Medicare Program; Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Policy Issues and Level II of the Healthcare Common Procedure Coding System (HCPCS), 70358-70414 [2020-24194]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 85, Number 214 (Wednesday, November 4, 2020)]
[Proposed Rules]
[Pages 70358-70414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24194]



[[Page 70357]]

Vol. 85

Wednesday,

No. 214

November 4, 2020

Part IV





Department of Health and Human Services





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Centers for Medicare and Medicaid Services





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42 CFR Part 414





Medicare Program; Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS) Policy Issues and Level II of the Healthcare 
Common Procedure Coding System (HCPCS); Proposed Rule

Federal Register / Vol. 85 , No. 214 / Wednesday, November 4, 2020 / 
Proposed Rules

[[Page 70358]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 414

[CMS-1738-P]
RIN 0938-AU17


Medicare Program; Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Policy Issues and Level II of the 
Healthcare Common Procedure Coding System (HCPCS)

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish methodologies for adjusting 
the Medicare durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS) fee schedule amounts using information from the 
Medicare DMEPOS competitive bidding program for items furnished on or 
after April 1, 2021, or the date immediately following the duration of 
the emergency period described in section 1135(g)(1)(B) of the Social 
Security Act, whichever is later; application evaluation processes and 
other procedures related to Healthcare Common Procedure Coding System 
(HCPCS) Level II code applications; and procedures for making benefit 
category and payment determinations for new items and services that are 
durable medical equipment (DME), prosthetic devices, orthotics and 
prosthetics, therapeutic shoes and inserts, surgical dressings, or 
splints, casts, and other devices used for reductions of fractures and 
dislocations under Medicare Part B. In addition, this rule proposes to 
classify continuous glucose monitors (CGMs) as DME under Medicare Part 
B and establish fee schedule amounts for these items and related 
supplies and accessories. Also, this proposed rule would expand the 
scope of the Medicare Part B benefit for DME by revising the 
interpretation of the ``appropriate for use in the home'' requirement 
in the definition of DME specifically for certain drugs or biologicals 
infused in the home using an external infusion pump. This proposed rule 
would also make conforming changes to the regulations related to 
implementation of section 106 of the Further Consolidated 
Appropriations Act, 2020.

DATES: To be assured consideration, comments must be received at one of 
the addresses specified in the ADDRESSES section, no later than 5 p.m. 
on January 4, 2021.

ADDRESSES: In commenting, please refer to file code CMS-1738-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may send written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1738-P, P.O. Box 8013, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1738-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    [email protected] or Alexander Ullman, 410-786-9671, for issues 
related to the DMEPOS payment policy.
    [email protected] or Kim Campbell, 410-786-2289, for issues related 
to HCPCS.
    [email protected] for issues related to home infusion 
therapy services payment policy.

SUPPLEMENTARY INFORMATION:  Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: https://www.regulations.gov. Follow the search instructions on 
that website to view public comments.

I. Executive Summary

A. Purpose

    This proposed rule contains proposals related to the Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Fee 
Schedule Amounts to ensure access to items and services in rural areas, 
procedures for making benefit category and payment determinations for 
new items and services that are DME, prosthetic devices, orthotics and 
prosthetics, therapeutic shoes and inserts, surgical dressings, or 
splints, casts, and other devices used for reductions of fractures and 
dislocations to prevent delays in coverage of new items and services, 
classification and payment for CGMs under the Part B benefit for DME to 
establish the benefit category and payment rules for these items, and 
the HCPCS Level II code application process to increase transparency 
and gather public input on proposed code application procedures. This 
proposed rule would expand the scope of the Medicare Part B benefit for 
DME by revising the interpretation of the ``appropriate use in the 
home'' requirement in the definition of DME at 42 CFR 414.202. External 
infusion pumps used to administer certain drugs or biologicals in the 
home would meet the definition of DME in cases where assistance in the 
patient's home from a skilled home infusion therapy supplier is 
necessary during the infusion and these home infusion therapy services 
are separately covered and paid for by Medicare under the home infusion 
therapy services benefit. This proposed rule would also make conforming 
changes to the regulations related to implementation of section 106 of 
the Further Consolidated Appropriations Act, 2020.
1. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Fee Schedule Adjustments
    The purpose of this proposal is to establish the methodologies for 
adjusting the fee schedule payment amounts for DMEPOS items and 
services furnished in non-competitive bidding areas (non-CBAs) on or 
after April 1, 2021 or the date immediately following the duration of 
the emergency period described in section 1135(g)(1)(B) of the Social 
Security Act (the Act) (42 U.S.C. 1320b-5(g)(1)(B)), whichever is 
later. The emergency period we are referring to is the Public Health 
Emergency (PHE) for coronavirus disease 2019 (COVID-19). We refer 
readers to section II.A.6. of this rule for details regarding the 
DMEPOS fee schedule changes CMS has already made as a result of the PHE 
for COVID-19. CMS previously established transition rules for phasing 
in the fee schedule adjustments under 42 CFR 414.210(g)(9), and these 
rules address the phase in of the fee schedule adjustments for items 
furnished through

[[Page 70359]]

December 31, 2020. The purpose of this proposal is to establish revised 
DMEPOS fee schedule adjustment methodologies for items and services 
furnished in non-CBAs on or after April 1, 2021 or the date immediately 
following the duration of the PHE for COVID-19, whichever is later.
2. DMEPOS Fee Schedule Adjustments for Items and Services Furnished in 
Rural Areas From June 2018 Through December 2018 and Exclusion of 
Infusion Drugs From the DMEPOS CBP
    The purpose of this section is to address our intent to finalize 
and address comments received on the May 11, 2018 interim final rule 
(83 FR 21912) entitled ``Medicare Program; Durable Medical Equipment 
Fee Schedule Adjustments To Resume the Transitional 50/50 Blended Rates 
To provide Relief in Rural Areas and Non-Contiguous Areas'' including 
comments related to the conforming amendment excluding infusion drugs 
from the DMEPOS CBP.
3. Healthcare Common Procedure Coding System (HCPCS) Level II Code 
Application Process
    CMS establishes and maintains certain codes under the HCPCS Level 
II and is responsible for making decisions about additions, revisions, 
and discontinuations to those codes. This proposed rule proposes 
application procedures and evaluation processes for external HCPCS 
Level II code applications related to drug or biological products, and 
non-drug, non-biological items and services, as defined in this 
proposed rule.
4. Benefit Category and Payment Determinations for DME, Prosthetic 
Devices, Orthotics and Prosthetics, Therapeutic Shoes and Inserts, 
Surgical Dressings, or Splints, Casts, and Other Devices Used for 
Reductions of Fractures and Dislocations
    The purpose of this proposal is to establish procedures for making 
benefit category and payment determinations for new items and services 
that are DME, prosthetic devices, orthotics and prosthetics, 
therapeutic shoes and inserts, surgical dressings, or splints, casts, 
and other devices used for reductions of fractures and dislocations 
that permit public consultation through public meetings. Section 531(b) 
of the Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA) (Pub. L. 106-554) requires the Secretary 
to establish procedures for coding and payment determinations for new 
DME under part B of title XVIII of the Act that permit public 
consultation in a manner consistent with the procedures established for 
implementing coding modifications for ICD-9-CM (which has since been 
replaced with ICD-10-CM as of October 1, 2015). CMS decided to expand 
these procedures to all new items and services in 2005. We are 
proposing to codify in regulation procedures for making benefit 
category determinations and payment determinations for new items and 
services that are DME, prosthetic devices, orthotics and prosthetics, 
therapeutic shoes and inserts, surgical dressings, or splints, casts, 
and other devices used for reductions of fractures and dislocations. 
Consistent with current CMS practice, the proposed procedures will 
incorporate public consultation on these determinations.
    Whether or not an item or service falls under a Medicare benefit 
category, such as the Medicare Part B benefit category for DME, is a 
necessary step in determining whether an item may be covered under the 
Medicare program and, if applicable, what statutory and regulatory 
payment rules apply to the items and services. If the item is excluded 
from coverage by the Act or does not fall within the scope of a defined 
benefit category, the item cannot be covered under Title XVIII. On the 
other hand, if the item is not excluded from coverage by the Act and is 
found to fall within a benefit category, we will need to determine what 
payment rules would apply to the item if other statutory criteria for 
coverage of the item are met, such as whether the item or service meets 
the reasonable and necessary criteria under section 1862(a)(1)(A) of 
the Act.
    Therefore, we are proposing procedures for use in determining if 
items and services fall under the Medicare Part B benefit categories 
for DME, prosthetic devices, orthotics, and prosthetics, surgical 
dressings, splints, casts and other devices for the reduction of 
fractures or dislocations, or therapeutic shoes and inserts, in order 
to promote transparency, continue our longstanding practice of 
establishing coverage and payment for new items and services that are 
DME, prosthetic devices, orthotics and prosthetics, therapeutic shoes 
and inserts, surgical dressings, or splints, casts, and other devices 
used for reductions of fractures and dislocations soon after they are 
identified through the HCPCS code application process, and prevent 
delays in access to new technologies that are DME, prosthetic devices, 
orthotics and prosthetics, therapeutic shoes and inserts, surgical 
dressings, or splints, casts, and other devices used for reductions of 
fractures and dislocations.
5. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B
    The purpose of this proposed rule is to address classification and 
payment for CGMs under the Medicare Part B benefit for DME.
6. Expanded Classification of External Infusion Pumps as DME
    The purpose of this proposed rule is to revise our interpretation 
of the ``appropriate for use in the home'' requirement at 42 CFR 
414.202 as it applies to certain external infusion pumps. We are 
proposing that an external infusion pump would be considered 
``appropriate for use in the home'' if: (1) The Food and Drug 
Administration (FDA)-required labeling requires the associated home 
infusion drug to be prepared immediately prior to administration or 
administered by a health care professional or both; (2) a qualified 
home infusion therapy supplier (as defined at Sec.  486.505) 
administers the drug or biological in a safe and effective manner in 
the patient's home (as defined at Sec.  486.505); and (3) the FDA-
required labeling specifies infusion via an external infusion pump as a 
route of administration, at least once per month, for the drug. The 
home infusion therapy benefit is only available when a drug or 
biological is administered through an external infusion pump that is an 
item of DME. In addition, drugs or biologicals administered through an 
external infusion pump that is an item of DME can be covered under the 
Medicare Part B benefit for DME as supplies necessary for the effective 
use of the external infusion pump. Under our proposal, if an individual 
or caregiver is unable to safely and effectively administer certain 
infusion drugs, such drugs could be covered as supplies necessary for 
the effective use of an external infusion pump under the DME benefit if 
the criteria listed previously is satisfied (and, presumably, the 
external infusion pump satisfies all other relevant statutory and 
regulatory requirements for DME).
7. Exclusion of Complex Rehabilitative Manual Wheelchairs and Certain 
Other Manual Wheelchairs From the CBP
    Section 106 of the Further Consolidated Appropriations Act, 2020 
excludes complex rehabilitative manual wheelchairs and certain other 
manual wheelchairs and related accessories from the DMEPOS CBP as well 
as from fee schedule adjustments based on

[[Page 70360]]

information from the DMEPOS CBP. This provision became effective 
January 1, 2020, and we are currently implementing this provision 
through program instructions, as authorized by section 106 of the 
Further Consolidated Appropriations Act, 2020. This rule proposes to 
make conforming changes to the regulations to reflect section 106 of 
the Further Consolidated Appropriations Act, 2020.

B. Summary of the Major Provisions

1. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Fee Schedule Adjustments
    This rule proposes to revise Sec.  414.210(g)(2) and (9) to 
establish the fee schedule adjustment methodologies for items and 
services furnished on or after April 1, 2021, or the date immediately 
following the duration of the emergency period described in section 
1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)), whichever is 
later, in non-CBAs.
2. DMEPOS Fee Schedule Adjustments for Items and Services Furnished in 
Rural Areas From June 2018 Through December 2018 and Exclusion of 
Infusion Drugs From the DMEPOS CBP
    We indicate in this rule our plan to finalize the May 11, 2018 
interim final rule (83 FR 21912) entitled ``Medicare Program; Durable 
Medical Equipment Fee Schedule Adjustments To Resume the Transitional 
50/50 Blended Rates To provide Relief in Rural Areas and Non-Contiguous 
Areas'' that resumed the transitional 50/50 blended rates for items 
furnished in rural areas and noncontiguous areas from June 1, 2018 
through December 31, 2018, including the conforming amendment to 
exclude infusion drugs from the DMEPOS CBP.
3. Healthcare Common Procedure Coding System (HCPCS) Level II Code 
Application Process
    This proposed rule proposes application procedures and evaluation 
processes for external HCPCS Level II code applications:
     Coding cycles for code applications: This rule 
proposes specific coding cycles for drug or biological products, and 
non-drug, non-biological items and services, as defined in this 
proposed rule, including timeframes for application submission and 
final decisions; and additional procedures and exceptions to these 
proposed processes.
     Processes for Evaluating Coding Applications: 
This rule proposes processes that CMS would use to evaluate code 
applications to determine whether to add, revise, or discontinue a code 
for drug or biological products, and non-drug, non-biological items and 
services, as defined in this proposed rule.
4. Benefit Category and Payment Determinations for DME, Prosthetic 
Devices, Orthotics and Prosthetics, Therapeutic Shoes and Inserts, 
Surgical Dressings, or Splints, Casts, and Other Devices Used for 
Reductions of Fractures and Dislocations
    This proposed rule would establish procedures for making benefit 
category and payment determinations for items and services that are 
DME, prosthetic devices, orthotics and prosthetics, therapeutic shoes 
and inserts, surgical dressings, or splints, casts, and other devices 
used for reductions of fractures and dislocations for which a HCPCS 
Level II code has been requested. Specifically, the purpose of the 
procedure would be to determine whether the product for which a HCPCS 
code has been requested meets the Medicare definition of DME, a 
prosthetic device, an orthotic or prosthetic, a surgical dressing, 
splint, cast, or other device used for reducing fractures or 
dislocations, or a therapeutic shoe or insert and is not otherwise 
excluded under Title XVIII, to determine how payment for the item of 
service would be made, and to obtain public consultation on these 
determinations.
5. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B
    This rule proposes to classify all CGMs as DME and addresses the 
payment for different types of CGMs, as well as supplies and 
accessories used with CGMs. Additional determinations regarding whether 
a CGM is covered in accordance with section 1862(a)(1)(A) of the Act, 
or is otherwise excluded under Title XVIII, will be made by DME MACs 
using the local coverage determination process or during the Medicare 
claim-by-claim review process.
6. Expanded Classification of External Infusion Pumps as DME
    We propose to interpret the ``appropriate for use in the home'' 
requirement within the definition of DME at 42 CFR 414.202 to be met 
for certain external infusion pump if: (1) The Food and Drug 
Administration (FDA)-required labeling requires the associated home 
infusion drug to be prepared immediately prior to administration or 
administered by a health care professional or both; (2) a qualified 
home infusion therapy supplier (as defined at Sec.  486.505) 
administers the drug or biological in a safe and effective manner in 
the patient's home (as defined at Sec.  486.505); and (3) the FDA-
required labeling specifies infusion via an external infusion pump as a 
possible route of administration, at least once per month, for the 
drug. The home infusion therapy benefit is only available when a drug 
or biological is administered through an external infusion pump that is 
an item of DME. In addition, drugs or biologicals administered through 
an external infusion pump that is an item of DME can be covered under 
the Medicare Part B benefit for DME as supplies necessary for the 
effective use of the external infusion pump.
7. Exclusion of Complex Rehabilitative Manual Wheelchairs and Certain 
Other Manual Wheelchairs From the DMEPOS CBP
    This rule proposes to revise the definition of ``item'' under the 
CBP at 42 CFR 414.402 to exclude complex rehabilitative manual 
wheelchairs and certain other manual wheelchairs and related 
accessories as required by section 106(a) of the Further Consolidated 
Appropriations Act, 2020.

C. Summary of Cost and Benefits

1. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Fee Schedule Adjustments
    We estimate that the payment methodologies described in section 
I.B.1. of this proposed rule would have no fiscal impact because the 
Office of the Actuary has determined that this provision neither 
increases nor decreases spending from what is assumed in the FY 2021 
President's Budget.
2. DMEPOS Fee Schedule Adjustments for Items and Services Furnished in 
Rural Areas From June 2018 Through December 2018 and Exclusion of 
Infusion Drugs From the DMEPOS CBP
    As we are signaling an intent to finalize an IFC that was already 
promulgated in 2018, there would be no fiscal impacts associated with 
this policy. The fiscal impacts of this IFC are considered to have 
already occurred.
3. Healthcare Common Procedure Coding System (HCPCS) Level II Code 
Application Process
    This rule proposes to continue certain existing code application 
policies and processes and proposes certain new coding policies and 
procedures. All proposed policies and procedures are assumed to have no 
fiscal impact when

[[Page 70361]]

considered against the FY 2021 President's Budget baseline.
4. Benefit Category and Payment Determinations for DME, Prosthetic 
Devices, Orthotics and Prosthetics, Therapeutic Shoes and Inserts, 
Surgical Dressings, or Splints, Casts, and Other Devices Used for 
Reductions of Fractures and Dislocations
    This rule proposes to establish a process for making benefit 
category and payment determinations for items and services that are 
DME, prosthetic devices, orthotics and prosthetics, therapeutic shoes 
and inserts, surgical dressings, or splints, casts, and other devices 
used for reductions of fractures and dislocations and is assumed to 
have an indeterminable fiscal impact due to the unique considerations 
given to establishing payment for specific items.
5. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B
    This rule proposes to classify all CGMs as DME and addresses the 
payment for different types of CGMs. This classification is assumed to 
have no fiscal impact when considered against the FY 2021 President's 
Budget baseline.
6. Expanded Classification of External Infusion Pumps as DME
    This rule proposes that an external infusion pump would be 
considered ``appropriate for use in the home'' in accordance with the 
definition of DME at 42 CFR 414.202 if: (1) The Food and Drug 
Administration (FDA)-required labeling requires the associated home 
infusion drug to be prepared immediately prior to administration or 
administered by a health care professional or both; (2) a qualified 
home infusion therapy supplier (as defined at Sec.  486.505) 
administers the drug or biological in a safe and effective manner in 
the patient's home (as defined at Sec.  486.505); and (3) the FDA-
required labeling specifies infusion via an external infusion pump as a 
possible route of administration, at least once per month, for the 
drug. The home infusion therapy benefit is only available when a drug 
or biological is administered through an external infusion pump that is 
an item of DME. In addition, drugs or biologicals administered through 
an external infusion pump that is an item of DME can be covered under 
the Medicare Part B benefit for DME as supplies necessary for the 
effective use of the external infusion pump. This expanded 
classification is assumed to be a small savings to Medicare in CY 2021 
when considered against the FY 2021 President's Budget baseline.
7. Exclusion of Complex Rehabilitative Manual Wheelchairs and Certain 
Other Manual Wheelchairs From the DMEPOS CBP
    This rule proposes to revise the definition of ``item'' at 42 CFR 
414.402 to exclude complex rehabilitative manual wheelchairs and 
certain other manual wheelchairs and related accessories as required by 
section 106(a) of the Further Consolidated Appropriations Act, 2020 and 
is assumed to have no fiscal impact. These conforming changes to the 
regulations have no impact since the exclusion of these items from the 
CBP is mandated by the statute.

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

A. Background

1. DMEPOS Competitive Bidding Program
    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(Pub. L. 108-173), mandates the Medicare Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding 
Program (CBP) for contract award purposes in order to furnish certain 
competitively priced DMEPOS items and services subject to the CBP:
     Off-the-shelf (OTS) orthotics, for which payment would 
otherwise be made under section 1834(h) of the Act;
     Enteral nutrients, equipment, and supplies described in 
section 1842(s)(2)(D) of the Act; and
     Certain DME and medical supplies, which are covered items 
(as defined in section 1834(a)(13) of the Act) for which payment would 
otherwise be made under section 1834(a) of the Act.
    Section 1847(a) of the Act requires the Secretary of the Department 
of Health and Human Services (the Secretary) to establish and implement 
CBPs in competitive bidding areas (CBAs) throughout the U.S. Section 
1847(a)(1)(B)(i) of the Act mandates that the programs be phased into 
100 of the largest metropolitan statistical areas (MSA) by 2011 and 
additional areas after 2011. Thus far, CBAs have been either an MSA or 
a part of an MSA. Under the Office of Management and Budget (OMB) 
standards for delineating MSAs, MSAs have at least one urbanized area 
that has a population of at least 50,000. The MSA comprises the central 
county or counties containing the core, plus adjacent outlying counties 
having a high degree of social and economic integration with the 
central county or counties as measured through commuting.\1\ OMB 
updates MSAs regularly and the most recent update can be found in OMB 
Bulletin No. 20-01.\2\ The statute allows us to exempt rural areas and 
areas with low population density within urban areas that are not 
competitive, unless there is a significant national market through mail 
order for a particular item or service, from the CBP. We may also 
exempt from the CBP items and services for which competitive 
acquisition is unlikely to result in significant savings.
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    \1\ OMB 2010 Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas; Notice, June 28, 2010 (75 FR 37252).
    \2\ https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf?#.
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    We refer to areas in which the CBP is not or has not been 
implemented as non-competitive bidding areas (non-CBAs). There are 
currently no CBAs due to a gap period in the DMEPOS CBP, however, we 
use the term ``former CBAs'' to refer to the areas that were formerly 
CBAs prior to the gap in the CBP, in order to distinguish those areas 
from ``non-CBAs.'' More information on why there are currently no CBAs 
can be found in the November 14, 2018 final rule entitled ``Medicare 
Program; End-Stage Renal Disease Prospective Payment System, Payment 
for Renal Dialysis Services Furnished to Individuals With Acute Kidney 
Injury, End-Stage Renal Disease Quality Incentive Program, Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
Competitive Bidding Program (CBP) and Fee Schedule Amounts, and 
Technical Amendments To Correct Existing Regulations Related to the CBP 
for Certain DMEPOS,'' (83 FR 56922) (hereinafter CY 2019 ESRD PPS 
DMEPOS final rule).
    Non-CBAs include rural areas, non-rural areas, and non-contiguous 
areas. A rural area is defined in 42 CFR 414.202 as a geographic area 
represented by a postal ZIP code, if at least 50 percent of the total 
geographic area of the area included in the ZIP code is estimated to be 
outside any MSA. A rural area also includes a geographic area 
represented by a postal ZIP code that is a low population density area 
excluded from a CBA in accordance with section 1847(a)(3)(A) of the Act 
at the time the rules in Sec.  414.210(g) are applied. Non-contiguous 
areas refer to areas outside the contiguous U.S.--that is, areas such 
as Alaska, Guam, and Hawaii (81 FR 77936).

