge payment methodology. The fee schedule amounts are
generally adjusted annually by the change in the Consumer Price Index
for All Urban Consumers (CPI-U) for the 12-month period ending June 30
of the preceding year. The fee schedule amounts are limited by a
ceiling (upper limit) and floor (lower limit) equal to 100 percent and
85 percent, respectively, of the median of the statewide fee schedule
amounts.
Implementing regulations for these statutory provisions are located
in 42 CFR part 414, subpart D.
B. Issuance of Proposed Rulemaking
On August 22, 2003, we published in the Federal Register (68 FR
50735) a proposed rule to clarify that one of the items of DME, a
respiratory assist device with bi-level capability and a backup rate,
must be paid as a CR category item under the Medicare program and not
paid as an item that requires FSS. As explained below, we issued this
proposal to correct coding and payment errors that have been made by
some Medicare contractors that misinterpreted our statutorily
prescribed policy and allowed respiratory assist devices to be paid
under the category for items requiring FSS. In the August 22, 2003
proposed rule, we proposed to include respiratory assist devices billed
using HCPCS codes K0533 and K0534 in the DME fee schedule payment
category for other items of DME, or capped rental items, as defined in
section 1834(a)(7) of the Act. We proposed that rental claims received
on or after the effective date of the final regulation would be
considered claims for the initial month of rental for capped rental
payment purposes.
A summary of the public comments we received on the proposed rule
and our responses to those comments appear under section III of this
preamble.
II. Payment for Ventilators as DME Under Medicare
A. Payment Methodology
Under section 1834(a) of the Act, payment may be made under
Medicare Part B for various types of ventilators as items of DME.
Section 1834(a)(3) of the Act, as amended, provides for payment for
covered items of DME requiring frequent and substantial servicing such
as intermittent positive pressure breathing (IPPB) machines and
ventilators, excluding ventilators that are either continuous positive
airway pressure (CPAP) devices or intermittent assist devices with CPAP
devices (now referred to as respiratory assist devices), to avoid risk
to the patient's health. Payment for an item in the FSS category is
made on a monthly rental basis, and rental payments continue as long as
the item remains medically necessary for the beneficiary. Section
414.222 of our regulations implements the payment provisions for the
types of items of DME that are paid under the FSS category. Ventilators
that are excluded from the FSS payment category are paid in accordance
with section 1834(a)(7) of the Act under the CR category on a rental
basis. Section 414.229 of the regulations implements the payment
provisions relating to items of DME that are paid under the CR
category. Payment for an item in the CR category is made on a monthly
rental basis. During the 10th rental month, the supplier is required to
offer the beneficiary the option to take over ownership of the item. If
the beneficiary chooses this option, Medicare rental payments end after
the 13th month of use and the title for the equipment transfers from
the supplier to the beneficiary. After the title for the equipment has
transferred to the beneficiary, Medicare will make payments for any
necessary maintenance and servicing of the patient-owned equipment. If
the beneficiary chooses to continue renting the equipment, Medicare
rental payments end after the 15th month of use, the supplier continues
to own the equipment, and the supplier must continue to supply the item
to the beneficiary until the medical necessity ends or Medicare
coverage ceases. Beginning 6 months after the 15th month of use, the
supplier may bill and receive a semiannual maintenance and servicing
payment in an amount not to exceed 10 percent of the purchase price for
the equipment as determined in accordance with the statute and Sec.
414.229(c). These maintenance and servicing payments are made
regardless of whether maintenance and servicing were actually performed
on the equipment during the 6-month period. Total Medicare payments
made through the 13th and 15th months of rental equal 105 and 120
percent, respectively, of the statutory purchase price of the
equipment.
Suppliers of DME must meet the standards specified in regulations
at Sec. 424.57. These standards specify that the supplier ``must
maintain and replace at no charge or repair directly, or through a
service contract with another company, Medicare-covered items it has
rented to beneficiaries.'' This requirement applies to items in both
the FSS and CR payment categories. Therefore, for rental items in
either category, the supplier is responsible for ensuring that the
equipment is in good working order. In the case of an item for which
the beneficiary has selected the purchase option, the patient arranges
for the servicing and repair of the patient-owned equipment. Medicare
payments are made as needed for maintenance and servicing of patient-
owned equipment in the CR category.