[[Page 70362]]

2. Payment Methodology for CBAs
    In the DMEPOS CBP, suppliers bid for contracts for furnishing 
multiple items and services, identified by HCPCS codes, under several 
different product categories. In the CY 2019 ESRD PPS DMEPOS final 
rule, we made significant changes to how we calculate single payment 
amounts (SPAs) under the DMEPOS CBP. Prior to these changes, for 
individual items within each product category in each CBA, the median 
of the winning bids for each item was used to establish the SPA for 
that item in each CBA. As a result of the changes we made in the CY 
2019 ESRD PPS DMEPOS final rule, SPAs are calculated for the lead item 
in each product category (per Sec.  414.402, the item in a product 
category with multiple items with the highest total nationwide Medicare 
allowed charges of any item in the product category prior to each 
competition) based on the maximum winning bid (the highest of bids 
submitted by winning suppliers) in each CBA. Per Sec.  414.416(b)(3), 
the SPA for each non-lead item in a product category (all items other 
than the lead item) is calculated by multiplying the SPA for the lead 
item by the ratio of the average of the 2015 fee schedule amounts for 
all areas for the non-lead item to the average of the 2015 fee schedule 
amounts for all areas for the lead item.
    For competitively bid items and services furnished in a CBA, the 
SPAs replace the Medicare allowed amounts established using the lower 
of the supplier's actual charge or the fee schedule payment amount 
recognized under sections 1834(a)(2) through (7) of the Act. Section 
1847(b)(5) of the Act provides that Medicare payment for competitively 
bid items and services is made on an assignment-related basis and is 
equal to 80 percent of the applicable SPA, less any unmet Part B 
deductible described in section 1833(b) of the Act.
3. Fee Schedule Adjustment Methodology for Non-CBAs
    Section 1834(a)(1)(F)(ii) of the Act requires the Secretary to use 
information on the payment determined under the Medicare DMEPOS CBP to 
adjust the fee schedule amounts for DME items and services furnished in 
all non-CBAs on or after January 1, 2016. Section 1834(a)(1)(F)(iii) of 
the Act requires the Secretary to continue to make these adjustments as 
additional covered items are phased in under the CBP or information is 
updated as new CBP contracts are awarded. Similarly, sections 
1842(s)(3)(B) and 1834(h)(1)(H)(ii) of the Act authorize the Secretary 
to use payment information from the DMEPOS CBP to adjust the fee 
schedule amounts for enteral nutrition and OTS orthotics, respectively, 
furnished in all non-CBAs. Section 1834(a)(1)(G) of the Act requires 
the Secretary to specify the methodology to be used in making these fee 
schedule adjustments by regulation, and to consider, among other 
factors, the costs of items and services in non-CBAs (where the 
adjustments would be applied) compared to the payment rates for such 
items and services in the CBAs.
    In accordance with the requirements of Section 1834(a)(1)(G) of the 
Act, we conducted notice-and-comment rulemaking in 2014 to specify 
methodologies for adjusting the fee schedule amounts for DME, enteral 
nutrition, and OTS orthotics in non-CBAs in 42 CFR 414.210(g). We will 
provide a summary of these methodologies, but also refer readers to the 
July 11, 2014 proposed rule entitled ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System, Quality Incentive Program, 
and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies,'' 
(79 FR 40208) (hereinafter CY 2015 ESRD PPS DMEPOS proposed rule), and 
the November 6, 2014 final rule entitled ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System, Quality Incentive Program, 
and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies,'' 
(79 FR 66120 ( ) (hereinafter CY 2015 ESRD PPS DMEPOS final rule) for 
additional details.
    The methodologies set forth in Sec.  414.210(g) account for 
regional variations in prices, including for rural and non-contiguous 
areas of the U.S. In accordance with Sec.  414.210(g)(1), CMS 
determines regional adjustments to fee schedule amounts for each state 
in the contiguous U.S. and the District of Columbia, based on the 
definition of region in Sec.  414.202, which refers to geographic areas 
defined by the Bureau of Economic Analysis in the Department of 
Commerce for economic analysis purposes (79 FR 66226). Under Sec.  
414.210(g)(1)(i) through (iv), adjusted fee schedule amounts for areas 
within the contiguous U.S. are determined based on regional prices 
limited by a national ceiling of 110 percent of the regional average 
price and a floor of 90 percent of the regional average price (79 FR 
66225). Under Sec.  414.210(g)(1)(v), adjusted fee schedule amounts for 
rural areas are based on 110 percent of the national average of 
regional prices. Under Sec.  414.210(g)(2), fee schedule amounts for 
non-contiguous areas are adjusted based on the higher of the average of 
the SPAs for CBAs in non-contiguous areas in the U.S., or the national 
ceiling amount.
    For items and services that have been included in no more than 10 
CBPs, Sec.  414.210(g)(3) specifies adjustments based on 110 percent of 
the average of the SPAs. In cases where the SPAs from DMEPOS CBPs that 
are no longer in effect are used to adjust fee schedule amounts, Sec.  
414.210(g)(4) requires that the SPAs be updated by an inflation 
adjustment factor on an annual basis based on the Consumer Price Index 
for all Urban Consumers update factors from the mid-point of the last 
year the SPAs were in effect to the month ending 6 months prior to the 
date the initial payment adjustments would go into effect.
    Under Sec.  414.210(g)(5), in situations where a HCPCS code that 
describes an item used with different types of base equipment is 
included in more than one product category in a CBA, a weighted average 
of the SPAs for the code is computed for each CBA prior to applying the 
other payment adjustment methodologies in Sec.  414.210(g). Under Sec.  
414.210(g)(6), we will adjust the SPAs for certain items prior to using 
those SPAs to adjust fee schedule amounts for items and services if 
price inversions have occurred under the DMEPOS CBP. Price inversions 
occur when one item in a grouping of items in a product category 
includes a feature that another similar item in the product category 
does not, and the average of the 2015 fee schedule amounts for the item 
with the feature is higher than the average of the 2015 schedule 
amounts for the item without the feature, but following a CBP 
competition, the SPA for the item with the feature is lower than the 
SPA for the item without the feature. For groupings of similar items 
where price inversions have occurred, the SPAs for the items in the 
grouping are adjusted to equal the weighted average of the SPAs for the 
items in the grouping.\3\
---------------------------------------------------------------------------

    \3\ For further discussion regarding adjustments to SPAs to 
address price inversions, we refer readers to the CY 2017 ESRD PPS 
DMEPOS final rule, entitled Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Coverage and Payment for Renal 
Dialysis Services Furnished to Individuals With Acute Kidney Injury, 
End-Stage Renal Disease Quality Incentive Program, Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies Competitive Bidding 
Program Bid Surety Bonds, State Licensure and Appeals Process for 
Breach of Contract Actions, Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies Competitive Bidding Program and Fee Schedule 
Adjustments, Access to Care Issues for Durable Medical Equipment; 
and the Comprehensive End-Stage Renal Disease Care Model, 81 FR 
77937 (November 4, 2016).

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[[Page 70363]]

    In Sec.  414.210(g)(8), the adjusted fee schedule amounts are 
revised each time a SPA for an item or service is updated following one 
or more new DMEPOS CBP competitions and as other items are added to the 
DMEPOS CBP. The fee schedule amounts that are adjusted using SPAs are 
not subject to the annual DMEPOS covered item update and are only 
updated when SPAs from the DMEPOS CBP are updated or, in accordance 
with Sec.  414.210(g)(10), when there are temporary gaps in the DMEPOS 
CBP. Updates to the SPAs may occur as contracts are recompeted. In the 
CY 2015 ESRD PPS DMEPOS final rule, we established Sec.  414.210(g)(9) 
to provide for a transitional phase-in period of the DMEPOS fee 
schedule adjustments. We established a 6-month transition period for 
blended rates from January 1 through June 30, 2016 (79 FR 66228 through 
66229). In establishing a transition period, CMS agreed with commenters 
that phasing in the adjustments to the fee schedule amounts would allow 
time for suppliers to adjust to the new payment rates, and further 
noted that CMS would monitor the impact of the change in payment rates 
on access to items and services and health outcomes using real time 
claims data and analysis (79 FR 66228). Under Sec.  414.210(g)(9)(i), 
we specified that the fee schedule adjustments for items and services 
furnished between January 1, 2016 through June 30, 2016 would be based 
on a blend of 50 percent of the unadjusted fee schedule amount and 50 
percent of the adjusted fee schedule amount. Under Sec.  
414.210(g)(9)(ii), we specified that for items and services furnished 
with dates of service on or after July 1, 2016, the fee schedule 
amounts would be fully adjusted in accordance with the rules specified 
in Sec.  414.210(g)(1) through Sec.  414.210(g)(8).
4. 21st Century Cures Act
    Section 16007(a) of the 21st Century Cures Act (Cures Act) was 
enacted on December 13, 2016, and extended the transition period for 
the phase-in of fee schedule adjustments at Sec.  414.210(g)(9)(i) by 
an additional 6 months from July 1, 2016 through December 31, 2016. In 
the May 11, 2018 interim final rule with comment period entitled 
``Medicare Program; Durable Medical Equipment Fee Schedule Adjustments 
To Resume the Transitional 50/50 Blended Rates To Provide Relief in 
Rural Areas and Non-Contiguous Areas,'' 83 FR 21912 through 21925 
(hereinafter 2018 Interim Final Rule), we amended Sec.  
414.210(g)(9)(i) to implement the 6 month extension to the initial 
transition period, as mandated by section 16007(a) of the Cures Act. 
Accordingly, the fee schedule amounts were based on blended rates until 
December 31, 2016, with full implementation of the fee schedule 
adjustments applying to items and services furnished with dates of 
service on or after January 1, 2017 (83 FR 21915). Section 16008 of the 
Cures Act amended section 1834(a)(1)(G) of the Act to require that the 
Secretary take into account certain factors when making any fee 
schedule adjustments under sections 1834(a)(1)(F)(ii) or (iii), 
1834(h)(i)(H)(ii), or 1842(s)(3)(B) of the Act for items and services 
furnished on or after January 1, 2019. Specifically, the Secretary was 
required to take into account: (1) Stakeholder input solicited 
regarding adjustments to fee schedule amounts using information from 
the DMEPOS CBP; (2) the highest bid by a winning supplier in a CBA; and 
(3) a comparison of each of the following factors with respect to non-
CBAs and CBAs: The average travel distance and cost associated with 
furnishing items and services in the area, the average volume of items 
and services furnished by suppliers in the area, and the number of 
suppliers in the area.
5. Extension of DMEPOS Fee Schedule Transition Period & Revised 
Methodology
    In the 2018 Interim Final Rule (83 FR 21918), we expressed an 
immediate need to resume the transitional, blended fee schedule amounts 
in rural and non-contiguous areas, noting strong stakeholder concerns 
about the continued viability of many DMEPOS suppliers, our finding of 
a decrease in the number of suppliers furnishing items and services 
subject to the fee schedule adjustments, as well as the Cures Act 
mandate to consider additional information material to setting fee 
schedule adjustments based on information from the DMEPOS CBP for items 
and services furnished on or after January 1, 2019. We explained that 
resuming these transitional blended rates would preserve beneficiary 
access to needed DME items and services in a contracting supplier 
marketplace, while also allowing CMS time to address the adequacy of 
the fee schedule adjustment methodology, as required by section 16008 
of the Cures Act. As a result, we amended Sec.  414.210(g)(9) by adding 
Sec.  414.210(g)(9)(iii) to resume the fee schedule adjustment 
transition rates for items and services furnished in rural and non-
contiguous areas from June 1, 2018 through December 31, 2018. We 
explained that resuming these transitional blended rates would allow 
additional time for suppliers serving rural and non-contiguous areas to 
adjust their businesses, prevent suppliers that beneficiaries may rely 
on for access to items and services in rural and non-contiguous areas 
from exiting the business, and allow additional time for CMS to monitor 
the impact of the blended rates. We also amended Sec.  
414.210(g)(9)(ii) to reflect that for items and services furnished with 
dates of service from January 1, 2017 to May 31, 2018, fully adjusted 
fee schedule amounts would apply (83 FR 21922). In addition, we added 
Sec.  414.210(g)(9)(iv) to specify that fully adjusted fee schedule 
amounts would apply for items furnished in non-CBAs other than rural 
and non-contiguous areas from June 1, 2018 through December 31, 2018 
(83 FR 21920). We explained that we would use the extended transition 
period to further analyze our findings and consider the information 
required by section 16008 of the Cures Act in determining whether 
changes to the methodology for adjusting fee schedule amounts for items 
furnished on or after January 1, 2019 are necessary (83 FR 21918 
through 21919).
    In the CY 2019 ESRD PPS DMEPOS final rule, we finalized changes to 
bidding and pricing methodologies under the DMEPOS CBP for future 
competitions (83 FR 57020 through 57025). Specifically, we finalized 
lead item pricing for all product categories under the DMEPOS CBP, 
which would use the bid for the lead item to establish the SPAs for 
both the lead item and all other items in the product category (the 
non-lead items). We explained that this change would reduce the burden 
on suppliers since they would no longer have to submit bids on numerous 
items in a product category. We also finalized changes to the 
methodology for calculating SPAs under the DMEPOS CBP based on lead 
item pricing using maximum winning bids for lead items in each product 
category. We finalized revisions to Sec. Sec.  414.414 and 414.416 to 
reflect our changes to the bidding and pricing methodologies, and 
revised the definitions of bid, composite bid, and lead item in Sec.  
414.402.
    Also in the CY 2019 ESRD PPS DMEPOS final rule, we established fee 
schedule adjustment transition rules for items and services furnished 
from January 1, 2019 through December 31, 2020. We decided to make 
these fee schedule adjustment transition rules effective for a 2-year 
period only, for two reasons. First, we believed that we must proceed 
cautiously when adjusting fee schedules in the short term in an effort 
to protect access to items, while we continued to monitor health 
outcomes, assignment rates, and other information (83 FR 57029). 
Second, as

[[Page 70364]]

part of the final rule, we made significant changes to the way bids are 
submitted and SPAs are calculated under the CBP. We stated in the final 
rule these changes could warrant further changes to the fee schedule 
adjustment methodologies in the future (83 FR 57030). Consistent with 
the requirements of Section 16008 of the Cures Act, we set forth our 
analysis and consideration of stakeholder input solicited on 
adjustments to fee schedule amounts using information from the DMEPOS 
CBP, the highest bid by a winning supplier in a CBA, and a comparison 
of the various factors with respect to non-CBAs and CBAs. We noted 
stakeholder concerns that the adjusted payment amounts constrained 
suppliers from furnishing items and services to rural areas, and their 
request for an increase to the adjusted payment amounts for these areas 
(83 FR 57025). In reviewing highest winning bids, we found no pattern 
indicating that maximum bids were higher for areas with lower volume 
than for areas with higher volume (83 FR 57026). In our consideration 
of the Cures Act factors with respect to non-CBAs and CBAs, we found 
higher costs for non-contiguous areas, an increased average travel 
distance in certain rural areas, a significantly lower average volume 
per supplier in non-CBAs, especially in rural and non-contiguous areas, 
and a decrease in the number of non-CBA supplier locations. Based on 
our consideration of the foregoing, we expressed our belief that the 
fee schedule amounts for items and services furnished from January 1, 
2019 through December 31, 2020, in all rural or non-contiguous areas 
should be based on a blend of 50 percent of the adjusted fee schedule 
amounts and 50 percent of the unadjusted fee schedule amounts in 
accordance with the current methodologies under paragraphs (1) through 
(8) of Sec.  414.210(g) (83 FR 57029). We also expressed our belief 
that the fee schedule amounts for items and services furnished from 
January 1, 2019 through December 31, 2020, in all areas that are non-
CBAs, but are not rural or non-contiguous areas, should be based on 100 
percent of the adjusted fee schedule amounts in accordance with the 
current methodologies under paragraphs (1) through (8) of Sec.  
414.210(g) (83 FR 57029). We finalized amendments to the transition 
rules at Sec.  414.210(g)(9) to reflect these fee schedule adjustment 
methodologies for items and services furnished from January 1, 2019 
through December 31, 2020 (83 FR 57039; 83 FR 57070 through 57071).
6. The Coronavirus Aid, Relief, and Economic Security Act
    The Coronavirus Aid, Relief, and Economic Security (CARES) Act 
(Pub. L. 116-136) was enacted on March 27, 2020. Section 3712 of the 
CARES Act specifies the payment rates for certain DME and enteral 
nutrients, supplies, and equipment furnished in non-CBAs through the 
duration of the emergency period described in section 1135(g)(1)(B) of 
the Social Security Act. Section 3712(a) of the CARES Act continues our 
policy of paying the 50/50 blended rates for items furnished in rural 
and non-contiguous non-CBAs through December 31, 2020, or through the 
duration of the emergency period, if longer. Section 3712(b) of the 
CARES Act increased the payment rates for DME and enteral nutrients, 
supplies, and equipment furnished in areas other than rural and non-
contiguous non-CBAs through the duration of the emergency period. 
Beginning March 6, 2020, the payment rates for DME and enteral 
nutrients, supplies, and equipment furnished in these areas are based 
on 75 percent of the adjusted fee schedule amount and 25 percent of the 
historic, unadjusted fee schedule amount, which results in higher 
payment rates as compared to the full fee schedule adjustments that 
were previously required under Sec.  414.210(g)(9)(iv). We made changes 
to the regulation text at Sec.  414.210(g)(9), consistent with section 
3712 of the CARES Act, in an interim final rule with comment period 
that we published in the May 8, 2020 Federal Register entitled 
``Medicare and Medicaid Programs; Additional Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency.''

B. Current Issues

    We are now proposing the fee schedule adjustment methodologies for 
items and services furnished in non-CBAs on or after April 1, 2021, or 
the date immediately following the duration of the emergency period 
described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later. Though the transition rules under 42 
CFR 414.210(g)(9) expire on December 31, 2020, we believe that the rest 
of the current fee schedule adjustment rules at 414.210(g) would 
continue to be in effect should the emergency period described in 
section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B) expire 
after January 1, 2021, and before April 1, 2021. In other words, in the 
event that the emergency period described in section 1135(g)(1)(B) of 
the Act (42 U.S.C. 1320b-5(g)(1)(B)) expires before April 1, 2021, the 
current fee schedule adjustment rules at Sec.  414.210(g)(1) through 
(8) would be used to adjust fee schedule amounts for items and services 
furnished in non-CBAs and the current fee schedule adjustment rule at 
414.210(g)(10) would be used to adjust fee schedule amounts for items 
and services furnished in CBAs or former CBAs until March 31, 2021.
1. Section 16008 of the Cures Act Analysis
    As discussed, section 16008 of the Cures Act requires that we take 
into account a number of factors in making any fee schedule adjustments 
for items and services furnished on or after January 1, 2019, 
including: (1) Stakeholder input we have solicited on adjustments to 
fee schedule amounts using information from the DMEPOS CBP; (2) the 
highest bid by a winning supplier in a CBA; and (3) a comparison of the 
factors outlined in section 16008 of the Cures Act with respect to non-
CBAs and CBAs. Our analysis of the Cures Act factors focuses on the 
effect we believe increased payment levels have had in rural and non-
contiguous non-CBAs, and the effect we believe fully adjusted fees have 
had in non-rural contiguous non-CBAs. We also provide our analysis of 
other metrics we believe are important in measuring the impacts of our 
payment policies.
a. Stakeholder Input Gathered in Accordance With Section 16008 of the 
Cures Act
    Section 16008 of the Cures Act requires us to solicit and take into 
account stakeholder input in making fee schedule adjustments based on 
information from the DMEPOS CBP for items and services furnished on or 
after January 1, 2019. On March 23, 2017, we hosted a national provider 
call to solicit stakeholder input regarding adjustments to fee schedule 
amounts using DMEPOS CBP information (83 FR 57025 through 57026). More 
than 330 participants called in, with 23 participants providing oral 
comments during the call. We also received 125 written comments from 
stakeholders in response to our request for written comments. Our 
announcement of this call, a copy of our presentation, the audio 
recording of the call, and its transcript can be found at the following 
link on the CMS website.\4\
---------------------------------------------------------------------------

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

    In general, the commenters were mostly suppliers located in MSAs, 
but also included manufacturers, trade

[[Page 70365]]

organizations, and healthcare providers such as physical and 
occupational therapists. For additional details about the national 
provider call and a summary of oral and written comments received, we 
refer readers to the CY 2019 ESRD PPS/DMEPOS proposed rule (83 FR 
57026). For a summary of public comments received on the CY 2019 ESRD 
PPS DMEPOS proposed rule and our responses, we refer readers to the CY 
2019 ESRD PPS DMEPOS final rule (83 FR 57030 through 57036). While the 
stakeholder input from 2017 did not quantify the degree to which costs 
of furnishing items in CBAs versus rural areas or any other non-CBAs, 
the comments we received in response to our 2014 proposed rule (79 FR 
40208) indicated that the adjusted fee schedule amounts for rural areas 
should be equal to 120 to 150 percent of the average of the regional 
single payment amounts (RSPAs) rather than 110 percent of the average 
of the RSPAs. In addition, a 2015 industry survey of suppliers of 
respiratory equipment indicated that the cost of furnishing respiratory 
equipment in ``super rural'' areas is 17 percent higher than the cost 
of furnishing respiratory equipment in CBAs.\5\ The term ``super 
rural'' refers to areas identified as ``qualified rural areas'' under 
the ambulance fee schedule statute at section 1834(l)(12)(B) of the Act 
(as implemented at 42 CFR 414.610(c)(5)(ii)). For the purposes of the 
fee schedule for ambulance services, rural areas are defined at 42 CFR 
414.605 as areas located outside an urban area (MSA), or a rural census 
tract within an MSA as determined under the most recent version of the 
Goldsmith modification as determined by the Federal Office of Rural 
Health Policy at the Health Resources and Services Administration 
(HRSA). The most recent version of the Goldsmith Modification are the 
Rural-Urban Commuting Area (RUCA) codes, which are a method of 
determining rurality.\6\ Under 42 CFR 414.610(c)(5)(ii), for ground 
ambulance services furnished during the period July 1, 2004 through 
December 31, 2022, the payment amount for the ground ambulance base 
rate is increased by 22.6 percent where the point of pickup is in a 
rural area determined to be in the lowest 25 percent of rural 
population arrayed by population density. CMS refers to this as the 
``super rural'' bonus, and the areas that receive this super rural 
bonus as ``super rural'' areas.\7\ For purposes of payment under the 
Medicare ambulance fee schedule, a ``super rural'' area is thus a rural 
area determined to be in the lowest 25 percent of rural population 
arrayed by population density. DMEPOS industry stakeholders have 
recommended that this differential in payment between super rural areas 
and MSAs may be adopted in the DMEPOS fee schedule payment context as 
well.
---------------------------------------------------------------------------

    \5\ https://www.cqrc.org/img/CQRCCostSurveyWhitePaperMay2015Final.pdf.
    \6\ https://www.hrsa.gov/rural-health/about-us/definition/.
    \7\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AmbulanceFeeSchedule/afspuf.
---------------------------------------------------------------------------

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

[[Page 70366]]

Statistical Areas (OCBSAs),\9\ and super rural areas,\10\ we found that 
suppliers generally must travel farther distances to beneficiaries 
located in those areas than for beneficiaries located in CBAs and other 
non-CBAs. For additional details on our previous travel distance 
analysis, we refer readers to the CY 2019 ESRD PPS DMEPOS proposed rule 
(83 FR 34367 through 34371).
---------------------------------------------------------------------------

    \8\ A Frontier and Remote (FAR) area is statistically delineated 
by the Health Resources and Services Administration (HRSA) based on 
remoteness and population sparseness. HRSA Methodology for 
Designation of Frontier and Remote Areas, 79 FR 25599 through 25603 
(May 5, 2014).
    \9\ Outside Core Based Statistical Areas are delineated by OMB 
as counties that do not qualify for inclusion in a Core Based 
Statistical Area. OMB 2010 Standards for Delineating Metropolitan 
and Micropolitan Statistical Areas; Notice, 75 FR 37245 (June 28, 
2010).
    \10\ Under the Ambulance Fee schedule (AFS), temporary add-on 
payments known as the ``super rural bonus'' are available in 
relation to areas that are within the lowest 25 percentile of all 
rural areas arrayed by population density. 42 CFR 414.610(c)(5)(ii).
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    We have updated some of the travel distance data used in our 
previous travel distance analysis with data from 2018, which is the 
most recent full year of data with CBAs. In reviewing the data from 
2018, we found that the same trends we presented in the CY 2019 ESRD 
PPS DMEPOS proposed rule, which were based on 2016 data, apply. Similar 
to our previous travel distance analysis, to prevent the data from 
being skewed in certain ways, we only included claims where the 
supplier billing address is in the same or adjoining state as the 
beneficiary address, and we excluded claims from suppliers with 
multiple locations that always use the same billing address. These data 
restrictions left in place 96 percent of allowed claims lines when 
looking at hospital beds, 97 percent when looking at oxygen, and 92 
percent when looking at all items.

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

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

[[Page 70367]]

over 99 percent in all areas. Thus, for the overwhelming majority of 
claims for items and services furnished in the non-CBAs that were 
subject to the fee schedule adjustments, suppliers have decided to 
accept the Medicare payment amount in full, and have not needed to 
charge the beneficiary for any additional costs that the Medicare 
allowed payment amount did not cover. Of note, for the 17 months from 
January 2017 through May 2018 when Medicare paid at the fully adjusted 
fee level in all areas, or about 40 percent below the un-adjusted fee 
schedule amounts on average, the assignment rate did not dip below 99 
percent for the items and services subject to the adjusted fee schedule 
amounts.
e. Average Volume of Items and Services Furnished by Suppliers in the 
Area Analysis
    Section 16008 of the Cures Act requires that we take into account a 
comparison of the average volume of items and services furnished by 
suppliers in CBAs and non-CBAs. In the CY 2019 ESRD PPS DMEPOS proposed 
rule (83 FR 34377), we found that in virtually all cases, the average 
volume of items and services furnished by suppliers is higher in CBAs 
than non-CBAs. In reviewing updated data from 2018, we found that in 
most cases, the average volume of items and services furnished by 
suppliers was higher in CBAs than in non-CBAs. We reviewed the number 
of allowed claim lines on a national level for 15 different product 
categories subject to the fee schedule adjustments. In doing so, we 
found that non-CBAs had more allowed claim lines than CBAs for 4 of the 
15 product categories that we reviewed (nebulizer, oxygen, seat lifts, 
and transcutaneous electrical nerve stimulation (TENS) devices). Rural 
non-CBAs had more allowed claim lines than CBAs for 2 of the 15 product 
categories that we reviewed (seat lifts and TENS). Finally, non-rural 
non-CBAs had more allowed claims lines than CBAs for those same two 
product categories (seat lifts and TENS).
    Additionally, total services per supplier continued to increase in 
2018 and 2019 in all non-CBAs. Thus, we found that the average volume 
per supplier in non-CBAs continues to increase while assignment rates 
are 99 percent or higher, and overall utilization remains steady or is 
increasing. We believe these findings support a payment methodology 
that takes into account and ensures beneficiary access to items and 
services in non-CBAs with relatively low volume.
f. Number of Suppliers Analysis
    Section 16008 of the Cures Act requires us to take into account a 
comparison of the number of suppliers in the area.
    The number of suppliers billing Medicare Fee-for-Service (FFS) for 
items subject to fee schedule adjustments in all non-CBAs declined from 
June 2018 through the end of 2019, which is the time period in which we 
paid the fully adjusted fees in non-rural, contiguous non-CBAs and the 
blended rates in rural and non-contiguous non-CBAs, in accordance with 
42 CFR 414.210(g)(9)(iii) and (iv). More specifics about this decline 
can be found in Table 2. We note that the decline in the number of 
billing suppliers is part of a long-term trend that preceded the 
adjustment of the fee schedule amounts beginning in 2016, but we are 
still concerned about this trend, particularly for rural and non-
contiguous areas, because beneficiaries could have trouble accessing 
items and services in these lower population areas if more suppliers 
decide to stop serving these areas.
    We studied supplier numbers and found that when looking at a sample 
of HCPCS codes for high volume items subject to fee schedule 
adjustments (E1390 for oxygen concentrators, E0601 for CPAP machines, 
E0260 for semi-electric hospital beds, and B4035 for enteral nutrition 
supplies), that the average volume of items furnished by suppliers 
before they stopped billing Medicare is very small compared to the 
average volume of items furnished by suppliers who continued to bill. 
Data shows that large national chain suppliers are accepting a large 
percentage of the beneficiaries who were previously served by the 
smaller suppliers that exited the Medicare market. In addition, the 
average volume per supplier continues to increase (as the number of 
suppliers who bill Medicare decline, the suppliers that still bill 
Medicare are picking up more volume), while overall services continue 
to grow, suggesting industry consolidation rather than any type of 
access issue for DME. Therefore, the decline in the number of supplier 
locations is largely a result of the consolidation of suppliers 
furnishing items subject to the fee schedule adjustments rather than a 
decline in beneficiary access to items subject to the fee schedule 
adjustments. In addition, this trend in consolidation is matched by an 
increase in the average volume of items furnished per supplier, 
increasing economies of scale for these suppliers, although this does 
decrease the number of overall suppliers beneficiaries can choose from 
to provide DMEPOS items.
    However, to determine what effect, if any, our payment amounts have 
had on the number of billing suppliers, we also examined supplier 
numbers during defined timeframes in which we paid suppliers the 
unadjusted and adjusted fees, and the 50/50 blended rates (50 percent 
unadjusted and 50 percent adjusted). The declines in the number of 
billing suppliers in both rural and non-rural non-CBAs were very 
similar, even when we increased payment levels to the blended rates in 
rural and non-contiguous non-CBAs, and continued paying the fully 
adjusted fees in non-rural/contiguous non-CBAs. We did not see an 
appreciable difference in supplier reductions between the two areas. We 
note that non-contiguous non-CBAs exhibited a slightly different trend 
than other non-CBAs, as the number of billing suppliers in these areas 
increased from 2015 to 2016 when we paid the unadjusted fees, and 
January 2017 to May 2018 when we paid the fully adjusted fees, but 
subsequently declined between June 2018 to November 2019 when we paid 
the blended rates.
    For this analysis, we reviewed the following timeframes and noted 
the payment policies in effect at that time:

 Period 1: January 2015-December 2015: Unadjusted fees in all 
non-CBAs
 Period 2: January 2016-December 2016: Blended rates in all 
non-CBAs (as noted previously, Congress passed section 16007 of the 
Cures Act on December 13, 2016, which made the blended rates effective 
retroactively in all non-CBAs from June 30 through December 31, 2016)
 Period 3: January 2017-May 2018: Fully adjusted fees in all 
non-CBAs
 Period 4: June 2018-November 2019: Blended rates in rural and 
non-contiguous non-CBAs, fully adjusted fees in non-rural non-CBAs in 
the contiguous U.S.

[[Page 70368]]



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

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

[[Page 70369]]

declined at the same rate in OCBSAs as in all areas. Access to oxygen 
equipment in OCBSAs was unchanged, despite a 49 percent increase in 
unit prices.
    In sum, we do not believe our payment rates had a discernible 
impact on any trends that were already occurring before we paid the 
higher fees, and we did not see any appreciable differences between the 
areas in which we paid the higher 50/50 blended rates in rural and non-
contiguous non-CBAs and the areas in which we pay the fully adjusted 
fees in non-rural/contiguous non-CBAs. In addition, assignments rates 
are still high in all non-CBAs--over 99 percent--, which means over 99 
percent of suppliers are accepting Medicare payment as payment in full 
and not balance billing beneficiaries for the cost of the DME.
    We seek comments on all of our findings.

 Table 3--Summary of Our Analysis of the Section 16008 Cures Act Factors
------------------------------------------------------------------------
   Section 16008 Cures Act
           factors                      Summary of our analysis
------------------------------------------------------------------------
Stakeholder input............   Most of the input we have
                                received has come from the DMEPOS
                                industry, such as DMEPOS suppliers,
                                expressing that the fully adjusted fee
                                schedule amounts are too low, and that
                                CMS should increase how much Medicare
                                pays DMEPOS suppliers to furnish items
                                and services to beneficiaries in non-
                                CBAs. These stakeholders expressed
                                concerns that the level of the adjusted
                                payment amounts constrains suppliers
                                from furnishing items and services to
                                rural areas.
                                Stakeholder input that did not
                                support such payment increases included
                                input from the Medicare Payment Advisory
                                Commission (MedPac), which believed any
                                adjustment for rural and non-contiguous
                                areas should be limited to only the
                                amount needed to ensure access, targeted
                                at areas and products for which an
                                adjustment is needed, and that CMS
                                should consider taking steps to offset
                                the cost of any adjustments. MedPac
                                supported setting fee schedule rates in
                                urban, contiguous non-CBAs based 100
                                percent on information from the CBP.*
Highest Winning Bid..........   In the CY 2019 ESRD PPS DMEPOS
                                final rule (83 FR 57026), we found no
                                pattern indicating that maximum bids are
                                higher for areas with lower volume than
                                for areas with higher volume.
Travel Distance..............   Average travel distance between
                                the supplier and beneficiary is
                                generally higher in CBAs than in non-
                                CBAs, except for non-CBAs classified as
                                FAR, super rural, or OCBSA.
Cost.........................   We examined four sources of cost
                                data: (1) The Practice Expense
                                Geographic Practice Cost Index (PE
                                GPCI), (2) delivery driver wages from
                                the Bureau of Labor Statistics (BLS),
                                (3) real estate taxes from the U.S.
                                Census Bureau's American Community
                                Survey (ACS), and (4) gas and utility
                                prices from the Consumer Price Index
                                (CPI).
                                Overall, in comparing CBAs to
                                non-CBAs, CBAs tended to have the
                                highest costs out of the cost data we
                                examined. For certain cost data, we also
                                found that Alaska and Hawaii--both non-
                                contiguous areas--tended to have higher
                                costs than many contiguous areas of the
                                U.S. Assignment rates, which we consider
                                to be a measure of the sufficiency of
                                payment to cover a supplier's costs for
                                furnishing items and services under the
                                Medicare program, have consistently
                                remained high at over 99 percent (out of
                                100) in non-CBAs, meaning over 99
                                percent of suppliers furnishing items
                                subject to fee schedule adjustments in
                                the non-CBAs are accepting the Medicare
                                payment in full.
Volume.......................   CBAs generally have higher
                                volume than non-CBAs.
                                Total services per supplier
                                continued to increase in 2018 and 2019
                                in non-CBAs.
Number of Suppliers..........   The number of suppliers billing
                                Medicare for furnishing items and
                                services subject to fee schedule
                                adjustments in the non-CBAs has been
                                declining for several years, and this
                                downward trend started years before CMS
                                started adjusting fee schedule amounts
                                in the non-CBAs in 2016.
                                When looking at a sample of
                                HCPCS codes for high volume items
                                subject to fee schedule adjustments, the
                                average volume of items furnished by
                                suppliers before they stopped billing
                                Medicare is very small compared to the
                                average volume of items furnished by
                                suppliers who continued to bill. Data
                                shows that large national chain
                                suppliers are accepting a large
                                percentage of the beneficiaries who were
                                previously served by the smaller
                                suppliers that exited the Medicare
                                market. In addition, the average volume
                                per supplier continues to increase (as
                                the number of suppliers who bill
                                Medicare decline, the suppliers that
                                still bill Medicare are picking up more
                                volume), while overall services continue
                                to grow, suggesting industry
                                consolidation rather than any type of
                                access issue for DME. Therefore, the
                                decline in the number of supplier
                                locations is largely a result of the
                                consolidation of suppliers furnishing
                                items subject to the fee schedule
                                adjustments rather than a decline in
                                beneficiary access to items subject to
                                the fee schedule adjustments.
                                When looking at different
                                timeframes over the last several years
                                in which we paid different fee schedule
                                amounts (unadjusted fees, adjusted fees,
                                and the 50/50 blended rates), we did not
                                see an appreciable effect that these
                                payment changes had on stemming the
                                reduction in the number of suppliers
                                billing Medicare.
                                All counties with a single
                                oxygen supplier from 2016 to 2018 had
                                100 percent assignment rates for oxygen
                                services, and more than half of the
                                single-supplier counties were in Puerto
                                Rico.
------------------------------------------------------------------------
* https://www.medpac.gov/docs/default-source/commentletters/08312018_esrd_cy2019_dme_medpac_comment_v2_sec.pdf?sfvrsn=0.


[[Page 70370]]

C. Provisions of the Proposed Regulations

    After reviewing updated information that must be taken into 
consideration in accordance with section 1834(a)(1)(G) of the Act in 
determining adjustments to DMEPOS fee schedule amounts, we are 
proposing to revise Sec.  414.210(g) to establish three different 
methodologies for adjusting fee schedule amounts for DMEPOS items and 
services included in more than ten competitive bidding programs 
furnished in non-CBAs on or after April 1, 2021, or the date 
immediately following the duration of the emergency period described in 
section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)), 
whichever is later. We are proposing three different fee schedule 
adjustment methodologies, based on the non-CBA in which the items are 
furnished: (1) One fee schedule adjustment methodology for items and 
services furnished in non-contiguous non-CBAs; (2) another adjustment 
methodology for items and services furnished in non-CBAs within the 
contiguous United States that are defined as rural areas at Sec.  
414.202; and (3) a third adjustment methodology for items and services 
furnished in all other non-CBAs (non-rural areas within the contiguous 
United States). With respect to items and services furnished in no more 
than ten competitive bidding programs, we are proposing to continue 
using the methodology in Sec.  414.210(g)(3) to adjust the fee schedule 
amounts for these items furnished on or after April 1, 2021. The rest 
of the discussion that follows addresses the fee schedule adjustments 
for items and services that have been included in more than ten 
competitive bidding programs.
    First, we are proposing to continue paying the 50/50 blended rates 
in non-contiguous non-CBAs, but are proposing that the 50/50 blend will 
no longer be a transition rule under Sec.  414.210(g)(9), and will 
instead be the fee schedule adjustment methodology for items and 
services furnished in these areas under Sec.  414.210(g)(2) unless 
revised in future rulemaking. We are proposing that the fee schedule 
amounts for items and services furnished on or after April 1, 2021, or 
the date immediately following the duration of the emergency period 
described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later, in non-contiguous non-CBAs be adjusted 
so that they are equal to a blend of 50 percent of the greater of the 
average of the SPAs for the item or service for CBAs located in non-
contiguous areas or 110 percent of the national average price for the 
item or service determined under Sec.  414.210(g)(1)(ii) and 50 percent 
of the unadjusted fee schedule amount for the area, which is the fee 
schedule amount in effect on December 31, 2015, increased for each 
subsequent year beginning in 2016 by the annual update factors 
specified in sections 1834(a)(14), 1834(h)(4), and 1842(s)(1)(B) of the 
Act, respectively, for durable medical equipment and supplies, off-the-
shelf orthotics, and enteral nutrients, supplies, and equipment. We 
explained our rationale for a methodology that incorporates 110 percent 
of the national average price in our CY 2015 ESRD PPS DMEPOS final 
rule. We stated that we believe that a variation in payment amounts 
both above and below the national average price should be allowed, and 
we believe that allowing for the same degree of variation (10 percent) 
above and below the national average price is more equitable and less 
arbitrary than allowing a higher degree of variation (20 percent) above 
the national average price than below (10 percent), as in the case of 
the national ceiling and floor for the Prosthetic & Orthotic fee 
schedule, or allowing for only 15 percent variation below the national 
average price, as in the case of the national ceiling and floor for the 
DME fee schedule.
    Second, we are proposing to continue paying the 50/50 blended rates 
in rural contiguous areas, but are proposing that the 50/50 blend will 
no longer be a transition rule under Sec.  414.210(g)(9), and will 
instead be the fee schedule adjustment methodology for items and 
services furnished in these areas under Sec.  414.210(g)(2) unless 
revised in future rulemaking. We are proposing that the fee schedule 
amounts for items and services furnished in rural contiguous areas on 
or after April 1, 2021 or the date immediately following the duration 
of the emergency period described in section 1135(g)(1)(B) of the Act 
(42 U.S.C. 1320b-5(g)(1)(B)), whichever is later, be adjusted so that 
they are equal to a blend of 50 percent of 110 percent of the national 
average price for the item or service determined under Sec.  
414.210(g)(1)(ii) and 50 percent of the fee schedule amount for the 
area in effect on December 31, 2015, increased for each subsequent year 
beginning in 2016 by the annual update factors specified in sections 
1834(a)(14), 1834(h)(4), and 1842(s)(1)(B) of the Act, respectively, 
for durable medical equipment and supplies, off-the-shelf orthotics, 
and enteral nutrients, supplies, and equipment. We are also revising 
Sec.  414.210(g)(1)(v) to address the period before April 1, 2021, to 
say that for items and services furnished before April 1, 2021, the fee 
schedule amount for all areas within a state that are defined as rural 
areas for the purposes of this subpart is adjusted to 110 percent of 
the national average price determined under paragraph (g)(1)(ii) of 
this section. We decided to propose a policy of paying a 50/50 blend of 
adjusted and unadjusted rates in non-contiguous non-CBAs and in rural 
non-CBAs, as opposed to a different ratio (such as a 75/25 blend, which 
is an alternative we considered and discuss further in this section), 
because past stakeholder input from the DME industry has expressed 
support for this 50/50 blend. For instance, we proposed paying the 50/
50 blend for rural and non-contiguous non-CBAs from January 1, 2019 
through December 31, 2020 in our CY 2019 ESRD PPS DMEPOS proposed rule, 
and we finalized this policy in our CY 2019 ESRD PPS DMEPOS final rule. 
Most of the comments we received on this proposal were from commenters 
in the DME industry, such as homecare associations, DME manufacturers, 
and suppliers, and these commenters generally supported the 50/50 
blended rates proposal.
    Third, for items and services furnished on or after April 1, 2021 
or the date immediately following the duration of the emergency period 
described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later, in all other non-rural non-CBAs within 
the contiguous United States, we are proposing that the fee schedule 
amounts be equal to 100 percent of the adjusted payment amount 
established under Sec.  414.210(g)(1)(iv).
    Accordingly, we are proposing to add paragraph Sec.  
414.210(g)(9)(vi) to say that for items and services furnished in all 
areas with dates of service on or after April 1, 2021, or the date 
immediately following the duration of the emergency period described in 
section 1135(g)(1)(B) of the Act, whichever is later, based on the fee 
schedule amount for the area is equal to the adjusted payment amount 
established under Sec.  414.210(g).
    Thus under our proposal, CMS would continue paying suppliers 
significantly higher rates for furnishing items and services in rural 
and non-contiguous areas as compared to items and services furnished in 
other areas because of stakeholder input indicating higher costs in 
these areas, greater travel distances and costs in certain non-CBAs 
compared to CBAs, the unique logistical challenges and costs of 
furnishing items to beneficiaries in the non-contiguous areas, 
significantly lower volume of items furnished in these areas versus