B. Legislative Change Relating to Types of Ventilators Payable Under
the FSS Category
Section 13543 of the Omnibus Budget Reconciliation Act of 1993
(OBRA of 1993) (Pub. L. 103-66) amended section 1834(a)(3)(A) of the
Act by establishing two exceptions to the previously existing statutory
authority that all ventilators were classified as items requiring FSS
for Medicare DME payment purposes. One category of ventilators that are
excluded from the FSS payment category is ``intermittent assist devices
with continuous positive airway pressure devices,'' now referred to
under the Medicare program as respiratory assist devices. The
legislative history of the House Report accompanying H.R. 3545 (H.R.
Conf. Rep. 103-213, 1993 U.S.C.C.A.N. 1088 at 703 (1987)) states that
the FSS ``category is intended to include items which require frequent
servicing in order to avoid imminent danger to a beneficiary's
health.'' As a result of this legislative amendment, ventilators that
are excluded from the Medicare DME FSS payment category fall into the
DME payment category of CR items.
C. HCPCS Coding for Intermittent Assist Devices
Effective January 1, 1992, code E0452 with the description of
``intermittent assist device with continuous positive airway pressure
device (CPAP)'' was added to the HCPCS. This code was added to describe
respiratory assist devices with bi-level air pressure capability, with
or without a backup rate, and with the ability to switch to CPAP mode.
Bi-level pressure capability means that the device can deliver a lower
level of pressure when the patient exhales than when the patient
inhales, as opposed to CPAP, which is the continuous delivery of a
single level of positive air pressure. A backup rate feature enables
the device to automatically switch between the two
[[Page 4520]]
levels of pressure at predetermined intervals. The original
manufacturer of bi-level respiratory assist devices submitted
documentation to us as part of our HCPCS coding recommendation. The
manufacturer stated the following in the documentation:
The word ``intermittent'' refers to devices that are
designed to be used by the patient for only part of the day, usually
during the hours of sleep.
The bi-level equipment requires very little maintenance
and servicing.
Other than monthly replacement of the air inlet filter on
the front of the system, there is no routine maintenance required.
The manufacturer recommended that a performance verification be
performed after each year of operation to ensure that the device is
functioning properly.
The nomenclature for code E0452, intermittent assist device with
continuous positive airway pressure (CPAP) device, was established to
describe positive airway pressure devices with bi-level capability,
with or without a backup rate feature. The term ``respiratory assist
device'' is used today to refer to this exact same group of items. As
indicated earlier, in accordance with OBRA of 1993, intermittent assist
devices or respiratory assist devices are excluded from the FSS payment
category for DME and are classified under the CR payment category under
Medicare.
Effective January 1, 1992, code E0453 with the description of
``therapeutic ventilator; suitable for use 12 hours or less per day''
was added to the HCPCS. This code was added to describe ventilators
that are used on a part-time basis by patients who are dependent on
stationary ventilators (HCPCS code E0450) for more than 12 hours a day.
The premise behind the therapeutic ventilator (code E0453) is similar
to portable oxygen equipment. The stationary ventilator (code E0450),
like stationary oxygen equipment, would be the primary equipment used
by the patient. The portable therapeutic ventilator, like portable
oxygen equipment, would be used part of the day by the patient to move
about in order to exercise muscles, prevent decubitus ulcers, and
achieve other therapeutic goals. Therapeutic ventilators were properly
classified in the FSS payment category because they were not one of the
types of ventilators (CPAPs or intermittent assist devices) excluded
from this category by OBRA of 1993.
D. Billing for Intermittent Assist Devices With a Backup Rate
Beginning as early as May 25, 1992, some Medicare carriers issued
erroneous guidance to suppliers that intermittent assist devices with a
backup rate should be billed to Medicare using HCPCS code E0453 for
therapeutic ventilators (in the FSS payment category) instead of HCPCS
code E0452, the code category established for intermittent assist
devices (in the CR payment category). We are not certain to what extent
carriers and suppliers were using code E0453 as opposed to code E0452
to bill for intermittent assist devices with a backup rate. However,
this practice continued to some extent through 1993 and 1994, the years
in which the OBRA of 1993 change in payment categories for intermittent
assist devices was, respectively, enacted and implemented.
Responsibility for processing DME claims was transferred during this
time from 34 local carriers to 4 regional carriers known as Durable
Medical Equipment Regional Carriers (DMERCs). The DMERCs also issued
erroneous guidance to suppliers that intermittent assist devices with a
backup rate should be billed using code E0453 instead of code E0452.