[[Page 70371]]

CBAs, and concerns about financial incentives for suppliers in 
surrounding urban areas to continue including outlying rural areas in 
their service areas. Previous feedback from industry stakeholders 
expressed concern regarding beneficiary access to items and services 
furnished in rural and remote areas.
    Furthermore, in our analysis, we found that suppliers must travel 
farther distances to deliver items to beneficiaries located in super 
rural areas and areas outside both MSAs and micropolitan statistical 
areas than the distances they must travel to deliver items to 
beneficiaries located in CBAs (while the CBP was in effect). We also 
found that certain non-contiguous areas tended to have higher costs, 
and had smaller numbers of oxygen suppliers and beneficiaries. Rural 
and non-contiguous areas also have much lower volume of DMEPOS items 
furnished by suppliers than in CBAs, and we are also concerned that 
national chain suppliers or suppliers in higher populated urban areas 
that are currently serving rural areas may abandon these areas if they 
are less profitable markets due to fee schedule adjustments and may 
instead concentrate on the larger markets only. We believe that this 
feedback as well as these findings supports a payment methodology that 
errs on the side of caution and ensures adequate payment for items and 
services furnished to beneficiaries in all rural and non-contiguous 
non-CBAs. We also believe that the proposed fee schedule adjustment 
methodologies would create an incentive for suppliers to continue 
serving areas where fewer beneficiaries reside and will therefore 
further ensure beneficiary access to items and services in these areas. 
We believe that this proposal, which proposes to continue paying the 
50/50 blended rates in rural and non-contiguous non-CBAs, and 100 
percent of the adjusted payment amount established under Sec.  
414.210(g)(1)(iv) in non-rural non-CBAs in the contiguous U.S., takes 
into account stakeholder feedback as well as information from our 
previous and updated analyses of the Cures Act factors.
    The purpose of the 50/50 blend is to ensure payment rates are 
sufficient to maintain access to DME in areas where suppliers often 
furnish a lower volume of DME, such as rural areas of the country and 
non-contiguous areas.
    The proposed fee schedule adjustment methodologies rely on SPAs 
generated by the CBP. CMS recently announced that it will only award 
Round 2021 CBP contracts to bidders in the OTS back braces and OTS knee 
braces product categories.\11\ CMS will not award Round 2021 CBP 
contracts to bidders that bid in any other product categories that were 
included in round 2021 of the CBP, therefore, CMS will not have any new 
SPAs for these items and services. As a result, we are seriously 
considering whether to simply extend application of the current fee 
schedule adjustment transition rules for all of the items and services 
that were included in Round 2021 of the CBP but have essentially been 
removed from Round 2021 of the CBP. That is, for non-CBAs, the fee 
schedule adjustment transition rules at Sec.  414.210(g)(9) and, for 
CBAs and former CBAs (CBAs where no CBP contracts are in effect), the 
fee schedule adjustment rules at Sec.  414.210(g)(10), would be 
extended until a future round of the CBP. More specifically, for non-
CBAs, we would extend the transition rules at Sec.  414.210(g)(9)(iii) 
and (v) for items and services included in product categories other 
than the OTS back and knee brace product categories, and, for these 
same items and services furnished in CBAs or former CBAs, we are 
considering extending the rules at Sec.  414.210(g)(10), until such 
product categories are competitively bid again in a future round of the 
CBP. In this situation, the proposed fee schedule adjustments discussed 
previously in this proposed rule would only apply to OTS back braces 
and OTS knee braces furnished in non-CBAs on or after April 1, 2021.
---------------------------------------------------------------------------

    \11\ The link to the announcement is https://www.cms.gov/files/document/round-2021-dmepos-cbp-single-payment-amts-fact-sheet.pdf.
---------------------------------------------------------------------------

    In short, beginning on April 1, 2021 or the date immediately 
following the duration of the emergency period described in section 
1135(g)(1)(B) of the Act, whichever is later, there would be several 
different fee schedule adjustment methodologies in effect, depending on 
where an item or service is furnished, and whether CMS has awarded 
Round 2021 CBP contracts for that item or service. For OTS back braces 
and OTS knee braces included in Round 2021 of the CBP and furnished in 
CBAs, payment would be made in accordance with the methodologies 
described in 42 CFR 414.408. For OTS back braces and OTS knee braces 
included in Round 2021 of the CBP and furnished in rural and non-
contiguous non-CBA areas, payment would be made in accordance with the 
methodologies we are proposing in this proposed rule in Sec.  
414.210(g)(2). For OTS back braces and OTS knee braces included in 
Round 2021 of the CBP furnished in non-rural and contiguous non-CBA 
areas, payment would be made using the methodologies described in 42 
CFR 414.210(g)(1)(iv).
    For items and services included in the product categories that have 
essentially been removed from Round 2021 of the CBP, payment would be 
based on the methodologies described in 42 CFR 414.210(g)(10) when such 
items and services are furnished in CBAs or former CBAs. When such 
items and services are furnished in rural and non-contiguous non-CBAs, 
payment would be based on the methodologies we proposed at 42 CFR 
414.210(g)(2) and the methodology at 42 CFR 414.210(g)(4). In non-rural 
and contiguous non-CBA areas, payment for these items and services 
would be based on the methodologies described in 42 CFR 
414.210(g)(1)(iv) and the methodology at (g)(4). CMS welcomes comment 
on whether the transition rules at Sec.  414.210(g)(9) and fee schedule 
adjustment rules at Sec.  414.210(g)(10) should continue for these 
items and services that have essentially been removed from Round 2021 
of the CBP. Specifically, we invite comment on whether we should extend 
the transition rules at Sec.  414.210(g)(9)(iii) and (v) for items and 
services furnished in non-CBAs and included in product categories other 
than the OTS back and knee brace product categories, and, for these 
same items and services furnished in CBAs or former CBAs, whether we 
should extend the rules at Sec.  414.210(g)(10), until such product 
categories are competitively bid again in a future round of the CBP.
3. Alternatives Considered But Not Proposed
    We considered, but are not proposing, three alternatives to our 
proposals and we are seeking comments on these alternatives:
a. Adjust Fee Schedule Amounts for Super Rural Areas and Non-Contiguous 
Areas Based on 120 Percent of the Fee Schedule Amounts for Non-Rural 
Areas
    Under the first alternative, we considered prior suggestions from 
stakeholders to use the ambulance fee schedule concept of a ``super 
rural area'' when determining fee schedule adjustments for non-CBAs. 
Specifically, we considered proposing to eliminate the definition of 
rural area at Sec.  414.202 and 42 CFR 414.210(g)(1)(v), which brings 
the adjusted fee schedule amounts for rural areas up to 110 percent of 
the national average price determined under section 414.210(g)(1)(ii). 
In place of this definition and rule, we considered proposing an 
adjustment to the fee schedule amounts for DMEPOS items and services 
furnished in super rural

[[Page 70372]]

non-CBAs within the contiguous U.S. equal to 120 percent of the 
adjusted fee schedule amounts determined for other, non-rural non-CBAs 
within the same state. For example, the adjusted fee schedule amount 
for super rural, non-CBAs within Minnesota would be based on 120 
percent of the adjusted fee schedule amount (in this case, the regional 
price) for Minnesota established in accordance with section 
414.210(g)(1)(i) through (iv). Consistent with the ambulance fee 
schedule rural adjustment factor at Sec.  414.610(c)(5)(ii), we 
considered defining ``super rural'' as a rural area determined to be in 
the lowest 25 percent of rural population arrayed by population 
density, where a rural area is defined as an area located outside an 
urban area (MSA), or a rural census tract within an MSA as determined 
under the most recent version of the Goldsmith modification as 
determined by the Federal Office of Rural Health Policy at the Health 
Resources and Services Administration. Per this definition and under 
this alternative rule, certain areas within MSAs would be considered 
super rural areas whereas now they are treated as non-rural areas 
because they are located in counties that are included in MSAs. For all 
other non-CBAs, including areas within the contiguous U.S. that are 
outside MSAs but do not meet the definition of super rural area, we 
considered adjusting the fee schedule amounts using the current fee 
schedule adjustment methodologies under Sec.  414.210(g)(1) and Sec.  
414.210(g)(3) through (8).
    In addition to addressing past stakeholder input, this alternative 
approach would provide a payment increase that is somewhat higher than, 
but similar to the 17 percent payment differential identified by 
stakeholders in 2015 based on a survey of respiratory equipment 
suppliers.\12\ In addition, we have received input from suppliers that 
serve low population density areas within MSAs that are not CBAs. These 
stakeholders claim that they are serving low population density areas 
that are not near to or served by suppliers located in the urban core 
areas of the MSA and believe they should receive higher payments than 
suppliers serving the higher population density areas of the MSA. Under 
the alternative fee schedule adjustment methodology, if these low 
population density areas were to meet the definition of super rural 
area, they would receive a 20 percent higher payment than areas that 
are not super rural areas. This alternative payment rule would address 
these concerns with how the current payment rules and definition of 
rural area affect these areas, and would target payments for those 
rural areas that are low population density areas, regardless of 
whether they are located in an MSA or not. This approach would also 
address concerns raised from stakeholders on the March 23, 2017 call 
regarding the cost of traveling long distances to serve far away, 
remote areas.
---------------------------------------------------------------------------

    \12\ https://www.cqrc.org/img/CQRCCostSurveyWhitePaperMay2015Final.pdf.
---------------------------------------------------------------------------

    Under this alternative, Sec.  414.210(g)(2), which addresses fee 
schedule adjustments for DMEPOS items and services furnished in non-
contiguous areas, would be replaced with a new rule that adjusts the 
fee schedule amounts for non-contiguous areas based on the higher of 
120 percent of the average of the SPAs for the item or service in CBAs 
outside the contiguous U.S. (currently only Honolulu, Hawaii), or the 
national average price determined under Sec.  414.210(g)(1)(ii).
b. Establish Additional Phase-In Period for Fully Adjusted Fee Schedule 
Amounts for Rural Areas and Non-Contiguous Areas
    We considered proposing an alternative fee schedule adjustment 
methodology that would establish an additional transition period to 
allow us to determine the impact of the new SPAs and monitor the impact 
of adjusted fee schedule amounts. Under this alternative, we considered 
adjusting the fee schedule amounts for items and services furnished in 
rural areas and non-contiguous non-CBAs based on a 75/25 blend of 
adjusted and unadjusted rates for the 3-year period from April 1, 2021, 
or the date immediately following the duration of the emergency period 
described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later, through December 31, 2023. Such a 
phase-in would bring the fee schedule payment amounts down closer to 
the fully adjusted fee levels and allow for a 3-year period to monitor 
the impact of the lower rates on access to items and services in these 
areas before potentially phasing in the fully adjusted rates in 2024.
c. Extend Current Fee Schedule Adjustments for Items and Services 
Furnished in Non-CBAs, CBAs, and Former CBAs That Were Included in 
Product Categories Removed From Round 2021 of the CBP
    CMS recently announced that it will only award Round 2021 CBP 
contracts to bidders in the OTS back braces and OTS knee braces product 
categories. CMS will not award Round 2021 CBP contracts to bidders that 
bid in any other product categories that were included in Round 2021 of 
the CBP, therefore, CMS will not have any new SPAs for these items and 
services. As a result, under this alternative, we are seriously 
considering whether to simply extend application of the current fee 
schedule adjustment rules for all of the items and services that were 
included in Round 2021 of the CBP but have essentially been removed 
from Round 2021 of the CBP. Specifically, for items and services 
included in product categories that have essentially been removed from 
Round 2021 of the CBP, CMS would consider extending the transition 
rules at Sec.  414.210(g)(9)(iii) and (v) for items and services 
furnished in non-CBAs and the fee schedule adjustment rules at Sec.  
414.210(g)(10) for items and services furnished in CBAs or former CBAs 
until such product categories are competitively bid again in a future 
round of the CBP. Under this alternative, we would consider adjusting 
the fee schedule amounts for items and services furnished in areas 
other than rural areas and non-contiguous non-CBAs in accordance with 
Sec.  414.210(g)(9)(v) based on 100 percent of the adjusted rates 
beginning on April 1, 2021 or the date immediately following the 
duration of the emergency period described in section 1135(g)(1)(B) of 
the Act (42 U.S.C. 1320b-5(g)(1)(B)), whichever is later, through the 
date immediately preceding the effective date of the next round of CBP 
contracts. The fee schedule amounts for items and services removed from 
the CBP and furnished in rural and non-contiguous non-CBAs would 
continue to be adjusted based on a 50/50 blend in accordance with Sec.  
414.210(g)(9)(iii) through the date immediately preceding the effective 
date of the next round of CBP contracts. For items and services 
included in product categories that have essentially been removed from 
Round 2021 of the CBP, the fee schedule amounts for items and services 
furnished in CBAs or former CBAs would continue to be adjusted in 
accordance with Sec.  414.210(g)(10) through the date immediately 
preceding the effective date of the next round of CBP contracts. In 
contrast, for items and services that are included in Round 2021 of the 
CBP, CMS would adjust the fee schedule amounts for such items and 
services in accordance with the adjustment methodologies outlined in 
this proposed rule; CMS would pay the 50/50 blended rates in rural and 
non-contiguous non-CBAs, and 100 percent of the adjusted payment amount 
established under

[[Page 70373]]

Sec.  414.210(g)(1)(iv) in non-rural non-CBAs in the contiguous U.S.
    We are seeking comments on these alternative methodologies and our 
proposed methodologies. For instance, we would be interested to learn 
if there are benefits or downsides to our proposals that we did not 
consider or discuss in this proposed rule.

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

    On May 11, 2018 we published an interim final rule (83 FR 21912) in 
the Federal Register entitled ``Medicare Program; Durable Medical 
Equipment Fee Schedule Adjustments To Resume the Transitional 50/50 
Blended Rates To provide Relief in Rural Areas and Non-Contiguous 
Areas'' (which we will refer to as the ``2018 Interim Final Rule''). We 
solicited comments on the 2018 Interim Final Rule, but because we have 
not yet responded to the comments we received, we are signaling our 
intent to do so in the final rule.
    Section 5004(b) of the Cures Act amended section 1847(a)(2)(A) of 
Act to exclude drugs and biologicals described in section 1842(o)(1)(D) 
of the Act from the DMEPOS CBP. In the 2018 Interim Final Rule, we made 
conforming changes to the regulation to reflect the exclusion of 
infusion drugs, described in section 1842(o)(1)(D) of Act, from items 
subject to the DMEPOS CBP.
    As discussed in section II. of this rule, in the 2018 Interim Final 
Rule, we also expressed an immediate need to resume the transitional, 
blended fee schedule amounts in rural and non-contiguous areas, noting 
strong stakeholder concerns about the continued viability of many 
DMEPOS suppliers, our finding of a decrease in the number of suppliers 
furnishing items and services subject to the fee schedule adjustments, 
as well as the Cures Act mandate to consider additional information 
material to setting fee schedule adjustments based on information from 
the DMEPOS CBP for items and services furnished on or after January 1, 
2019 (83 FR 21918). We amended Sec.  414.210(g)(9) by adding Sec.  
414.210(g)(9)(iii) to resume the fee schedule adjustment transition 
rates for items and services furnished in rural and non-contiguous 
areas from June 1, 2018 through December 31, 2018. We also amended 
Sec.  414.210(g)(9)(ii) to reflect that for items and services 
furnished with dates of service from January 1, 2017 to May 31, 2018, 
fully adjusted fee schedule amounts would apply (83 FR 21922). We also 
added Sec.  414.210(g)(9)(iv) to specify that fully adjusted fee 
schedule amounts would apply for certain items furnished in non-CBAs 
other than rural and non-contiguous areas from June 1, 2018 through 
December 31, 2018 (83 FR 21920). We explained that we would use the 
extended transition period to further analyze our findings and consider 
the information required by section 16008 of the Cures Act in 
determining whether changes to the methodology for adjusting fee 
schedule amounts for items furnished on or after January 1, 2019 are 
necessary (83 FR 21918 through 21919). We intend to respond to the 
comments we received on these issues in the final rule.

IV. Healthcare Common Procedure Coding System (HCPCS) Level II Code 
Application Process

A. Background

1. Origin and Purpose of HCPCS
    Section 1833(e) of the Act provides that no payment shall be made 
to any provider of services or other person under Medicare Part B 
unless there has been furnished such information as may be necessary in 
order to determine the amounts due such provider or other person under 
that part. In order to process claims and determine payment for items 
and services under Medicare, we need a way to appropriately identify 
the items and services billed. As discussed later in this section, we 
have established certain codes for providers and suppliers to use to 
identify items and services on claims. Medicare receives over 1 billion 
electronic claims per year.
    The Healthcare Common Procedure Coding System (HCPCS) is a 
standardized coding system used to identify particular items and 
services on claims submitted to Medicare, Medicaid, and other health 
insurance programs in a consistent and orderly manner. The HCPCS is 
divided into two principal subsystems, referred to as Level I and Level 
II of the HCPCS. Level I is comprised of Current Procedural Terminology 
(CPT[supreg]) codes.\13\ The HCPCS Level II code set is used primarily 
to identify items, services, supplies, and equipment that are not 
identified by CPT[supreg] codes. The HCPCS Level II codes were 
originally created for use by government insurers including 
Medicare.\14\ On August 17, 2000, HHS published a final rule (65 FR 
50312) in which it adopted HCPCS Level II codes as the standard code 
set to be used by all payers for, among other things, health care 
equipment and supplies not described by CPT[supreg] codes, for use in 
Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
transactions (45 CFR 162.1002).\15\ The HCPCS Level II coding system 
was selected as the standard code set, in part, because of its wide 
acceptance among both public and private insurers. With few 
exceptions,\16\ HCPCS Level II codes are maintained by CMS, which is 
responsible for making decisions about additions, revisions, and 
discontinuations to the codes. CMS maintains the code set for Medicare 
but, because HCPCS Level II is a standard code set designated for use 
under HIPAA by all payers, CMS also considers the needs of other 
payers, including both government and private insurers, in establishing 
and maintaining codes.
---------------------------------------------------------------------------

    \13\ The CPT[supreg] is a uniform coding system consisting of 
descriptive terms and identifying codes that are used primarily to 
identify medical services and procedures furnished by physicians and 
other health care professionals. Decisions regarding the addition, 
deletion, or revisions of CPT[supreg] codes are made and published 
by the American Medical Association (AMA) through the CPT[supreg] 
Editorial Panel. More information on CPT[supreg] codes can be found 
at www.ama-assn.org/about/cpt-editorial-panel/cpt-code-process.
    \14\ The code set was previously called the HCFA (Health Care 
Financing Administration) Common Procedure Coding System, after the 
previous name of the Agency, before it became known as the 
Healthcare Common Procedure Coding System as it is known today.
    \15\ Through subtitle F of Title II of the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104-
191), Congress added to Title XI of the Social Security Act a new 
Part C, entitled ``Administrative Simplification.'' HIPAA requires 
the Secretary to adopt standards for code sets for the electronic 
transactions, including health care claims transactions, for which 
the Secretary has adopted a standard.
    \16\ The Code on Dental Procedures and Nomenclature (CDT[supreg] 
code) represents a separate medical code set adopted under HIPAA. 
See 45 CFR 162.1002. Based on alpha-numeric format, they are 
considered HCPCS Level II series D-codes but are maintained, 
copyrighted, licensed and published separately by the American 
Dental Association. More information on CDT[supreg] codes can be 
found at https://www.ada.org/en/publications/cdt.
---------------------------------------------------------------------------

    The procedures by which the public submits and CMS evaluates 
external code applications to modify the HCPCS Level II code set have 
been primarily included in guidance documents released on the CMS 
website at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo. We 
update and release the HCPCS Level II dataset files to our contractors 
and the public via our website on a quarterly basis. Although the HCPCS 
Level II code set is a coding system used to identify categories of 
items and services, it is not a methodology or system for making 
coverage or payment determinations for individual items and services, 
and the existence or absence of a code does not, of itself, determine 
coverage or non-

[[Page 70374]]

coverage for the corresponding item or service.
    HCPCS Level II codes are alpha-numeric codes that begin with an 
alphabetical letter followed by four numeric digits. Currently, there 
are almost 8,000 HCPCS Level II codes that represent categories of like 
items and services. Each code includes a text descriptor (code text) 
that identifies the category of items and services encompassed in the 
code. HCPCS Level II codes are generally organized into lettered 
categories that loosely describe the types of codes under that letter; 
\17\ however the lettered categories are not dispositive, meaning that 
they are not all inclusive of the types of items and services described 
in the heading for each lettered category.
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    \17\ A-codes: Transportation Services, Medical and Surgical 
Supplies, Miscellaneous; B-codes: Enteral and Parenteral Therapy; C-
codes: Hospital Outpatient Prospective Payment System; D-codes: 
Dental Procedures; E-codes: Durable Medical Equipment; G-codes: 
Temporary Codes for Procedures and Professional Services; H-codes: 
Rehabilitative Services; J-codes: Drugs Administered Other Than Oral 
Method, Chemotherapy Drugs; K-codes: Medicare National Codes for 
DMEPOS; L-codes: Orthotics, and Prosthetics; M-codes: Medical 
Services; P-codes: Pathology and Laboratory Services; Q-codes: 
Medicare National Codes; R-codes: Diagnostic Radiology Services; S-
codes: Non-Medicare National Codes; T-codes: State Medicaid Agency 
Codes; U-codes: Clinical Laboratory Tests; and V-codes: Vision and 
Hearing Services.
---------------------------------------------------------------------------

2. External HCPCS Level II Code Applications
    Interested parties seeking to modify the HCPCS Level II code set 
may submit an application, as available on CMS' website, that requests 
to add a code, revise an existing code, or discontinue an existing 
code. The types of items and services subject to the external HCPCS 
Level II code application procedures and evaluation processes proposed 
in this rule are described in section IV.B. of this proposed rule. The 
information collection activity is approved under OMB control number 
0938-1042. In recent years, approximately 150 code applications 
typically have been submitted to CMS annually from the public. As part 
of our external HCPCS Level II code application process, we establish 
deadlines for when code applications need to be submitted by the public 
and post those deadlines on CMS' HCPCS website.
    Section 531(b) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) 
requires the Secretary to establish procedures for coding and payment 
determinations for new DME under Part B of Title XVIII of the Act that 
permit public consultation in a manner consistent with the procedures 
established for implementing coding modifications for ICD-9-CM (which 
has since been replaced with ICD-10-CM as of October 1, 2015). In 
November 2001, we issued a notice announcing the establishment of 
public meetings for making coding and payment determinations for new 
DME beginning in 2002 (66 FR 58743 through 58745). We also issued a 
notice on March 25, 2005, stating that the public meeting process 
previously limited to DME was expanded to include all new public 
requests for revisions to the HCPCS Level II codes (70 FR 15340). This 
change was intended to provide more opportunities for the public to 
become aware of and provide comment on code applications and changes 
under consideration, as well as opportunities for CMS to gather public 
input. Given the expansion of the public meeting process, we scheduled 
additional annual public meetings for 2005 and subsequent years.
    Public meetings have provided a forum for interested parties to 
make oral presentations and to submit written comments in response to 
preliminary HCPCS Level II coding recommendations \18\ for new DME, as 
well as for other items and services included in the public meeting. 
The dates for the public meetings are announced in the Federal 
Register. Agenda items for the meetings are published in advance of the 
public meeting. The public meeting agendas generally have included 
descriptions of the coding requests under consideration, the applicant, 
the name of the item or service, our preliminary HCPCS Level II coding 
recommendations and rationale, as well as preliminary Medicare payment 
recommendations.\19\ We publish the public meeting agendas on CMS' 
HCPCS website at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/HCPCSPublicMeetings.
---------------------------------------------------------------------------

    \18\ CMS has also previously referred to preliminary 
recommendations as preliminary decisions. Hereinafter, in section 
IV. of this proposed rule, we will use the term preliminary 
recommendation.
    \19\ Preliminary Medicare payment recommendations (also referred 
to as preliminary Medicare payment determinations) are discussed in 
more detail in section V.A.2. of this proposed rule.
---------------------------------------------------------------------------

    Prior to 2020, CMS received and reviewed HCPCS Level II code 
applications and typically made related coding changes annually, 
including releasing updated coding files. However, CMS' quarterly 
systems release process gave CMS the flexibility to review applications 
and make codes effective quarterly in response to claims processing 
needs, which it used in very limited circumstances. In November 2019, 
we announced updates to our HCPCS Level II coding procedures to enable 
shorter and more frequent HCPCS Level II code application cycles 
beginning in January 2020 as part of our initiative to facilitate 
launching new products into the marketplace for providers and 
patients.\20\ Specifically, we implemented a process whereby HCPCS 
Level II code applications for DMEPOS and other non-drug, non-
biological items and services are submitted and reviewed no less 
frequently than bi-annually; and HCPCS Level II code applications for 
drugs and biological products are submitted and reviewed no less 
frequently than quarterly (hereinafter also referred to as bi-annual 
and quarterly coding cycles, respectively).\21\
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    \20\ HCPCS--General Information. Announcement of Shorter Coding 
Cycle Procedures, Applications, and Deadlines for 2020. Available 
at: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo.
    \21\ HCPCS--General Information. Announcement of Shorter Coding 
Cycle Procedures, Applications, and Deadlines for 2020, available 
at. https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo; Healthcare 
Common Procedure Coding System (HCPCS) Level II Coding Procedures, 
Rev. September 16, 2020, available at: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Downloads/2018-11-30-HCPCS-Level2-Coding-Procedure.pdf.
---------------------------------------------------------------------------

    Prior to 2020, we included code applications for drugs and 
biological products in the HCPCS public meeting process, even though 
not required under section 531(b) of BIPA. In order to achieve the 
additional time savings necessary to implement coding for the majority 
of drugs and biological products for which we receive code applications 
on a quarterly cycle, in November 2019, we updated our HCPCS Level II 
coding procedures such that beginning January 1, 2020, we no longer 
conduct public meetings as part of our HCPCS Level II code application 
process for drugs and biological products.\22\ Although code 
applications for drugs and biological products are no longer included 
in the public meetings, the 2020 coding procedures provide an 
opportunity for applicants to resubmit a code application for a drug or 
biological product in a subsequent quarterly coding cycle, which offers 
individual applicants who are dissatisfied with our coding decisions in 
one quarterly cycle an opportunity to reapply in the next or a 
subsequent quarterly cycle.
---------------------------------------------------------------------------

    \22\ Healthcare Common Procedure Coding System (HCPCS) Level II 
Coding Procedures, revised November 26, 2019.
---------------------------------------------------------------------------

    We also announced that beginning in 2020, consistent with 
implementing shorter and more frequent HCPCS

[[Page 70375]]

coding cycles, we will release decisions on coding actions on a 
quarterly basis in the same format as we previously announced annual 
decisions.\23\ These actions are available on the CMS website at 
https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo. We note that each 
payer effectuates the changes to the code sets on its own timeframes. 
For Medicare, unless otherwise announced or specified, Table 4 sets 
forth the coding timeframes for the 2020 coding cycles. We refer 
readers to the CMS website at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo for the most recent updates and revisions to these 
timeframes.
---------------------------------------------------------------------------

    \23\ Healthcare Common Procedure Coding System (HCPCS) Level II 
Coding Procedures, Rev. September 16, 2020, available at: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Downloads/2018-11-30-HCPCS-Level2-Coding-Procedure.pdf.

                                                 Table 4--2020 Schedule for HCPCS Level II Coding Cycles
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                Coding
                                                           Application       Preliminary                                  Final decision       changes
         Application topic               Coding cycle        deadline       recommendation         Public meeting          publication        effective
                                                                             publication                                                         date
--------------------------------------------------------------------------------------------------------------------------------------------------------
DMEPOS and Other Non-Drug, Non-     Bi-annual 1..........    1/06/2020  May 2020.............  June 1 and 2, 2020 **  July 2020............   10/01/2020
 Biological Items and Services.
DMEPOS and Other Non-Drug, Non-     Bi-annual 2..........    6/29/2020  Approximately 2 weeks  Fall 2020............  January 2021 or          4/01/2021
 Biological Items and Services.                                          prior to the Public                           earlier.
                                                                         Meeting in Fall 2020.
Drugs and Biological Products.....  Q1...................    1/06/2020  N/A *................  N/A *................  April 2020...........    7/01/2020
Drugs and Biological Products.....  Q2...................    4/06/2020  N/A *................  N/A *................  July 2020............   10/01/2020
Drugs and Biological Products.....  Q3...................    6/29/2020  N/A *................  N/A *................  October 2020.........    1/01/2021
Drugs and Biological Products.....  Q4...................    9/21/2020  N/A *................  N/A *................  January 2021 or          4/01/2021
                                                                                                                       earlier.
--------------------------------------------------------------------------------------------------------------------------------------------------------
** Announced in the Federal Register at 85 FR 21859.
* As further explained, although we previously included code applications for drugs and biological products in our HCPCS public meeting processes, we
  are not doing so in 2020 in order to achieve the additional time savings necessary to implement coding for the vast majority of drugs and biological
  products on a quarterly cycle.

    As explained in more detail in section IV.B.2. of this proposed 
rule, there are three types of modifications to the HCPCS Level II code 
set that can be requested by the public under this process using the 
application form available on CMS' website: (1) The addition of a HCPCS 
Level II code; (2) a revision to the long descriptor language (code 
text) of an existing HCPCS Level II code; and (3) the discontinuation 
of an existing HCPCS Level II code. The current HCPCS Level II code 
application and instructions can be found on the CMS HCPCS website at 
https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Application_Form_and_Instructions.\24\ Anyone may submit an 
application. We outline procedures we use to make coding decisions for 
certain items and services that are coded in the HCPCS Level II code 
set in a document entitled ``Healthcare Common Procedure Coding System 
(HCPCS) Level II Coding Procedures,'' available on our website at 
https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Downloads/2018-11-30-HCPCS-Level2-Coding-Procedure.pdf.\25\ Summaries of external HCPCS 
code applications with our final coding decisions and rationale are 
made available on our website at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo. Separately, Quarterly Update releases of the full 
HCPCS Level II code set are made available on our website at https://www.cms.gov/Medicare/Coding/HCPCSReleaseCodeSets.
---------------------------------------------------------------------------

    \24\ Updated September 2020.
    \25\ Updated September 2020.
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B. Proposals for HCPCS Level II Coding Procedures

    To increase transparency and gather stakeholder input, we are 
proposing in this proposed rule to codify certain policies and 
procedures regarding the submission and evaluation of external HCPCS 
Level II code applications. Consistent with our current practices, the 
proposed external HCPCS Level II code application process applies to 
products paid separately as drugs or biologicals (defined later in the 
section and in proposed 42 CFR 414.8(a)(2)),\26\ and non-drug, non-
biological items and services (defined later in the section and in 
proposed 42 CFR 414.8(a)(1)).\27\
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    \26\ Note, in prior code documents on our website, we used the 
reference ``drugs and biological products'' (see ``Healthcare Common 
Procedure Coding System (HCPCS) Level II Coding Procedures,'' 
available at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Downloads/2018-11-30-HCPCS-Level2-Coding-Procedure.pdf).
    \27\ Note, in prior code documents on the website, we used the 
reference ``DMEPOS and other non-drug, non-biological items and 
services'' in our ``Healthcare Common Procedure Coding System 
(HCPCS) Level II Coding Procedures,'' available at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Downloads/2018-11-30-HCPCS-Level2-Coding-Procedure.pdf.
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    For purposes of section IV.B. of this proposed rule, the term 
``products paid separately as drugs or biologicals'' refers to products 
that are separately payable by Medicare under Part B (and potentially 
by other payers, such as private insurers) as drugs or biologicals as 
that term is defined in section 1861(t) of the Act. These products 
typically fall into one or more of the following three categories: (1) 
Products furnished incident to a physician's services under sections 
1861(s)(2)(A) and (B) of the Act, excluding products that are usually 
self-administered (for example, tablets, capsules, oral solutions, 
disposable inhalers); (2) products administered via a covered item of 
DME; and (3) other categories of products for which there is another 
Part B benefit category as specified by statute or regulations (for 
example, drug or biological products described elsewhere in section 
1861(s) of the Act, such as immunosuppressive drugs (at section 
1861(s)(2)(J) of the Act); hemophilia blood clotting factors (at 
section 1861(s)(2)(I) of the Act); certain oral anticancer drugs (at 
section 1861(s)(2)(Q) of the Act); certain oral antiemetic drugs (at 
section 1861(s)(2)(T) of the Act); pneumococcal pneumonia, influenza 
and hepatitis B vaccines (at section 1861(s)(10) of the Act)). For ease 
of reference, when discussing products paid separately as drugs or 
biologicals in this proposed rule, we will generally refer to these as 
``drug or biological products.'' The proposed code application and 
evaluation processes for drug or biological products are described in 
section IV.B. of this proposed rule.
    For purposes of the proposals regarding HCPCS Level II coding 
procedures in section IV.B. of this proposed rule, the term ``non-drug, 
non-

[[Page 70376]]

biological items and services'' refers to items and services that 
Medicare (and potentially other payers, such as private insurers) 
typically pay separately \28\ and that are described in the following 
list,\29\ as well as certain items and services that are not covered 
under Medicare (as described in the following list):
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    \28\ Items and services that are separately payable would not be 
included in a bundled payment. We discuss this in more detail in 
section IV.B.2 of this proposed rule.
    \29\ The statutory citations and corresponding definitions are 
not intended to be strict definitions of the items and services in 
these categories or the categories themselves, but are intended for 
purposes of describing the types of non-drug, non-biological items 
and services that are subject to the HCPCS Level II code application 
process.
---------------------------------------------------------------------------

     Medical and surgical supplies, such as splints and casts 
described in section 1861(s)(5) of the Act and therapeutic shoes 
described in section 1861(s)(12) of the Act.
     Dialysis supplies and equipment such as those described in 
section 1861(s)(2)(F) of the Act.\30\
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    \30\ Beginning January 1, 2011, all renal dialysis services 
defined under 42 CFR 413.171 are paid under the ESRD PPS, and 
therefore, we do not pay separately for most dialysis supplies and 
equipment. However, the transitional drug add-on payment adjustment 
(TDAPA) and the transitional add-on payment adjustment for new and 
innovative equipment and supplies (TPNIES), available under the ESRD 
PPS (42 CFR 413.234 and 413.236), require separate coding for 
certain items and services that are eligible for a payment 
adjustment.
---------------------------------------------------------------------------

     Ostomy and urological supplies such as those described in 
section 1861(s)(8) of the Act.
     Surgical dressings such as those described in section 
1861(s)(5) of the Act.
     Prosthetics (artificial legs, arms, and eyes) such as 
those described in section 1861(s)(9) of the Act and prosthetic devices 
such as those described in section 1861(s)(8) of the Act.
     Orthotics (leg, arm, back, and neck braces) such as those 
described in section 1861(s)(9) of the Act.
     Enteral/parenteral nutrition such as those described in 
section 1842(s)(2) of the Act.
     Durable Medical Equipment (and related accessories and 
supplies other than drugs), such as oxygen and oxygen equipment, 
wheelchairs, infusion pumps, and nebulizers such as those described in 
sections 1861(s)(6) and 1861(n) of the Act.
     Vision items and services, such as prosthetic lenses 
described in section 1861(s)(8) of the Act.
     Other items and services that are statutorily excluded 
from Medicare coverage for which CMS or other government or private 
insurers have identified a claims processing need for a HCPCS Level II 
code, such as hearing aids which are excluded from coverage by section 
1862(a)(7) of the Act.
    We note that these are the general categories of non-drug, non-
biological items and services currently listed in the HCPCS Level II 
code application \31\ on our website. For purposes of this proposed 
rule, the term non-drug, non-biological items and services does not 
include drugs covered under the DME benefit as supplies put directly 
into DME, such as a nebulizer or infusion pump, to achieve the 
therapeutic benefit of the DME (such drugs, as noted previously, are 
considered ``drug or biological products'' under this proposed rule), 
but does include gaseous or liquid oxygen put into oxygen equipment 
(tanks or other containers).
---------------------------------------------------------------------------

    \31\ HCPCS Code Application, Question #3.
---------------------------------------------------------------------------

    The proposed code application procedures and evaluation processes 
in section IV.B of this proposed rule would not apply to other items 
and services described in procedural codes for oral health and 
dentistry that begin with the letter ``D'' (CDT[supreg] codes), which 
are published, copyrighted, and licensed by the American Dental 
Association (ADA) and are not maintained by CMS, nor items and services 
coded by CMS internally that are not based on an external application 
request and are based exclusively on Medicare claims processing needs.
1. Proposed HCPCS Level II Coding Cycles and Related Policies
    As discussed in section IV.A.2. of this proposed rule, beginning in 
January 2020, the following coding cycles for HCPCS Level II code 
applications apply: (1) For non-drug, non-biological items and 
services, coding cycles begin no less frequently than bi-annually; and 
(2) for drug or biological products, coding cycles begin no less 
frequently than quarterly. As discussed in more detail later in the 
section, we propose to codify these coding cycles and certain related 
policies for code applications for non-drug, non-biological items and 
services, and for drug or biological products. We propose to add new 
sections Sec. Sec.  414.8 and 414.9 to set forth these proposed 
policies.
a. Coding Cycles for Non-Drug, Non-Biological Items and Services
    We propose that for HCPCS Level II code applications for non-drug, 
non-biological items and services, we would continue to begin a new 
coding cycle for such code applications no less frequently than bi-
annually. Subject to the exceptions proposed and explained later in 
this section, we also propose that for each coding cycle for non-drug, 
non-biological items and services, we would continue to: (1) Establish 
a deadline for submitting code applications in or around January or 
June each year (depending on the cycle) on the CMS website or in 
another manner; (2) issue preliminary recommendations (a preliminary 
recommendation may also include questions or requests for additional 
information that could help CMS in reaching a final decision) on code 
applications that will be addressed at the public meeting on the CMS 
website or in another manner prior to the relevant public meeting; (3) 
hold public meetings to provide the public with an opportunity to 
become aware of and provide input on code applications and preliminary 
recommendations under consideration for that coding cycle; and (4) 
issue final coding decisions on the CMS website or in another manner 
within approximately 6 months of the code application deadline. 
Consistent with our current practice, coding changes would become 
effective approximately 3 months after issuance of the final coding 
decision. We propose to add new Sec.  414.8(b), (c), (d) and (e) to set 
forth these proposed procedures.
    We currently post all of our final coding decisions on the CMS 
website at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo. We 
believe these proposed bi-annual coding cycles for non-drug, non-
biological items and services allow us sufficient time to issue 
preliminary recommendations in advance of the public meetings and to 
meet the statutory requirement under section 531(b) of BIPA that we 
permit public consultation on coding determinations for new DME (which 
we currently accomplish through our public meetings), while also being 
responsive to previous stakeholder feedback requesting faster coding 
decisions. We note that even though section 531(b) of BIPA requires 
procedures for coding determinations for new DME that permit public 
consultation, as explained in section IV.A.2. of this proposed rule, we 
previously expanded public meetings to include all new HCPCS Level II 
code applications because we believe it is helpful to obtain public 
input on code applications for as many items and services as possible. 
Therefore, we are proposing at Sec. Sec.  414.8(d) and 414.8(b), to 
continue to include not only code applications for new DME items and 
services in the public meetings, but also code applications for all 
non-drug, non-biological items and services and to