The classification of intermittent assist devices or respiratory
assist devices with a backup rate under the FSS payment category versus
the CR payment category results in a substantial increase in Medicare
payments. Total Medicare payments for one device furnished to one
patient under the FSS payment category would be as much as $38,530
after 5 years as opposed to $12,201 if the device were classified under
the CR payment category.\1\ This difference in costs highlights the
fact that the correct classification of these devices for Medicare
payment purposes is a significant issue in terms of safeguarding the
Medicare Trust Fund.
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\1\ The CR payment includes 15 monthly rental payments plus 7
payments for maintenance and servicing that can be billed every 6
months beginning 6 months after the 15th rental payment has been
made.
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In 1998, for the first time, the DMERCs conducted an in-depth
review of the use of intermittent assist devices and issued proposed
medical review policies that included a recommendation to revise the
nomenclature for the HCPCS codes for these devices. The term
``respiratory assist device, bi-level pressure capability'' was
proposed to replace the HCPCS wording of ``intermittent assist device
with continuous positive airway pressure (CPAP),'' and separate HCPCS
codes were proposed to differentiate between devices with a backup rate
and devices without a backup rate.
E. Public Meeting on Payment for Respiratory Assist Devices
During the course of reviewing the DMERC medical review policies on
intermittent assist devices (now referred to as respiratory assist
devices), we became aware that the carriers and DMERCs had been
allowing HCPCS code E0453 to be used primarily for the billing of
respiratory assist devices with a back-up rate. As a result, we
intended to take action to clarify that these respiratory assist
devices belonged in the CR payment category. Because of concerns raised
by the industry on the appropriate coding and payment classification
for these devices, we announced in the Federal Register on June 4, 1999
(64 FR 30042) the convening of a public meeting on June 25, 1999, to
obtain input from the supplier community regarding the appropriate DME
payment category for respiratory assist devices with a backup rate. We
made presentations at the June 25, 1999 public meeting. Representatives
of the Food and Drug Administration (FDA) and the National Institutes
of Health, respiratory assist device manufacturers, suppliers,
clinicians, beneficiaries, and others also made presentations at the
meeting.
Testimony was given at the public meeting to support the claim that
there is a need for FSS of respiratory assist devices with bi-level
capability and a backup rate. Speakers described the need to have a
respiratory therapist visit the beneficiary to make sure that the
device is being used appropriately by the beneficiary and that the
beneficiary is complying with the treatment regimen. The testimony
pointed out that after the respiratory therapist performs an assessment
of the beneficiary and has consulted with the beneficiary's physician,
it may be determined that the pressure setting on the equipment needs
to be adjusted. However, no information was presented at the public
meeting that would indicate that the equipment itself requires FSS, as
required by section 1834(a)(3)(A) of the Act.
The DMERC medical review policies on respiratory assist devices
were implemented on October 1, 1999. The following HCPCS codes were
added as part of these new policies:
K0532 Respiratory Assist Device, Bi-Level Pressure
Capability, Without Back-Up Rate Feature, Used With Noninvasive
Interface, E.G., Nasal Or Facial Mask (Intermittent Assist Device
[[Page 4521]]
With Continuous Positive Airway Pressure Device)
K0533 Respiratory Assist Device, Bi-Level Pressure
Capability, With Back-Up Rate Feature, Used With Noninvasive Interface,
E.G., Nasal Or Facial Mask (Intermittent Assist Device With Continuous
Positive Airway Pressure Device)
K0534 Respiratory Assist Device, Bi-Level Pressure
Capability, With Back-Up Rate Feature, Used With Invasive Interface,
E.G., Tracheostomy Tube (Intermittent Assist Device With Continuous
Positive Airway Pressure Device)
These codes were added to better describe those respiratory assist
devices, or intermittent assist devices, that had been coded under
codes E0452 and E0453 of the HCPCS since 1992. Code K0532 describes
those intermittent assist devices that did not have a backup rate and
were previously coded under code E0452 (the CR payment category). Codes
K0533 and K0534 describe those intermittent assist devices that did
have a backup rate, but had been coded under code E0453 (the FSS
payment category). It was also decided that no code was needed for
therapeutic ventilators, the devices originally intended to fall under
code E0453. Although the DMERC medical review policies were implemented
on October 1, 1999, we delayed our decision regarding the appropriate
DME payment category for devices with the backup rate (codes K0533 and
K0534) to allow more time for consideration of comments made at the
June 25, 1999 public meeting. Since that time, code numbers K0532,
K0533, and K0534 have been replaced in the HCPCS by code numbers E0470,
E0471, and E0472, respectively.