[[Page 70377]]

follow the bi-annual coding cycle schedule for them.
    We also considered proposing coding cycles of no less frequently 
than quarterly for non-drug, non-biological items and services. While 
quarterly cycles for non-drug, non-biological items and services could 
provide for faster coding decisions on these items and services and 
would align with our proposal for quarterly coding cycles for drug or 
biological products, as further discussed in section IV.B.1.b. of this 
proposed rule, we believe quarterly coding cycles would not allow us 
sufficient time to evaluate the applications for all non-drug, non-
biological items and services, issue preliminary recommendations, hold 
public meetings, and issue final coding decisions. All of these 
activities would require more than 3 months to complete. As described 
earlier in this section, we are proposing to continue seeking public 
input at our public meetings on preliminary recommendations issued for 
all non-drug, non-biological items and services under consideration in 
a given bi-annual coding cycle, and not just for new DME items and 
services. In addition, in our experience, applications for non-drug, 
non-biological items and services tend to be more complex or require 
more research and review time than code applications for drug or 
biological products, and therefore we typically need more than 3 months 
for their evaluation. For example, non-drug and non-biological items 
and services may not be regulated by the Food and Drug Administration 
(FDA) and therefore, the manufacturer may not conduct clinical studies 
and in that case we may not receive clinical studies with the HCPCS 
Level II code application. Thus, applications for such items and 
services would require independent review and research by CMS to 
evaluate, for example, whether the item or service has functional or 
clinical differences compared to other similar items and services 
already described in the code set and thus, we would need more time to 
gather such information, if available, and review the code application. 
By contrast, as described in section IV.B.1.b. of this proposed rule, 
drug or biological products are regulated by the FDA and code 
applications for approved drug or biological products include detailed 
FDA documentation, which typically include clinical information and 
studies that assist us in evaluating the application. Thus, typically 
we require less time to assess such applications than many of the 
applications for non-drug, non-biological items and services. As a 
result, while we are proposing quarterly coding cycles for drug or 
biological products, we believe bi-annual cycles are more appropriate 
for applications for non-drug, non-biological items and services.
    We also propose at Sec.  414.8(e)(3), consistent with our current 
practice, that in circumstances where code applications for non-drug, 
non-biological items or services raise complex or significant issues or 
considerations and we determine that additional time is needed to 
evaluate such applications, we may delay issuing a preliminary 
recommendation and therefore delay the final coding decision. We note 
that a decision to delay a preliminary recommendation would have the 
effect of pushing the code application to the next coding cycle for 
further determination. In addition, after issuing a preliminary 
recommendation, we may delay issuing the final coding decision. These 
delays may be for one or more coding cycles (depending on the nature 
and timing of the issues raised). While we make every effort to 
complete our review and issue final coding decisions for all timely and 
complete code applications within the applicable coding cycle, there 
are occasions where additional time and evaluation are necessary to 
fully assess certain applications because the code application raises 
complex or significant issues or considerations. These circumstances 
would include, but are not limited to, situations where the code 
application involves a significant policy consideration (for example, a 
unique issue related to a specific item or service or group of items or 
services, such as appropriate coding for combination products that 
include a drug and a service component), involves a significant claims 
processing consideration (for example, operational issues arising from 
a coding action requiring significant revisions to the claims 
processing system, such as re-tooling to add another character to the 
price field to accommodate higher prices than contemplated when the 
system was established, including determining whether the claims 
processing system change could be made, and in what timeframe, to 
ensure that the coding solution would be viable, or whether an 
alternative solution needs to be implemented before publishing new 
codes), or requires in-depth clinical or other research.
    We note that under our current process, we also may delay issuing 
preliminary recommendations and final coding decisions on code 
applications because we need additional time to evaluate the 
applications. We note that this occurs infrequently, and we believe it 
is important to continue this practice to allow us sufficient time to 
evaluate and determine appropriate coding actions on certain 
applications. While we expect to make a final coding decision within 
the next coding cycle in most instances where we determine such delays 
are necessary, we may further delay issuing a preliminary 
recommendation and final coding decision, or a final coding decision 
after a preliminary recommendation, to subsequent coding cycles. We 
expect extended delays would be rare and would only occur if necessary 
due to significant complexities arising from an application that 
requires additional consideration and time to come to a preliminary 
recommendation or final coding decision. We believe the ability to 
extend our evaluation of an application in limited circumstances for 
more than one bi-annual coding cycle may be necessary to account for 
potential significant complexities presented by individual 
applications, particularly in light of the proposed bi-annual coding 
cycles, so that we can continue to ensure we have sufficient time as 
well as information needed to determine the most appropriate coding 
action. Therefore, we propose that, where additional time and 
evaluation are necessary to fully assess an application (including in 
the circumstances described earlier), we may delay issuing a 
preliminary recommendation, and therefore, the final coding decision, 
or after making a preliminary recommendation, we may delay issuing a 
final coding decision alone, on the application for one or more coding 
cycles. We propose to add new Sec.  414.8(e)(3) to set forth this 
proposed policy. We note that prior to a final coding decision, 
miscellaneous codes are available for assignment by insurers, if they 
deem appropriate, to allow suppliers to begin billing for an item or 
service as soon as it receives FDA marketing authorization for those 
items and services that require such marketing authorization, or as 
soon as it begins marketing for those items and services that do not 
require FDA marketing authorization, including during the HCPCS code 
application review process.
    In cases in which we determine that we need additional time to make 
a preliminary recommendation, we propose that we would continue our 
current practice of issuing a determination that additional time is 
needed to evaluate a particular

[[Page 70378]]

application, either on the CMS website or in another manner, at the 
same time that we issue preliminary recommendations for other items and 
services included in that coding cycle (see proposed Sec.  
414.8(e)(3)(iii)). We also may seek additional information from the 
applicant or other sources or both as we continue to consider the 
application, which is consistent with our current practice.
    In cases in which a preliminary recommendation is issued, but we 
later determine that we need additional time to come to a final coding 
decision, we propose to continue our current practice of issuing a 
determination that additional time is needed to evaluate a particular 
application, either on the CMS website or in another manner, at the 
same time that we issue final coding decisions for other items and 
services included in that coding cycle (see proposed Sec.  
414.8(e)(3)(iii)). In such cases, we propose to continue to evaluate 
that application in the next coding cycle and note that per proposed 
Sec.  414.8(e)(3) it could be delayed into additional subsequent 
cycles. We may seek additional information from the applicant or other 
sources or both as we continue to consider the application.
b. Coding Cycles for Drug or Biological Products
    We propose that for HCPCS Level II code applications for drug or 
biological products, we would continue to begin new coding cycles for 
such code applications no less frequently than quarterly. Subject to 
the exceptions proposed and explained later in this section, we also 
propose that for each coding cycle for applications for drug or 
biological products, we would continue to: (1) Establish (on the CMS 
website or in another manner) a deadline for submitting code 
applications, which would occur in or around January, April, June, or 
September each year depending on the cycle; and (2) issue final coding 
decisions on the CMS website or in another manner, within approximately 
3 months of the code application deadline. Coding changes would become 
effective approximately 3 months after issuance of the final coding 
decisions. We currently post summaries of the applications with our 
final coding decisions on the CMS website at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo. We propose to codify these procedures 
at proposed Sec.  414.8(b), (c)(2), and (e).
    The proposed quarterly coding cycles for drug or biological 
products are responsive to previous stakeholder feedback requesting 
faster coding cycles for such products. We also believe that faster 
coding cycles may facilitate and expedite claims processing and 
launching new products into the marketplace for providers and patients. 
We believe that quarterly cycles are appropriate for most drug or 
biological product applications because it is our experience that drug 
or biological product applications tend to be more straightforward and 
take less time to assess than many of the applications for non-drug, 
non-biological items and services. Most separately paid Part B drugs 
are paid using the methodology in section 1847A of the Act, and the 
code evaluation process for many drug or biological products is based 
on Medicare statutory requirements consistent with section 1847A of the 
Act. Specifically, section 1847A of the Act requires different payment 
methodologies for single source drugs, multiple source drugs, and 
biological products (including biosimilar biological products), which, 
in turn, necessitates separate codes for purposes of facilitating 
separate payment amounts. The use of separate codes for this purpose is 
discussed further in subregulatory guidance published in 2007 (https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Downloads/051807_coding_annoucement.pdf). In most cases, information pertaining 
to the need for separate payment amounts for drug or biological 
products under section 1847A is driven by factors such as the FDA 
approval pathway (for example, a Biologics License Application (BLA), 
New Drug Application (NDA), or Abbreviated New Drug Application (ANDA)) 
as well as Therapeutic Equivalence ratings as provided in section 
1847A(c)(6)(C). Information on these factors is easy to obtain using 
public sources such as Daily Med (https://dailymed.nlm.nih.gov/dailymed/index.cfm), the Orange Book (https://www.accessdata.fda.gov/scripts/cder/ob/), and the Purple Book (https://purplebooksearch.fda.gov/). In addition, the FDA approval processes for 
drug or biological products, and the accompanying documentation 
provided with external HCPCS Level II code applications for those 
products, which includes clinical data, information relevant to the 
safety profile, clinical indications for use, contraindications, and 
appropriate use or dosing intervals and other information, helps us 
evaluate those applications faster and tends to allow CMS to make final 
coding decisions about the program need for a code and the information 
required for a code descriptor without the need for public input. The 
proposed procedures for evaluating drug or biological product code 
applications are discussed in more detail in section IV.B.2. of this 
proposed rule. For situations where more detailed information may be 
required to support coding decisions pertaining to an external code 
application, for example if we are not able to immediately establish 
whether the drug is separately payable under Part B, we may delay the 
final coding decision to a subsequent coding cycle as proposed later in 
this section.
    Furthermore, except for code applications that are resubmitted for 
reevaluation as provided in proposed Sec.  414.9(b), and code 
applications where a decision is delayed under proposed Sec.  
414.8(e)(3) that present program, policy, or implementation concerns or 
complexities, or otherwise raise questions that public input could help 
to address (see proposed Sec.  414.8(d)(4)(ii)), we propose that, 
consistent with our current procedures, we would not hold public 
meetings or issue preliminary recommendations for drug or biological 
product code applications. Because of the additional time needed to 
prepare for and hold the public meetings, we believe it would not be 
feasible to include public meetings within the quarterly cycles. We 
note that there is no statutory requirement for public consultation on 
drug or biological product coding determinations. We propose to set 
forth this proposed policy at new Sec.  414.8(d)(4). We refer readers 
to section IV.B.1.d. of this proposed rule where we propose to add drug 
or biological product applications to a bi-annual public meeting agenda 
if an applicant is dissatisfied with a prior final coding decision and 
submits an application for reevaluation. We refer readers to later in 
this section where we propose that we may add drug or biological 
product applications to a bi-annual public meeting if the code 
applications are delayed and present program, policy, or implementation 
concerns or complexities, or otherwise raise questions that public 
input could help to address.
    We also considered coding cycles of no less frequently than bi-
annually for applications for drug or biological products, which would 
align with our proposal for bi-annual coding cycles for non-drug, non-
biological items and services discussed in section IV.B.1.a. of this 
proposed rule and enable us to include all drug or biological product 
applications in the public meeting process. While we understand there 
is value in providing an opportunity for the public to submit input and 
for CMS to consider public input on all applications, we also believe 
that by

[[Page 70379]]

expediting coding decisions for drug or biological products and the 
incorporation of such products in the claims processing system, 
quarterly coding cycles for drug or biological product applications may 
facilitate patient and provider access to new products. In addition, as 
explained previously, we believe that generally, we can make well-
informed HCPCS Level II coding decisions for drug or biological 
products based on the information contained in the code applications 
without a public meeting given that applications for such products are 
largely evaluated based on Medicare statutory requirements consistent 
with section 1847A of the Act, and the code applications include 
detailed FDA documentation, as discussed earlier in this section. Given 
these considerations, we believe that more expeditious coding for these 
products outweighs the benefit of including such applications in the 
public meeting process.
    As noted, the trade-off for conducting public meetings for 
applications for drug or biological products would be longer coding 
cycles, such as bi-annual cycles, to accommodate the time required to 
prepare preliminary recommendations and conduct public meetings, 
evaluate public input received from the public meetings, and reach 
final coding decisions for such applications. We seek comments on 
whether it would be appropriate or preferable to instead adopt coding 
cycles of no less frequently than bi-annually for drug or biological 
product code applications, which would enable us to issue preliminary 
recommendations and solicit public input at public meetings on all such 
products for a given coding cycle.
    For applications for drug or biological products, we propose at 
Sec.  414.8(e)(3) that, consistent with our current practice, in 
circumstances where the code application raises complex or significant 
issues or considerations and we determine that additional time is 
needed to evaluate the code application, we may delay issuing a final 
coding decision by one or more coding cycles. While we will make every 
effort to complete our review of all timely and complete code 
applications within the applicable coding cycle, there will be 
occasions where additional time and evaluation are necessary to fully 
assess certain applications because the application raises complex or 
significant issues or considerations. These circumstances would 
include, but are not limited to, situations where the code application 
involves a significant policy consideration (for example, a unique 
issue related to a specific drug or biological product or group of drug 
or biological products), or a significant claims processing 
consideration (for example, operational issues arising from a coding 
action requiring significant revisions to the claims processing 
system); or the code application requires in-depth clinical or other 
research (for example, if we are not able to immediately establish 
whether the drug is separately payable under Part B). Based on coding 
experience with Part B drugs since the implementation of section 1847A 
of the Act, we anticipate that these situations would be particularly 
rare for drug or biological product applications, which tend to be more 
straightforward than applications for non-drug, non-biological items 
and services, as explained earlier in this section. While in most 
instances where we determine such a delay is necessary we expect to 
make a final coding decision within the next coding cycle, we propose 
that in certain circumstances, we may further delay issuing a final 
coding decision into a subsequent coding cycle. We expect this would be 
a rare occurrence, and would only be done if necessary due to 
significant complexities arising from an application that requires 
additional consideration and time to come to a final coding decision. 
We believe the ability to extend our evaluation of an application in 
limited circumstances for more than one coding cycle may be necessary 
to account for potential significant complexities presented by 
individual applications, particularly in light of the proposed shorter 
coding cycles, so that we can continue to ensure we have sufficient 
time, as well as information needed, to determine the most appropriate 
coding action. We propose to set forth this proposed policy at new 
Sec.  414.8(e)(3). As is our current practice, we also propose that we 
would continue to issue a determination that additional time is needed 
to evaluate a particular application on the CMS website or in another 
manner at the same time that we issue final coding decisions for drug 
or biological products included in that coding cycle, in the same way 
as described in section IV.B.1.a. of this proposed rule for non-drug, 
non-biological items and services (see proposed Sec.  
414.8(e)(3)(iii)). We reiterate that we believe such delays would occur 
infrequently, and we would make every effort to complete our review and 
issue final coding decisions for all timely and complete code 
applications within the applicable coding cycle.
    Additionally, in some of these situations where we delay a final 
coding decision we propose at Sec.  414.8(d)(4)(ii) that we may also 
add the application to the agenda for a public meeting, in order for 
CMS to obtain further input and public discussion of the application. 
We would add an application for a drug or biological product to a 
public meeting agenda only when we believe that an individual 
application requires additional consideration because it presents 
program, policy, or implementation concerns or complexities, or 
otherwise raises questions that public input could help to address, 
such as where we believe we may need input from other external sources 
such as clinicians or other users of the product. For example, we 
believe it may be helpful to gather public input when a request to code 
a new drug that is similar to other drugs categorized within existing 
HCPCS Level II codes would involve modifying, discontinuing existing 
codes, or replacing those existing codes with new ones. In these types 
of circumstances, gathering public input through the public meeting 
process could facilitate our review of the application and assist in 
reaching an appropriate coding decision. If an application is put on a 
public meeting, we propose that we would issue a preliminary 
recommendation prior to that public meeting. In order to provide 
sufficient time to prepare for the public meeting, we would not be able 
to include the application on a public meeting in the quarter in which 
it is submitted, even if regular bi-annual public meetings were held in 
that quarter. In other words, if an application for a drug or 
biological product is included in a public meeting it would need to 
follow the bi-annual cycle schedule and would also be subject to the 
proposals that allow for delay of preliminary recommendations and final 
coding decisions for one or more cycles under new Sec.  414.8(e)(3). 
Given that including a drug or biological product code application on a 
public meeting agenda could result in delaying a final coding decision 
more than one quarterly cycle given the bi-annual public meeting 
timelines, we would weigh the benefit of and need for receiving public 
input with the interests of making final coding decisions as quickly as 
possible when deciding whether to put a drug or biological product code 
application on a public meeting agenda. For instance, while we may 
determine that we need to delay a final coding decision on an 
application for a drug or biological product to consider complexities 
or other concerns internally, if we do not

[[Page 70380]]

believe public input is needed, we may decide not to place the 
application on a public meeting agenda, which would give flexibility to 
potentially come to a final coding decision in the next quarterly 
coding cycle. For example, if an application is submitted by the 
deadline in the second quarterly coding cycle, which has an application 
deadline around April, and we decide to delay the final decision, if we 
also decide to put the application on a public meeting agenda, the 
earliest public meeting it could be placed on would be the public 
meeting for the second bi-annual cycle, which would necessarily delay 
the final decision at least two quarterly cycles. However, if the final 
decision is delayed but it is not placed on a public meeting agenda it 
may be possible to come to a final decision within the next quarterly 
cycle, depending on the circumstances. Our goal is to make every 
attempt to make final coding decisions as quickly as possible and avoid 
unnecessary delays. We note that any determination to include an 
application in a public meeting would be initiated by CMS based on the 
considerations described in this section and would not be granted based 
on requests from an applicant.
    We also seek public comment on whether there may be other 
circumstances under which it may be appropriate for CMS to decide to 
include a drug or biological product application in a public meeting 
(for example, when an applicant requests to add such an application to 
the public meeting process; or other particular circumstances where a 
public meeting would be important). However, we note that unless the 
addition of an application for drug or biological product to a public 
meeting agenda is a rare occurrence, we believe that the operational 
burden of accommodating public meetings for these products could make 
it infeasible for CMS to carry out a quarterly coding review cycle for 
drug or biological product applications. Consequently, if stakeholders 
favor public meetings for the review of applications for drug or 
biological products on other than a very infrequent basis, it is likely 
that we would need to consider implementing bi-annual coding cycles for 
all drug or biological product applications, including a public meeting 
component.
    As an alternative to including the code applications described at 
proposed Sec.  414.8(d)(4)(ii) in a public meeting, we considered 
soliciting public input for such applications through the CMS website 
(rather than a public meeting). We considered that such a web-based 
public input process would occur bi-annually, as the public meetings 
do, and would include posting on CMS' HCPCS website either a 
preliminary HCPCS coding recommendation, one or more coding options for 
which we are seeking feedback, one or more questions, or other requests 
for comment or information that would help CMS formulate a coding 
decision. We considered that this process could be applied to the same 
types of code applications we propose at Sec.  414.8(d)(4)(ii) to 
include in a public meeting, that is, where we determine to delay a 
decision on a code application and we determine the application 
requires additional consideration because it presents program, policy, 
or implementation concerns or complexities, or otherwise raises 
questions that public input could help to address. We considered that a 
15-calendar day period for public input could be applied under such a 
process, with the comment window beginning on the date that the public 
would be invited to comment on the CMS website. We note that a 15-
calendar day period is approximately the same amount of time we 
currently provide for submitting public input on preliminary 
recommendations issued for non-drug, non-biological code applications 
in the public meeting agenda (which is generally posted approximately 
two weeks prior to the associated public meeting), including written 
and oral comments related to public meetings, if received by the end of 
the public meeting at which the relevant application is discussed. 
Similar to the proposal to add select drug or biological product 
applications to the public meeting process, in order to provide 
sufficient time to prepare either a preliminary HCPCS coding 
recommendation, one or more coding options for which we are seeking 
feedback, one or more questions, or other requests for comment or 
information that would help CMS formulate a coding decision, we believe 
that we would not be able to put an application through such a web-
based public input process in the same quarter in which the application 
is submitted and would need to follow the bi-annual cycle schedule. We 
considered that we would also similarly weigh the benefit of and need 
for receiving public input through such a web-based process with the 
interests of making final coding decisions as quickly as possible when 
deciding whether to put a drug or biological product code application 
through such a web-based public input process, given the potential that 
a final decision may be delayed more than two quarters depending on the 
timing of the bi-annual public input periods. While we are not 
proposing in Sec.  414.8(d)(4)(ii) a web-based public input process for 
drug or biological product code applications described in that proposed 
provision, we seek comment on the alternative we considered (as 
discussed previously) to solicit public input for such drug or 
biological product applications through the CMS website (rather than in 
a public meeting). We also seek comment on whether there may be other 
specific circumstances in which public input via such a web-based 
public input process may be useful, considering that under the shorter 
coding cycles only a limited number of applications could be 
accommodated.
c. Proposed Requirements for Applications To Be Considered in a Coding 
Cycle
    Consistent with our current procedures and requirements for HCPCS 
Level II code applications, we propose at new Sec.  414.9(a) that to be 
considered in a given coding cycle, an application must be timely and 
complete. We further propose that an application that is not timely and 
complete would be declined by CMS but may be submitted by the applicant 
in a subsequent coding cycle. We propose at new Sec.  414.9(a)(1) that 
an application is timely if it is submitted to CMS by the applicable 
code application submission deadline specified by CMS for each coding 
cycle, which CMS posts on its website or in another manner, or as 
specified in proposed Sec.  414.9(a)(3). We propose at new Sec.  
414.9(a)(2)(i) that an application would be considered complete if it 
includes, by the applicable code application submission deadline, the 
applicable information and documentation required in proposed Sec.  
414.9, and meets the administrative elements as specified by the 
application instructions issued by CMS and posted on the CMS website 
(for example, it includes answers to all of the application questions, 
includes required FDA documentation, and is within the page limit). We 
also propose at new Sec.  414.9(a)(2)(ii) that, consistent with our 
current practice, for an application to be complete, the applicant 
provide FDA documentation of the item's current classification, as 
applicable, as well as FDA marketing authorization documentation, or 
provide the regulation number under 21 CFR parts 862 through 892 for a 
device exempted from the premarket notification requirement. If a 
device exceeds the limitations to the exemptions under 21 CFR parts 862 
through 892 of the device

[[Page 70381]]

classification regulations, the appropriate marketing authorization 
documentation must be submitted to CMS as part of the application. We 
propose that FDA documentation of the item's current classification, as 
applicable, and FDA marketing authorization documentation, or the 
regulation number under 21 CFR parts 862 through 892 for a device 
exempted from the 510(k) requirement would be required to be submitted 
with the code application by the relevant HCPCS Level II code 
application deadline, for an application to be complete.
    Additionally, for biosimilar biological products, we propose to 
allow a 10-business day extension past the application deadline to 
provide a complete application, including FDA marketing authorization 
documentation, if the proposed criteria discussed later in this section 
are met. Under the annual coding cycle prior to 2020, for drug or 
biological product code applications, we provided a 3-month extension 
for submission of FDA marketing authorization documentation and to 
provide updates to the application based on the FDA marketing 
authorization documentation. However, the shorter quarterly coding 
cycles for drug or biological product applications cannot accommodate a 
3-month extension for submission of FDA marketing authorization 
documentation and to update the application based on that 
documentation, as was previously offered under the annual coding cycle, 
and thus, beginning in 2020, we eliminated the 3-month extension to 
enable the quarterly coding cycles for drug or biological products. 
Therefore, currently, in order for an application to be complete, code 
applications must be submitted by the application deadline with the 
aforementioned FDA documentation. Under the shorter quarterly coding 
cycles, applicants who are unable to submit a complete application, 
including the required FDA marketing authorization documentation, by 
the application deadline for a given coding cycle would be able to 
submit the application and required FDA marketing authorization 
documentation for the next quarterly cycle, provided the application is 
complete by the next coding cycle's application deadline. We note that 
under our previous annual coding process prior to 2020, the next 
opportunity to submit was the next annual coding cycle.
    Our recent changes to the coding cycles were designed to facilitate 
more rapid coding, which could be frustrated if required FDA 
documentation is unavailable for a large number of applications at the 
deadline because the items have not yet received FDA marketing 
authorization, or if a lengthy extension is allowed in order to provide 
such documentation. We have concerns about the impact of extending the 
submission deadline for required FDA marketing authorization 
documentation and the impact that not having the documentation would 
have on the ability to provide complete information in the rest of the 
application and how that could further compress the amount of time 
available to process applications. We also have concerns about allowing 
deadline extensions for all drug or biological product code 
applications given our resources and the compressed review timeframe 
under shorter quarterly coding cycles. If we were to consider 
extensions to accommodate submission of required FDA documentation for 
all drug or biological product code applications, we believe that this 
would potentially strain our resources and possibly hinder our ability 
to thoroughly evaluate applications and issue final coding decisions in 
a timely manner. Therefore, we do not believe an extension for the 
submission for required FDA documentation would be feasible for all 
drug or biological product applications. However, we recognize that 
there may be instances in which an extension to accommodate the 
submission of required FDA documentation past the quarterly application 
deadline for certain items and services could serve broader Medicare 
programmatic goals, particularly where expedited coding could 
facilitate and expedite claims processing, without straining our 
resources and possibly hindering our ability to thoroughly evaluate and 
issue final coding decisions for all the applications we receive in a 
given coding cycle.
    Stakeholders have mentioned biosimilar biological products as a 
type of product that might warrant an extension for submitting required 
FDA documentation beyond the code application deadline while still 
allowing a coding decision to be made within a particular coding cycle 
to facilitate faster coding for such products. A biosimilar biological 
product is a biological product that is highly similar to and has no 
clinically meaningful differences in terms of safety, purity, and 
potency from an FDA-approved biological reference product.\32\ In the 
Revisions to the Payment Policies under the Physician Fee Schedule and 
Other Revisions to Part B for CY 2018 final rule (CY 2018 PFS and Other 
Revisions to Part B final rule) (82 FR 53186) we finalized a policy to 
separately code and pay for biosimilar biological products under 
Medicare Part B. In that final rule, we noted that we were persuaded 
that there is a program need for assigning Part B biosimilar biological 
products into separate HCPCS codes, and specifically that the policy 
would address concerns about a stronger marketplace, access to these 
drugs in the United States marketplace, provider and patient choice and 
competition. As stated in the CY 2018 PFS and Other Revisions to Part B 
final rule (82 FR 53186), we believe that the change in policy 
encourages the innovation needed to bring more products to the market 
by encouraging greater manufacturer participation in the marketplace 
and the introduction of more biosimilar biological products, thus 
creating a stable and robust market, driving competition and decreasing 
uncertainty about access and payment. Additionally, we stated we 
believe that the policy provides physicians with greater certainty 
about biosimilar payment and that, in turn, that will affect 
utilization of biosimilar biological products, creating more demand 
that would help increase competition (82 FR 53186). We also anticipated 
greater access to biosimilar biological products and that more price 
competition between more products would occur. Finally, as stated in 
the CY 2018 PFS and Other Revisions to Part B final rule (82 FR 53186), 
we believed the change in policy could lead to additional savings for 
Medicare and its beneficiaries over the long-term by increasing the 
utilization of products that are less expensive than reference 
biologicals. We believe that providing a code application deadline 
extension for biosimilar biological products to accommodate the 
submission of required FDA documentation past the application deadline 
would similarly support the goal of a competitive market because it 
will facilitate faster assignment of a separate HCPCS code, which we 
believe will increase the availability of and access to biosimilar 
biological products. We also believe that providing an extension for 
submitting the required FDA documentation for biosimilar biological 
products will help further the President's initiative to promote access 
to generics and biosimilar biological products in order to lower 
prescription drug costs for all Americans.\33\ We believe this 10-

[[Page 70382]]

business day extension would be helpful for manufacturers of biosimilar 
biological products seeking a HCPCS Level II code who receive their FDA 
marketing authorization just after the deadline for submitting an 
application in a given coding cycle, and because we do not currently 
receive many applications for biosimilar biological products, we do not 
believe this extension would impact our ability to review all the 
applications and issue final coding decisions in a particular coding 
cycle. We do not believe an extension longer than 10-business days 
would be feasible given the number of applications we receive in a 
coding cycle and the resources for evaluating those applications. We 
note that if we were to begin receiving a large number of applications 
for biosimilar biological products within the 10-business day extension 
period in a coding cycle, and the number of applications negatively 
impacted our timely review of all of the applications we received, we 
might decide to reconsider this proposed policy, if finalized.
---------------------------------------------------------------------------

    \32\ See section 351(i)(2) of the Public Health Service Act.
    \33\ See ``Increasing Access to Generics and Biosimilars in 
Medicare'' (Feb. 5, 2020) available at https://www.cms.gov/blog/increasing-access-generics-and-biosimilars-medicare.
---------------------------------------------------------------------------

    Thus we propose to add a new policy at new Sec.  414.9(a)(3) that 
would establish a 10-business day extension past the code application 
deadline for submitting a complete application, including FDA marketing 
authorization documentation, for biosimilar biological products. We 
propose that this extension would apply only if the following proposed 
criteria are met: (1) The marketing authorization documentation is 
dated between the first day of the extension period and no later than 
the last day of the extension period; and (2) the applicant submits a 
complete application to CMS by the last day of the extension period. We 
believe these proposed limitations are necessary to limit the deadline 
extension only to those applicants that receive marketing authorization 
after the regular quarterly application deadline and before the end of 
the extension period. We believe a 10-business day extension would be 
an adequate and reasonable amount of time for applicants, given the 
proposed shorter quarterly coding cycles, while still allowing enough 
time for CMS to evaluate the code application and generally make a 
final coding decision within the quarterly coding cycle. We also 
considered an extension of up to 3 weeks. Because there are only a 
limited number of days in the quarterly coding cycle to evaluate the 
applications and because we are usually already heavily involved in 
application review by that point, we believe it would be very difficult 
for us to provide an extension beyond 10 business days and still be 
able to make a final coding decision in the quarterly coding cycle. 
Given implementation of shorter, quarterly coding cycles, we believe it 
is reasonable to have applicants submit a full and complete application 
in the next coding cycle when complete documentation cannot be 
submitted by the 10-business day extension after the code application 
deadline. We also considered extensions shorter than 10 business days, 
but we believe shorter extensions might not make a meaningful 
difference for applicants to receive an FDA decision and submit the 
required documentation to CMS.
    Also, while we do not believe an application deadline extension to 
accommodate later submission of required FDA documentation would be 
feasible for all drug or biological product applications given our 
resources and the compressed review timeframe under shorter coding 
cycles, we seek comment on other potential circumstances that could 
warrant such a deadline extension within the quarterly coding cycles 
(for example, for particular drugs or drug classes). We note however 
that our ability to accommodate any extension is based on our 
expectation that the extension would impact only a limited number of 
applications. If the number of applications that are submitted to CMS 
within an extension period becomes too large, we may need to reevaluate 
the policy, if finalized. We also seek comment on the appropriate 
length of an extension for those circumstances, taking into 
consideration that one possible approach to address requests for more 
lengthy extensions, or a higher volume of applications submitted within 
an extension period, may be a longer coding cycle (for example, a bi-
annual coding cycle) for all drug or biological product applications. 
We also seek comment on the impact of product launch delays for 
biosimilar biological products once they are approved by the FDA. A 
number of biosimilar biological products have not been launched 
immediately after their approval by the FDA, thus we seek comment on 
whether a 10-day deadline extension is necessary.
    Consistent with current practice, we also propose at new Sec.  
414.9(a)(2)(iii) that in order for applications for non-drug, non-
biological items or services that are not subject to marketing 
authorization under the Federal Food Drug & Cosmetic Act (FD&C Act) or 
Public Health Service Act (PHSA) to be considered complete, the 
application must include evidence that the item or service is available 
in the U.S. market for use and purchase at the time of the relevant 
HCPCS Level II code application submission deadline specified by CMS. 
Prior to 2020, we had a requirement for 3 months of marketing activity 
at the time of the application deadline to create or revise a code for 
non-drug items, although an insurer could assign a miscellaneous code 
for use until such time as a coding decision is made.\34\ Beginning in 
2020, we adjusted the marketing criteria to only require evidence that 
the item or service is available in the U.S. market for use and 
purchase at the time of the relevant HCPCS Level II code application 
submission deadline, to improve the speed of beneficiary access to new 
items and services, and applied this policy to non-drug items that are 
not regulated by the FDA. We believe it is important that non-drug, 
non-biological items not subject to marketing authorization under the 
FD&C Act or PHSA be available in the U.S. market for use and purchase 
at the time of the relevant HCPCS Level II code application submission 
deadline as some measure of assurance that the item is available for 
prescription or use and thus is ready to receive a HCPCS Level II code. 
We believe this minimizes the chance of adding unnecessary codes or 
making updates to the code set that may not be useful, thus promoting 
administrative simplification and minimizing burden on insurers, 
providers, coders, and other users of the HCPCS code set. As discussed 
in more detail in section IV.B.2. of this proposed rule, a major goal 
of an effective code set is to strike a balance between sufficiently 
identifying and differentiating items and services and producing a 
manageable system and set of codes for users to efficiently submit and 
process claims. When a new code is added, updates

[[Page 70383]]

must be disseminated, policies and coding manuals revised, and medical 
records, billing software, and other systems changes are necessary to 
accommodate the new and revised codes. In addition, coders, providers, 
and suppliers have to be educated on and prepared for changes in codes 
to ensure they are accurately utilizing the appropriate code that best 
describes a specific item or services. By contrast, given the rigorous 
FDA marketing authorization processes, requirements for clinical data, 
and the user fees generally associated with the FDA marketing 
authorization processes, CMS believes that manufacturers of items that 
are subject to FDA marketing authorization intend to market the product 
that is the subject of the code application and as such we do not 
require evidence that these items are available in the U.S. market for 
use and purchase at the time of the relevant code application deadline. 
We note however that even if an item or service that is subject to FDA 
marketing authorization is not available on the U.S. market at the time 
of the application submission deadline, as noted in proposed Sec.  
414.9(a)(2), all such code applications must include the applicable FDA 
documentation and other information outlined in Sec.  414.9(a)(2), to 
be complete.
---------------------------------------------------------------------------

    \34\ HCPCS Level II codes include ``miscellaneous/not otherwise 
classified'' codes. Historically, these codes have been used when a 
supplier is submitting a bill for an item or service for which there 
is no existing code that adequately describes the item or service 
being billed. If a supplier or manufacturer has been advised to use 
a miscellaneous code (also known as unlisted code, unclassified 
code, or not otherwise specified code) because there is no existing 
code that describes the item or service but the supplier or 
manufacturer believes that a new code is needed, then the supplier 
or manufacturer may submit an application to add a new HCPCS Level 
II code. Significantly, miscellaneous codes allow suppliers to begin 
billing immediately for a service or item as soon as it is allowed 
to be marketed by the FDA in the absence of a specific HCPCS code--
including during the period when a request for a new code is being 
considered under the HCPCS code review process. In addition, to 
avoid the inefficiency and administrative burden of assigning 
distinct codes, miscellaneous codes also may be used for items or 
services that are rarely furnished or for which few claims are 
expected to be submitted.
---------------------------------------------------------------------------

    As described earlier in this subsection and at proposed Sec.  
414.9(a), we are proposing to decline applications received after the 
applicable deadline or that are incomplete. Applications that are 
declined because they are not submitted by the applicable deadline or 
are incomplete may be submitted in a subsequent coding cycle provided 
they are timely and complete by the applicable deadline for the 
subsequent coding cycle. We also considered allowing applicants to 
supplement incomplete applications after the application deadline for 
minor deficiencies or missing information that is insubstantial, such 
as a missing brochure or clinical study that is referenced by the 
applicant but not included as an attachment to the application. We 
weighed the benefits of accommodating the submission of such 
supplemental information within a coding cycle in cases where there are 
minor deficiencies, against the need for applicants to submit timely, 
complete applications. Given the shorter coding cycles we currently 
implement (which we propose to continue, as previously discussed), we 
believe it would be difficult to follow-up with numerous applicants 
within a cycle for missing information, and thus, we propose that an 
application must be timely and complete, in accordance with the 
criteria described earlier in this section, in order for the 
application to be considered and reviewed in a coding cycle. However, 
we seek comment on whether we should allow certain supplemental 
information to be submitted after the application deadline and in what 
circumstances (including requirements or timeframes we should impose 
for accepting additional information), recognizing that CMS would only 
have a limited amount of time and resources for following up about and 
obtaining missing information from applicants and may also have limited 
opportunities to consider supplemental information in the course of the 
coding review cycle. Please note that we would continue to allow 
applicants to supplement a complete application with additional 
materials up to the time of close of business on the date of the public 
meeting at which the application is discussed, as is our current 
policy.
d. Proposed Application Resubmission and Reevaluation
    As outlined in the HCPCS Level II Coding Procedures document posted 
on our website at: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/HCPCSCODINGPROCESS, we currently allow any applicant who is 
dissatisfied with our final coding decision to resubmit an application 
for a previously considered item or service in a subsequent coding 
cycle for us to reevaluate the final coding decision. Under our current 
policy, we allow applicants to resubmit HCPCS Level II code 
applications without limitation for items and services on which we 
previously reached a final coding decision. Although we have stated in 
our past guidance that previously unavailable information, additional 
explanations, or significant new information that supports such a 
reevaluation request may be helpful in informing CMS about why the 
prior decision should be changed, many resubmitted applications do not 
contain new information or specify a clear basis for us to reevaluate 
the previously submitted information or reconsider the prior final 
coding decision. As a result, we have spent time and resources 
reviewing applications that are resubmitted with substantially similar 
information, without a clear understanding of whether there is 
something new or whether aspects of the information previously 
submitted should be considered differently, such that it would warrant 
a change to our prior final coding decision. We are proposing to 
continue to allow applicants to resubmit code applications for 
reevaluation of prior final coding decisions. However, in the interest 
of reaching an appropriate coding decision and supporting efficient and 
expeditious review of all code applications that are resubmitted, we 
are proposing certain limitations and additional policies related to 
reevaluations of coding decisions.
    We propose at new Sec.  414.9(b)(1) that an applicant who is 
dissatisfied with a final coding decision on an initial code 
application may resubmit their application for reevaluation by CMS no 
more than two times. We propose that any application resubmitted for 
reevaluation must be timely and complete as specified in proposed Sec.  
414.9(a) and must include--(1) a description of the previous 
application submission(s); (2) a copy of the prior final coding 
decision(s); and (3) an explanation of the applicant's reason for 
disagreement with the prior final coding decision(s). The first time an 
applicant resubmits an application for reevaluation by CMS, we would 
not require, but would strongly encourage, that the applicant submit 
new information with the application. As we state in our current 
guidance, previously unavailable information, additional explanations, 
or significant new information that supports such a reevaluation 
request may be helpful in informing CMS about why the prior decision 
should be changed.
    In addition, at proposed Sec.  414.9(b), we propose that if an 
applicant is dissatisfied after our initial reevaluation of our prior 
final coding decision, we would allow one additional opportunity for 
the applicant to resubmit the application for reevaluation of the first 
resubmission decision. For a second application resubmission and 
reevaluation, we propose at Sec.  414.9(b)(2) that, in addition to the 
information and documentation required to be submitted with both 
resubmissions under proposed Sec.  414.9(b)(1), the application also 
must include the following: (1) Significant new information, defined as 
information that was not previously submitted to CMS with respect to 
the application that directly relates to the reason for the prior final 
coding decision(s) and could potentially change the final coding 
decision, and (2) an explanation of how the significant new information 
addresses and directly relates to the reason(s) for the previous final 
coding decision(s) and supports the request for a different coding 
decision. By significant new information, we mean information not 
previously submitted to CMS (for example, it was not included in the

[[Page 70384]]

prior application, and not submitted as a supplement to the prior 
application or in response to a preliminary recommendation issued for a 
prior public meeting up to the time of close of business on the date of 
the CMS HCPCS public meeting at which the application is discussed), 
and that directly relates to the reason for the prior final coding 
decision(s) (for example, significant new information could be a newly 
published relevant clinical study that supports a claim of a 
significant therapeutic distinction made, but unsupported, in the prior 
code application, or additional information that supports a claim in an 
initial application that the product performs a significantly different 
clinical function not captured in the current code set). The nature of 
the prior final coding decisions also would be relevant in determining 
whether the new information submitted would be considered significant 
new information within the meaning of this proposal. As in the example 
described previously, a new or additional clinical study may be 
considered significant new information if the previous final coding 
decision(s) directly relates to an unsupported claim of significant 
therapeutic distinction. If significant new information is not 
submitted with the second resubmission, or if the applicant does not 
provide the other information required to be provided with both 
resubmissions (as set forth at proposed Sec.  414.9(b)(1) and (2)), we 
would decline to reevaluate the application. We note that for an 
application to be considered for reevaluation it must be for the same 
item or service originally submitted, and it must be based on the same 
request made in the initial code application. For example, if an item 
receives a new indication that was not a part of the original 
application, a new and separate application would be required if the 
applicant seeks to address the new indication because the review of 
such an application would require new and different considerations.
    We believe that requiring applicants to include significant new 
information (and satisfy the additional requirements at proposed Sec.  
414.9(b)(1) and (b)(2)) when an application is resubmitted for a second 
reevaluation balances our desire to afford applicants another 
opportunity to seek a reevaluation when they believe a final coding 
decision should be changed and the recognition that it takes time and 
resources to reevaluate applications that are submitted multiple times, 
especially when those applications are submitted without a clear 
indication of whether there is new information that should impact CMS's 
decision, or whether aspects of the information previously submitted to 
CMS may be considered differently. We believe that requiring 
significant new information and other information, as outlined in 
proposed Sec.  414.9(b)(1) and (b)(2), would enhance the accuracy of 
our coding decisions and would enable us to focus our limited resources 
on maintaining continued efficiency and speed in processing 
applications.
    We believe our limitation on the number of times an application can 
be resubmitted for reevaluation of a final coding decision is 
reasonable. In the past under the annual coding cycles, applicants have 
resubmitted applications multiple times in subsequent coding cycles for 
reevaluation. We believe that this could happen even more often under 
the shorter more frequent coding cycles, especially for drug or 
biological product code applications, given the shorter coding cycles. 
However, we do not believe it would be necessary or appropriate to 
allow for more than two resubmissions of a code application for 
reevaluation, especially since under our proposal, resubmissions would 
include additional information and materials as required by proposed 
Sec.  414.9(b)(1) and (b)(2) (as previously discussed in this section) 
and the applications would go through a public meeting process with 
opportunity to comment on resubmissions (as discussed later in this 
section). Allowing further opportunities for applicants to resubmit 
applications after multiple evaluations of the prior coding decision(s) 
for the same item or service would strain our resources and is unlikely 
to result in a different decision (especially given that for the second 
resubmission, the applicant would be required to provide us with 
significant new information for our consideration). Therefore, we 
believe it is important to apply a reasonable limit to the number of 
times a code application for the same item or service can be 
resubmitted that takes into account prior opportunities for evaluation, 
conserves limited resources, and supports successful and timely 
implementation of shorter and more frequent coding cycles. We also 
believe that our proposal to place a limit on the number of 
resubmissions would encourage applicants to fully consider and robustly 
address the reason for the prior denial of their coding request before 
resubmitting. It also would decrease the likelihood of resubmission of 
applications without significant new information that could potentially 
change the prior coding decision. Therefore, we propose to limit the 
number of times an applicant may resubmit a code application for the 
same item or service for reevaluation by CMS to two resubmissions. This 
limitation would apply to resubmissions of applications for the same 
item or service with the same FDA marketing authorization submitted 
with the original application and would continue to apply to a code 
application for that item or service regardless of whether the 
applicant or manufacturer undergoes a change of ownership, a new 
manufacturer begins manufacturing the item or service at issue, there 
is a change of or new supplier of that item or service, or the item or 
service is renamed.
    In addition, in order to ensure that we have the opportunity to 
receive and consider additional input that may be helpful for 
reevaluations, at proposed Sec.  414.9(b)(3), we are proposing to 
include an application submitted for reevaluation on an agenda for a 
bi-annual public meeting and to issue a preliminary recommendation 
(provided the resubmitted application is timely and complete and meets 
all other proposed criteria and requirements for consideration under 
the HCPCS Level II external code application process). We note that 
this policy would also apply to resubmitted applications for drug or 
biological products as well as for non-drug and non-biological items 
and services. For resubmissions of code applications for drug or 
biological products, we propose at Sec.  414.9(b)(3)(i) that the 
resubmitted application would not be included in a public meeting or 
receive a final decision in the quarterly cycle in which the 
application is submitted. Even if a public meeting falls within the 
quarterly cycle in which such an application was resubmitted, we would 
not include the application in a public meeting agenda or issue a 
preliminary recommendation on such application until at least the 
following bi-annual cycle. We believe this is necessary because we 
would need more than approximately 1-month to prepare the preliminary 
recommendation before including an application on a public meeting 
agenda. For example, if a drug or biological product application were 
submitted for reevaluation for the second quarterly cycle of the year 
(application deadline around April), the preliminary recommendation for 
the public meeting that falls in that cycle would need to be prepared 
for May, which we believe would not allow us sufficient time to 
complete a preliminary recommendation. In