After reviewing all of the information presented at the June 25,
1999 public meeting, we concluded that respiratory assist devices with
bi-level pressure capability and a backup rate do not require FSS
payment. We also concluded that these devices are a type of
intermittent assist device with CPAP and, therefore, are excluded from
the FSS payment category by section 1834(a)(3)(A) of the Act. We
concluded that all payments made for these devices in the past under
the FSS payment category were erroneous.
As a result of these conclusions (and in conjunction with the
findings of the 1999 OIG report discussed in section II.F of this
preamble), we issued the August 22, 2003 proposed rule. As noted above,
the only regular servicing necessary for these devices is changing the
filter once a year; thus, we believe that it is not necessary for a
respiratory therapist to perform the maintenance and servicing of
respiratory assist devices. If DME suppliers perform maintenance and
servicing of equipment, Medicare pays for this service, regardless of
whether the item is in the FSS or the CR category. At the time that we
issued the proposed rule, we were confident that this change in payment
category would not result in a decrease in the current level of service
being provided to Medicare beneficiaries. After consideration of all
comments, we have maintained the proposed provisions in this final
rule.
F. Office of Inspector General (OIG) Report on Respiratory Assist
Devices
As we explained in the August 2003 proposed rule, in 1999, the OIG
began an inspection to determine if respiratory assist devices with a
backup rate receive frequent and substantial servicing. To assess
whether devices received frequent and substantial servicing, the OIG
reviewed a stratified random sample of Medicare claims and associated
supplier records. The OIG also conducted surveys of beneficiaries,
suppliers, manufacturers, and accreditation agencies. In June 2001, the
OIG issued its report on respiratory assist devices with a backup rate
(OEI-07-99-00440) and recommended that these devices be moved from the
FSS payment category to the CR payment category. The OIG made its
recommendation based on information gathered from the surveys it
conducted. The OIG included the following findings in its report:
Supplier services consist primarily of routine maintenance
and patient monitoring.
For most beneficiaries, actual supplier visits do not meet
the suppliers' own protocols or recommendations for frequency of visits
that are developed in the absence of official guidelines regarding the
number of visits that are necessary for the device.
Contrary to supplier protocols, the number of
beneficiaries receiving visits declines over time.
Covering the respiratory assist device with backup rate in
the capped rental category would have saved Medicare $11.5 million
annually.
Therefore, the OIG, after conducting a detailed inspection,
determined that respiratory assist devices with a backup rate do not
receive FSS.
III. Public Comments Received on the Proposed Rule and Departmental
Responses
We received 15 timely pieces of correspondence containing multiple
comments on the August 22, 2003 proposed rule. A summary of these
public comments and the Department's responses to those comments
follow:
Comment: All of the commenters opposed the proposed change in the
Medicare payment category for respiratory assist devices with backup
rate capability (HCPCS code K0533 or E0471) from the FSS category to
the CR category. Some commenters viewed the proposed change as a
reduction in payment rather than a correction of a coding error and
requested withdrawal of the proposal because the rationale was
unsupportable. The commenters stated that the alleged payment error
originally occurred when, they believe, CMS incorrectly relabeled what
the industry now refers to as bi-level ventilators or noninvasive
positive pressure ventilators (NPPVs) as respiratory assist devices.
The commenters indicated that the term ``respiratory assist device'' is
ambiguous and its use is inconsistent with current practice, with
medical literature, and with the FDA classification of these devices.
The commenters pointed out that the FDA classifies NPPVs as ventilators
and, as such, their purpose and function require monitoring and
servicing to avoid risk to the patient's health, and, thus,
classification under the Medicare FSS payment category. The commenters
added that Medicare payment policy is the only area where these
ventilators are referred to as ``respiratory assist devices.''
Response: Respiratory assist devices with bi-level capability and a
backup rate, or NPPVs as they are referred to by suppliers and
manufacturers of these devices, are a type of intermittent assist
device with CPAP and, therefore, are excluded from the FSS payment
category by law. CPAP devices and intermittent assist devices with CPAP
are indeed referred to as ventilators in the statute, but are
nonetheless excluded from the FSS category under section 1834(a)(3) of
the Act. This statutory provision does not allow us to exempt certain
types of intermittent assist devices (that is, those with backup rate
features). The terms ``intermittent assist device'' and ``respiratory
assist device'' describe the same general category of bi-level positive
airway pressure device technology that was brought onto the market
under the trade name of BiPAP[supreg] and that still exists today.
While some bi-level devices include a backup rate feature and some do
not, the term ``intermittent assist devices'' was developed for HCPCS
code E0452 to describe all bi-level devices, and this is the statutory
language that was used to exclude
[[Page 4522]]
certain ventilators from the FSS payment category. Therefore, the law
requires this change.
We note that FDA classification of devices for the purpose of
clearing products for market distribution does not determine Medicare
coverage and payment rules or our policy development. Likewise, our
definitions and classification of devices under the Medicare program
have no direct effect on FDA classification of drugs and devices. The
process of clearing devices for marketing and determining coverage and
payment of devices under Medicare are two different programs with
different parameters.
Comment: A number of commenters stated that CMS does not have the
legal authority under the plain meaning of the language in the statute
to change the payment category for NPPVs or respiratory assist devices
with bi-level capability and backup rate. In addition, they believed
CMS is taking too narrow a view of the term ``servicing'' in the
language of the 1993 statutory amendments to the Act and the
legislative history. The commenters stated that the House Report
language clarifies that ``frequent and substantial servicing'' refers
more broadly to the servicing, monitoring, and adjustments needed to
make certain that these ventilators are both functioning properly and
being used properly by the patient, not just to the equipment itself.
Further, one commenter indicated that the House Report further states
that these items are typically quite expensive and often subject to
relatively rapid technological changes. Therefore, the commenters
pointed out, NPPV ventilators fit the statutory definition for the FSS
payment category.
Response: As indicated above, respiratory assist devices with bi-
level capability and a backup rate, or NPPVs as they are referred to by
suppliers and manufacturers of these devices, are a type of
intermittent assist device with CPAP and, therefore, are excluded from
the FSS payment category by section 1834(a)(3) of the Act. This
statutory provision does not allow us to exempt certain types of
intermittent assist devices (that is, those with backup rate features).
Therefore, we do not have the discretion to place these items in the
FSS category. Even assuming arguendo that the items did require
frequent and substantial servicing, which we believe they do not, based
on information we have received, including the OIG report on this
subject, the law excludes them from this category of items.
Comment: A number of commenters suggested that if CMS wanted to
take corrective action against suppliers who are noncompliant with
established protocols pertaining to the FSS category, the better
approach would be to sanction those providers for inappropriate or
fraudulent billing practices, not to reduce payments for the devices.
Another commenter who agreed with the OIG report believed that CMS must
protect beneficiaries and take action when suppliers of DME fail to
properly set up, adjust incrementally, and provide careful followup on
the use of the equipment. The commenter believed that corrective action
would be proper, but disagreed with the lowering of the payment for the
services needed.
Response: Section 1834(a)(20) of the Act, as added by section
302(a) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Pub. L. 108-173), requires us to establish
quality standards for suppliers of DME, including respiratory assist
devices, to be applied by recognized independent accreditation
organizations. We expect to implement this statutory provision in the
near future, at which point suppliers of respiratory assist devices
will not be allowed to bill Medicare for furnishing these devices if
they do not meet the established quality standards. In addition, we
will continue to implement and refine our procedures for identifying
and sanctioning fraudulent and abusive suppliers under Medicare.
With regard to the lowering of overall Medicare payments for the
device that would result from implementation of this rule, it is not
the intent of this rule to lower payments in order to take corrective
action against suppliers who fail to provide necessary services. This
rule would place respiratory assist devices with bi-level capability
and a backup rate feature in the CR category in order to comply with
section 1834(a)(3) of the Act.
Comment: Several commenters believed that the OIG study
investigating the impact of the proposed policy was flawed in design,
interpretation of results and conclusions, and they challenged the four
major findings cited in the proposed rule (see also section II.D of
this final rule). The commenters believed that there were (1)
Inconsistent interpretation of the statute and intent of the Congress;
(2) disregard for FDA's regulatory classification of NPPVs as
ventilators; (3) conclusions regarding the nature and frequency of
services to patients using NPPVs that are inconsistent with the
underlying data (data that they believed were incorrect and
misleading); and (4) recommendations that were in conflict with
published medical views of NPPVs that pose health risks and prevent
access to devices by beneficiaries.
Response: The overriding issue addressed by the proposed rule and
this final rule is the fact that the statute excludes intermittent
assist devices or respiratory assist devices from the FSS category.
Although the OIG report indicates that suppliers of respiratory assist
devices are not performing frequent and substantial servicing of the
devices, the report itself cannot affect the legal mandate to exclude
these items from the FSS payment category.
Comment: A number of commenters recommended that CMS establish a
standard for payment of respiratory care services for patients who
require the use of NPPV, as well as guidelines specific to ventilator
treatment of patients with amyotrophic lateral sclerosis (ALS). The
commenters believed that switching NPPV to the category of capped
rental items without simultaneously covering the cost of respiratory
care services that the comments state that ventilator dependent
patients need would eliminate followup care by clinical personnel for
these patients and would endanger the lives of many patients who suffer
from respiratory insufficiency due to such diseases as ALS and post-
polio syndrome.
Response: As mentioned in an earlier response, section 1834(a)(20)
of the Act, as added by section 302(a) of Public Law 108-173, requires
us to establish quality standards for suppliers of DME, including
respiratory assist devices, to be applied by recognized independent
accreditation organizations. We expect to implement this provision in
the near future.
With regard to the services of a respiratory therapist and other
clinical services related to the care of a patient using a respiratory
assist device, these services do not fall within the scope of the DME
benefit. The overall clinical care of a beneficiary who receives DME is
the responsibility of the beneficiary's treating physician. Therefore,
payment under the DME benefit does not include payment for the clinical
services of a respiratory therapist or other clinicians that relate to
the care of the patient. Further clarification of this issue will be
provided through the DME supplier quality standards.
Comment: A number of commenters believed that the proposed change
(1) would have a significant adverse impact on beneficiaries' access to
ventilator therapy (for people with neuromuscular diseases such as ALS,
post-polio syndrome, and multiple sclerosis); (2) would jeopardize the
health and safety of disabled beneficiaries with neuromuscular
diseases; and (3) would
[[Page 4523]]
create additional costs to the Medicare program through an increase in
the number of hospitalizations and urgent care visits. Some of the
commenters believed that these issues were not adequately addressed in
the proposed rule, despite their presentation at the 1999 public
meeting.
Commenters acknowledged that there is no provision in the Medicare
statute that authorizes coverage and payment for services of a health
care professional who provides ``hands-on'' care for a home ventilator
patient. However, the commenters pointed out that, in the real world, a
professional who is attempting to provide FSS to the equipment
invariably also interacts with and may provide care to the patient, a
service that would be eliminated if the category payment change is
made. One commenter indicated that loss of payment resulting from the
change in payment category means loss of service to needy individuals.
Response: The proposed rule and this final rule pertain only to
respiratory assist devices, not to ventilator therapy. They do not
affect coverage of ventilators, which continue to be covered under the
DME benefit. We disagree that the proposed rule and this final rule
will significantly affect beneficiary access to respiratory assist
devices. The law requires that intermittent assist devices or
respiratory assist devices be excluded from the DME FSS payment
category under Medicare. We believe the payments for these respiratory
assist devices as capped rental items will cover the costs of medically
necessary equipment and services.
Comment: One commenter pointed out that a DME company has no
obligation to provide any services for a beneficiary who selects the
purchase option and that this creates a hazard to some beneficiaries.
The commenter added that it will not be cost-effective to provide
necessary services to beneficiaries with severe respiratory problems if
the device is moved to the CR payment category.
Response: We do not believe that the provisions of the proposed
rule and this final rule will create a hazard for beneficiaries.
Medicare will make rental payments for respiratory assist devices as
DME under the provisions of the statute and will make payments for any
necessary maintenance and servicing of patient-owned equipment if the
beneficiary selects the purchase option during the 10th rental month of
the 15-month rental. In addition, as we have indicated earlier, we are
in the process of developing rules that will establish quality
standards for suppliers of DME, including respiratory assist devices,
to be applied by recognized independent accreditation organizations.
These standards will implement provisions of section 1834(a)(20) of the
Act as added by section 302(a) of Pub. L. 108-173.
Comment: A number of commenters believed that the proposed rule
would have a disproportionate adverse economic effect on small
businesses, given the estimated significant reductions in payments that
would occur if the proposed rule were finalized, that is, a 78-percent
reduction in payments over a 5-year period. The commenters pointed out
the limited number of suppliers of NPPV ventilators nationally and
that, of the top 30 suppliers cited by CMS in the proposed rule, 83
percent are probably small businesses. The commenters agreed with CMS'
assessment in the proposed rule that the top 30 suppliers account for
50 percent of the use of code K0533 and that 5 of these suppliers
account for 40 percent of expenditures for the code. One commenter
indicated that as a result of the revised DMERC policy, many companies
have already stopped offering respiratory assist services. This
commenter believed that most companies would not offer to provide NPPV
at all under the proposed change in the payment category.
Response: We agree that some small suppliers may be adversely
affected by this rule. However, given that the current monthly fee
schedule ceiling for this device is $642.17 and is very generous
compared to the monthly fee schedule ceiling of $256.60 for the device
without the back-up rate feature, we do not believe that many of the
current suppliers of respiratory assist devices will be significantly
affected. In addition, we do not anticipate problems with beneficiary
access to respiratory assist devices as a result of this rule given
this generous payment schedule. We refer readers to a further
discussion of the impact of this final rule on small suppliers in
section VI of this final rule.
Comment: One commenter believed that the rapid rise in Medicare
expenditures for use of ventilators was due to the fact that the
benefits of NPPV were relatively unknown until 1995, not to the misuse
of the device and coding. The commenter indicated that CMS also failed
to consider the cost savings from decreased hospitalizations among the
groups of patients receiving NPPVs.
Response: The reasons for the growth in expenditures for
respiratory assist devices are not relevant to this final rule. The law
requires that these devices be excluded from the DME FSS payment
category under Medicare.
Comment: One commenter believed that CMS failed to meet the
statutory requirement to analyze options for regulatory relief under
the Regulatory Flexibility Act when over half of the small businesses
would be seriously impacted by the proposed rule (16 of 25). The
commenter wanted to know where and how it could seek relief. This
commenter also disagreed with CMS' determination that the costs and
benefits of the proposed rule would be economically insignificant, that
is, less than $100 million.
Response: The statute specifically excludes intermittent assist
devices (now referred to as respiratory assist devices) from the DME
FSS payment category under Medicare. The only relief from this
statutory exclusion would be a legislative change. As we discuss in
detail under section VI of this preamble, we estimate that this final
rule will result in total expenditures of less than the $100 million
threshold per year defined in the Executive Order as economically
significant.
IV. Provisions of the Final Rule
After consideration of the public comments received, we are
adopting as final the proposed clarification of the payment category
policy for respiratory assist devices under Medicare Part B. In this
final rule, we are specifying that respiratory assist devices with bi-
level capability and a backup rate must be paid as capped rental items
under the Medicare program and not paid as items requiring frequent and
substantial servicing. In cases where beneficiaries are currently
receiving these items, the capped rental period will begin for claims
with dates of service on or after April 1, 2006.
V. Collection of Information Requirements
This final rule does not impose information collection and
recordkeeping requirements. Consequently, it does not need to be
reviewed by the Office of Management and Budget under the authority of
the Paperwork Reduction Act of 1995.
VI. Regulatory Impact Statement
We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
[[Page 4524]]
A. Executive Order 12866
Executive Order 12866 (as amended by Executive Order 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).
Based on the OIG study (OEI-07-99-00440), moving these devices to the
CR payment category will result in annual savings of approximately 27
percent. Based on 2004 expenditures of approximately $70 million for
this device, below are the estimated 5-year savings for this
regulation.
------------------------------------------------------------------------
Savings *
Fiscal year (million)
------------------------------------------------------------------------
2006.................................................... $0
2007.................................................... 20
2008.................................................... 20
2009.................................................... 20
2010.................................................... 20
------------------------------------------------------------------------
* Rounded to the nearer $10 million.
Since we estimate that this final rule will result in reductions in
total expenditures of less than $100 million per year, this final rule
is not a major rule as defined in Title 5, United States Code, section
804(2) and is not an economically significant rule under Executive
Order 12866.
B. Regulatory Flexibility Analysis
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 government agencies.
Most hospitals and most other providers and suppliers are small
entities either because of their nonprofit status or because they have
revenues of $6 million to $29 million or less in any 1 year. For
purposes of the RFA, approximately 98 percent of suppliers of DME and
prosthetic devices are considered small businesses according to the
Small Business Administration's (SBA) size standards. Individuals and
States are not included in the definition of a small entity. We
estimate that 106,000 entities bill Medicare for DME, prosthetics,
orthotics, surgical dressings, and other equipment and supplies each
year. We believe the impact on the DME industry and small businesses in
general will be minimal because most companies supply more than this
one type of equipment. We estimate that total Medicare expenditures for
DME are approximately $7 billion per year.
As indicated above, we estimate that the overall impact on Medicare
revenue associated with moving respiratory assist devices with a backup
rate to the CR payment category will be payment reductions that range
from approximately $15 million in FY 2005 to $45 million in FY 2009.
Therefore, the overall impact on the total industry annual receipts
will be small, that is, less than a 1-percent reduction in Medicare
revenue. However, while the overall impact is small, some suppliers
will be seriously affected as a result of the mix of DME that they
furnish to Medicare beneficiaries. Namely, suppliers who specialize in
furnishing respiratory assist devices will be seriously affected by
this final rule. We have reviewed data from the statistical analysis
conducted by DMERCs for the top 30 suppliers of respiratory assist
devices with backup rate that were furnished during the period of
October through December 2003 and billed using HCPCS code K0533. These
suppliers accounted for over 66 percent of the total allowed charges in
that quarter for code K0533. For these suppliers, the percentage of
total DME allowed charges that were made up by allowed charges for code
K0533 was 22.5 percent on average. The top 3 DME suppliers of code
K0533 accounted for over 50 percent of the total allowed charges for
code K0533 and are not small suppliers based on Medicare allowed
charges attributed to these suppliers. For these 3 suppliers, the
percentage of total DME allowed charges that were made up by allowed
charges for code K0533 ranged from 1.4 percent to 2.9 percent. All but
one of the other 30 suppliers would be considered small suppliers based
on Medicare allowed charge data alone (we are not certain what revenue
sources these entities may have other than Medicare). The percentage of
total DME allowed charges that were made up by allowed charges for code
K0533 was over 50 percent for only 6 of the top 30 suppliers, and the
total allowed charges for code K0533 that were associated with these 6
suppliers accounted for only 4.4 percent of total allowed charges for
code K0533 during that quarter. Based on these data, we conclude that
most small suppliers of respiratory assist devices with backup rate
will not be significantly affected by this final rule.
C. Impact on Rural Areas
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a rule may have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. We are not preparing a
rural impact analysis because we have determined that this final rule
will not have a significant economic impact on the operation of a
substantial number of small rural hospitals.
D. Unfunded Mandates
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 government, in the aggregate, or by the private sector
of $110 million. This final rule will not have an effect on the
governments mentioned, and private sector costs will be less than the
$110 million threshold.
E. Executive Order 13132
Executive Order 13132 establishes certain requirements that an
agency must meet when it publishes 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. We have determined that this rule does not significantly
affect State or local governments.
F. Executive Order 12866
In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 414
Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medicare, Reporting and recordkeeping
requirements, Rural areas, X-rays.
0
For the reasons stated in the preamble, the Centers for Medicare &
Medicaid Services is amending 42 CFR part 414 as follows:
PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES
0
1. The authority citation for part 414 continues to read as follows:
[[Page 4525]]
Authority: Secs. 1102, 1871, and 1881(b)(1) of the Social
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr (b)(1)).
0
2. In Sec. 414.222 paragraph (a)(1) is revised to read as follows:
Sec. 414.222 Items requiring frequent and substantial servicing.
(a) Definition. * * *
(1) Ventilators (except those that are either continuous airway
pressure devices or respiratory assist devices with bi-level pressure
capability with or without a backup rate, previously referred to as
``intermittent assist devices with continuous airway pressure
devices'').
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.774,
Medicare--Supplementary Medical Insurance Program)
Dated: April 7, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Dated: August 10, 2005.
Michael O. Leavitt,
Secretary.
Editorial Note: This document was received at the Office of the
Federal Register January 24, 2006.
[FR Doc. 06-798 Filed 1-26-06; 8:45 am]
BILLING CODE 4120-01-P