[[Page 70385]]

addition, consistent with the policy that would apply to initial code 
applications, we propose at Sec.  414.9(b)(3)(ii) that preliminary 
recommendations and final decisions for applications that are 
resubmitted for reevaluation may be delayed as described in Sec.  
414.8(e)(3).
    We seek comments on the proposals discussed in this section.
2. Proposed Evaluation of HCPCS Level II Code Applications
    As explained earlier in section IV.A.2. of this proposed rule, 
interested parties seeking to modify the HCPCS Level II code set may 
submit an external HCPCS Level II code application, as available on 
CMS' website, that requests to add a code, revise an existing code, or 
discontinue an existing code. An application to add a code may be 
submitted when the applicant believes it is appropriate for the item or 
service that is the subject of the code application to be separately 
identified by a new HCPCS Level II code. An applicant may submit an 
application to revise an existing code if the applicant believes that 
the descriptor of an existing HCPCS Level II code does not adequately 
describe the subject item or service, and that a modification to the 
long descriptor language (code text) would provide a more appropriate 
description of the category of items or services represented by the 
code. An application to discontinue an existing code may be submitted 
when the applicant believes that an existing HCPCS Level II code is 
duplicative of another code or has become obsolete and should be 
removed from the HCPCS Level II code set. Consistent with these 
procedures, we propose at Sec.  414.10(b) that an applicant may submit 
an external HCPCS Level II code application to request the addition of 
a code, revision of an existing code, or discontinuation of an existing 
code.
    We propose at Sec.  414.10(c) that our evaluation of a code 
application would be based on information contained in the application 
and supporting material, any comments received through the public 
meeting process as applicable, any information obtained from and 
evaluations conducted by federal employees or CMS contractors, and any 
additional research or information we may obtain independently that may 
support or refute the claims made by or the evidence provided by the 
applicant. Our evaluation of a code application may result in a coding 
decision that reflects the applicant's coding request in whole, in 
part, or with modification. CMS may also deny the coding request. CMS's 
coding action would be set forth in the final coding decision. We 
propose at Sec.  414.10(h) to continue these procedures. Examples of 
prior years' CMS HCPCS Level II coding decisions are publicly available 
on our HCPCS website at: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo.
    As set forth at proposed Sec.  414.10(a), the code application 
evaluation procedures proposed in Sec.  414.10 and described in this 
section would apply to CMS' evaluation of external HCPCS Level II code 
applications for drug or biological products and non-drug, non-
biological items and services, as described in proposed Sec.  414.8. In 
this section, we propose the processes by which we would evaluate code 
applications, depending on the subject of the application and type of 
modification to the code set requested. Our evaluation of all code 
applications, however, involves careful consideration of CMS's 
objectives of maintaining a code set that is manageable for users and 
that meets the claims processing needs of Medicare, as explained in 
more detail in this section.
    A major goal of an effective code set is to strike a balance 
between sufficiently identifying and differentiating items and services 
and producing a manageable system and set of codes for the efficient 
submission and processing of claims. The HCPCS Level II code set is not 
intended to be a universal listing of all items and services at a 
granular, product-specific level. Rather, the HCPCS Level II code set 
currently contains almost 8,000 separate categories of like items or 
services that encompass products from different manufacturers. Thus, a 
code category is generally intended to describe the item or service 
provided in a way that is general enough so as not to be manufacturer 
specific. Categorizing items and services in this manner simplifies the 
submission and processing of claims with a manageable number of codes 
and thus promotes the goals of administrative simplification and burden 
reduction as previously discussed.
    In striking a balance between sufficiently identifying and 
differentiating items and services and producing a manageable system 
and set of codes for the efficient submission and processing of claims, 
throughout the proposed evaluation process for code applications, we 
consider CMS' objective of maintaining a code set that allows for the 
efficient and timely processing of Medicare claims in accordance with 
the Medicare statute and regulations that are specific to the items and 
services for which a code is being requested. As explained in section 
IV.A.1. of this proposed rule, prior to its adoption under HIPAA as the 
standard medical data code set for reporting certain items and services 
not identified by CPT[supreg] codes in HIPAA standard transactions, 
HCPCS Level II codes were developed by CMS, then known as HCFA, to 
standardize the coding systems used to facilitate claims processing and 
payment for items and services primarily for Medicare. The HCPCS Level 
II coding system was selected as a standard medical data code set for 
use in HIPAA standard transactions in part because of its wide 
acceptance among both public and private payers. We maintain the HCPCS 
Level II code set primarily to support the claims processing needs of 
Medicare, recognizing that other payers use HCPCS Level II codes as 
well.
    When we use the term ``claims processing need'' we are referring to 
evaluating HCPCS applications in a manner that sufficiently identifies 
and differentiates items and services but produces a manageable system 
and set of codes for the efficient submission and processing of 
Medicare claims in accordance with the Medicare statute and regulations 
that are specific to the items and services for which a code is being 
requested. The granularity of what falls within code categories in the 
HCPCS Level II code set is deeply tied to Medicare's ``claims 
processing need.'' Similarly, reaching a judgment about whether any two 
items that fall within the code set are sufficiently different so as to 
require distinct codes is also always tied to ``claims processing 
need.'' Several of the more specific proposed criteria for evaluating 
HCPCS Level II code applications, as described later in this proposed 
rule, can be understood to encompass an assessment of Medicare ``claims 
processing need.'' Sometimes a Medicare ``claims processing need'' is 
driven by Medicare program integrity concerns. A Medicare program 
integrity need may drive a need to add a HCPCS Level II code to 
identify an item or service that would otherwise fall outside the scope 
of the HCPCS Level II code set or may drive a need for a more specific 
code in order to make it efficient for CMS to distinguish and deny 
corresponding claims. In general, CMS has a ``claims processing need'' 
for each code within the HCPCS Level II taxonomy to adequately describe 
a corresponding item or service, such that when a related claims form 
is filed, CMS can understand what the Medicare beneficiary actually 
received from the provider or supplier, but without the code being 
overly specific and thereby causing undue administrative burden

[[Page 70386]]

for CMS (or for other users of the code set, for that matter). In other 
words, when we review applications for HCPCS Level II coding requests, 
we evaluate the information offered by the applicant that articulates 
the reasons why the applicant believes a specific code is warranted, 
against the information CMS believes is needed to process a claim 
effectively for a specific item or service, including the information 
needed to describe that item or service in order to apply Medicare 
coverage and payment policies, and to minimize program integrity risks. 
We invite the public to comment on the term ``claims processing need'' 
as we use it here and throughout this proposed rule, including in the 
context of specific provisions of this rule describing the proposed 
evaluation standards for the review of HCPCS Level II code 
applications.
a. Proposed Evaluation Process for Applications To Add a Code
    In this section, we propose the processes by which we would 
evaluate code applications to add a code.
(1) Proposed Evaluation Process for Non-Drug, Non-Biological 
Applications To Add a Code
(a) Proposed Threshold Factors for Evaluating Non-Drug, Non-Biological 
Applications To Add a Code
    As a threshold matter, when an applicant requests to add a code for 
a non-drug, non-biological item or service, as defined in section IV.B 
of this proposed rule, we believe it is important to first consider 
whether the item or service that is the subject of the application is 
appropriate for inclusion in the HCPCS Level II code set and whether 
there is a claims processing need on the part of Medicare to identify 
the item or service in the HCPCS Level II code set. Consistent with our 
current practice, we propose at Sec.  414.10(d)(1)(i)-(iii) that we 
would first determine whether, as a threshold matter, the subject item 
or service is appropriate for inclusion in the HCPCS Level II code set 
by assessing whether: (1) The item or service is not appropriate for 
inclusion in or already coded in a different HIPAA standard medical 
data code set, such as CPT[supreg], ICD, or CDT[supreg]; (2) the item 
or service is primarily medical in nature; and (3) if applicable, the 
item has the appropriate marketing authorization from FDA, or is exempt 
from premarket notification requirements. Consistent with our current 
practice, we propose at Sec.  414.10(d)(1)(iv) that we would also 
determine whether, as a threshold matter, there is a claims processing 
need on the part of Medicare to identify the item or service in the 
HCPCS Level II code set.
    As discussed in section IV.A. of this proposed rule, not all items 
and services are appropriate for inclusion in the HCPCS Level II code 
set maintained by CMS. This is because HIPAA mandated the adoption of 
certain medical data code sets to standardize the way various types of 
data are reported during routine transmission of electronic claims, 
with the HCPCS Level II code set specifically adopted to identify 
particular items and services, such as healthcare equipment and 
supplies not described by CPT[supreg] codes (45 CFR 162.1002). The 
adoption of standard national medical data code sets helps to avoid 
duplication and burden (65 FR 50361). Therefore, as a threshold matter, 
we believe it is important to determine whether the subject item or 
service is not appropriate for inclusion in or already coded in a HIPAA 
standard medical data code set other than the HCPCS Level II code set 
maintained by CMS, such as CPT[supreg], ICD, or CDT[supreg]. For 
example, although technically part of the HCPCS Level II code set, the 
CDT[supreg] code set was adopted under HIPAA as the standard national 
medical data code set to be maintained by the American Dental 
Association, for reporting dental items and services supplied to or 
used by dentists, oral and maxillo-facial surgeons, prosthodontists, 
and periodontists. Therefore, these items and services are not 
appropriate for inclusion in the HCPCS Level II code set maintained by 
CMS.
    When we evaluate whether an item or service is appropriate for 
inclusion in the HCPCS Level II code set, we also take into account the 
type of item or service, the setting in which it is furnished or used, 
by whom it is used, and how it is used. For example, an item or service 
exclusively used or administered in the inpatient hospital setting 
would not be appropriate for inclusion in the HCPCS Level II code set. 
Procedures performed during an inpatient stay are identified by ICD-10-
PCS codes. In addition, the setting in which the item or service is 
used or administered and by whom it is used or administered may be 
considered together when considering whether the item or service is 
appropriate for inclusion in the HCPCS Level II code set. For example, 
we consider whether an item or service is typically physician-
administered in a physician's office versus self-administered by the 
patient in the home. Procedures performed by physicians or other health 
care professionals when performed in a physician's office are typically 
described by CPT[supreg] codes. We also note that an item or service 
that is the subject of a HCPCS Level II code application could already 
be captured by a specific code or a comprehensive code used to identify 
a group of related items and services in another code set such as 
supplies that are used during an already coded procedure. As part of 
this assessment, we consider whether a particular item or service, or a 
component of an item or service, is included in a bundled payment \35\ 
and coded in a different HIPAA standard medical data code set because 
separate reporting and billing of a bundled item or service could be 
duplicative.
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    \35\ A bundled payment methodology involves the combining or 
``bundling'' items and services together for single rate or payment 
amount (an all-inclusive payment amount), such that individual items 
and services are not billed and paid for individually. This is 
common in many Medicare prospective payment systems, though the 
constellation of bundled items and services and underlying payment 
methodologies vary (for example, a bundled payment may be based on 
expected costs of the items and services furnished to a beneficiary 
during an episode of care). When bundled payment methodologies 
apply, we must ensure that duplicate payment is not made by Medicare 
(that is, that items and services are not ``unbundled'' and billed 
and paid for separately).
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    Consistent with our current practice, we also propose to assess, as 
a threshold consideration, whether the subject item or service is 
primarily medical in nature. The HCPCS Level II code set is a standard 
medical data code set adopted under HIPAA for describing and 
identifying healthcare equipment and supplies in electronic healthcare 
transactions (45 CFR 162.1002). The HCPCS Level II code set is not 
intended to be a universal or exhaustive listing of all items and 
services on the market, and is generally reserved for medical items and 
services, since HCPCS Level II codes generally represent categories of 
like healthcare items and services for health insurer claims processing 
purposes. As such, we believe it is important to evaluate whether the 
item or service for which an applicant is requesting coding action is 
primarily medical in nature. For purposes of this proposed threshold 
factor, an item or service would be considered ``primarily medical in 
nature'' when it is primarily and customarily used to serve a medical 
(diagnostic or therapeutic) purpose, and is generally not useful in the 
absence of an illness or injury. If the primary or customary use of an 
item or service is not for a medical (diagnostic or therapeutic) 
purpose, then it would not be considered primarily medical in nature, 
even if the item or service could be used in a healthcare setting or in 
a way that assists a patient. For example,

[[Page 70387]]

while an air conditioner may have a remote medical (therapeutic) use of 
lowering room temperature to reduce fluid loss in a cardiac patient and 
to maintain the proper fluid balance, the primary and customary use of 
the air conditioner is for a non-medical purpose--that is, the item is 
generally used by anyone, regardless of an existing medical condition, 
to stay cool in a way that is not for the diagnosis or treatment of an 
illness or injury. Furthermore, an air conditioner is useful in the 
absence of an illness or injury, and thus, an air conditioner would not 
be considered ``primarily medical in nature'' for purposes of this 
proposed threshold factor. Other examples of items that may be used by 
a person with a medical disease or condition, but that we would not 
consider primarily medical in nature for purposes of this proposed 
threshold factor due to their common usage for non-medical purposes 
include: Mirrors used for self-examination; drinking straws (including 
elongated straws) used to assist with reach; and wearable garments, 
such as shirts, pants, headbands and belts, even if the styling of the 
garment permits easier access to IV insertion sites or dialysis shunts, 
or keeps a body part dry when worn in the shower or swimming pool. The 
information that applicants include in the code application facilitates 
our assessment of this proposed threshold factor; applicants describe 
how the item or service is primarily and customarily used to serve a 
medical purpose and explain whether the item or service is useful in 
the absence of an illness or injury.
    Consistent with our current practice, we also propose to assess, as 
a threshold consideration, whether the item that is the subject of the 
code application has the appropriate marketing authorization from FDA, 
or is exempt from premarket notification requirements, if applicable. 
We believe it would be inappropriate and premature to consider 
potential coding action for an item that does not yet have the 
appropriate marketing authorization from FDA or a claimed exemption 
from such requirements. We require applicants to provide documentation 
of marketing authorization by FDA at the time the application is 
submitted, and also request information regarding the date the item was 
granted such marketing authorization, at the time the application is 
submitted. We also require applicants to explain the basis for any 
claimed exemptions from FDA premarket notification requirements, with 
specific citations to the regulation number under 21 CFR parts 862 
through 892 as appropriate. Our assessment of this proposed threshold 
factor involves verifying that the documentation and information 
provided by the applicant matches the item or service that is the 
subject of the code application. We seek input from FDA should we have 
any questions about the documentation and information provided by the 
applicant.
    Consistent with our current practice, we also propose to assess, as 
a threshold matter, whether there is a claims processing need on the 
part of Medicare to identify the item or service in the HCPCS Level II 
code set. Given our objective, as explained earlier in section IV.B.2. 
of this proposed rule, of maintaining a code set that meets the claims 
processing needs of Medicare, we believe it is important to first 
ensure that Medicare has a claims processing need to identify the 
subject item or service with a HCPCS Level II code.
    The determination of whether a HCPCS Level II code to identify the 
subject item or service is needed for claims processing purposes would 
depend on the individual facts and circumstances presented by each 
application. As we stated previously, we propose at Sec.  414.10(c) 
that our evaluation of a code application would be based on information 
contained in the application and supporting material, any comments 
received through the public meeting process as applicable, any 
information obtained from and evaluations conducted by federal 
employees or CMS contractors, and any additional research or 
information we may obtain independently that may support or refute the 
claims made or the evidence produced by the applicant. Consistent with 
current practice, this includes information obtained from and 
evaluations conducted by federal employees comprising a team generally 
known as the CMS HCPCS Workgroup. This is an internal workgroup 
composed of federal government officials representing the major 
components of CMS, as well as other employees from pertinent Federal 
agencies, including the Department of Veterans Affairs and the Defense 
Health Agency, which includes policy, product, and claims processing 
experts. The Workgroup discusses whether coding requests warrant a 
change to the HCPCS Level II code set, and informs CMS' decisions 
relative to the claims processing needs of Medicare. We also take into 
consideration any pertinent information that may have been received 
from code applicants and their representatives and other stakeholders, 
including government insurers and the general public, through HCPCS 
public meetings.
    Consistent with our current practice, we propose at Sec.  
414.10(d)(1) that if we determine that the subject item or service 
satisfies all the factors at proposed Sec.  414.10(d)(1)(i) through 
(iv), discussed previously, we would further evaluate the applicant's 
coding request under the process proposed in Sec.  414.10(d)(4) and 
discussed later in section IV.B.2.a.(1)(b) of this proposed rule, to 
determine whether it would be appropriate to add a code for the item or 
service.
    Furthermore, given our objective of maintaining a code set that 
meets the claims processing needs of Medicare, we propose at Sec.  
414.10(d)(2) that if one or more of the proposed factors under Sec.  
414.10(d)(1)(i)-(iii) are not met but the proposed factor in Sec.  
414.10(d)(1)(iv) is met, we would further evaluate the applicant's 
coding request under the process proposed in Sec.  414.10(d)(4). We 
believe it would be premature to deny the application when a Medicare 
claims processing need exists. For instance, Medicare may need to 
separately identify a non-covered, previously non-coded item or service 
that has been frequently miscoded using an existing specific or 
miscellaneous HCPCS Level II code, which could result in inappropriate 
payment. As an example, we created code A4467 (``Belt, strap, sleeve, 
garment, or covering, any type'') to identify certain items that were 
not found to be primarily medical in nature and thus not appropriate 
for inclusion in the HCPCS Level II code set, but that had been 
miscoded under miscellaneous or other existing HCPCS Level II codes for 
DME, resulting in erroneous payment. To ensure the accuracy of Medicare 
claims, code A4467 was established to separately identify these 
particular items in order to prevent them from being inappropriately 
reported through the use of other existing HCPCS Level II codes. In 
this way, separately identifying these items clarifies to coders that 
the particular item is not described by a different existing HCPCS 
Level II code. As another example, we may need a code to distinguish 
items statutorily excluded under Medicare, such as certain contact 
lenses, similarly to avoid miscoding and ensure more accurate claims 
processing. Thus, consistent with our current practice, we believe it 
is appropriate to propose the exception at proposed Sec.  414.10(d)(2).
    We propose at Sec.  414.10(d)(3) that if the application satisfies 
neither proposed Sec.  414.10(d)(1) nor Sec.  414.10(d)(2), we would 
not further evaluate the applicant's coding request under the process 
proposed in Sec.  414.10(d)(4) and thus would not

[[Page 70388]]

modify the HCPCS Level II code set in response to the coding request. 
If we determine that the subject item or service is only appropriately 
coded in a code set other than the HCPCS Level II code set, such as 
CPT[supreg], ICD, or CDT[supreg], we would, where appropriate, redirect 
the applicant to the other code set.
(b) Proposed Process for Further Evaluating Non-Drug, Non-Biological 
Applications To Add a Code
    If the application satisfies proposed Sec.  414.10(d)(1) or (d)(2), 
the focus of our evaluation then shifts from whether the subject item 
or service is appropriate for inclusion in the HCPCS Level II code set 
to the appropriate placement within the HCPCS Level II code set. Under 
this proposed evaluation process, we would further evaluate an 
applicant's coding request by assessing the functional and clinical 
differences of the subject item or service compared to other similar 
items or services already described in the HCPCS Level II code set, and 
determine based on our assessment of those differences, whether it 
would be appropriate to take coding action to add a new code to 
identify the subject item or service or revise the descriptor of an 
existing code category to clarify that the subject item or service is 
captured by the existing code category, or to take no coding action due 
to the availability of an existing code category that adequately 
describes the subject item or service. As explained in more detail in 
this section, we assess these differences due to the nature of HCPCS 
Level II codes, which generally represent categories of like items or 
services, grouped together at the broadest level, on the basis of 
performing the same or similar function for a patient. This is because, 
as previously noted in this section, the HCPCS Level II code set is not 
intended to be a universal listing of all items and services at a 
granular, product-specific level. Additionally, the information 
submitted by the applicant in the code application facilitates our 
determination of appropriate coding action. In the code application, 
applicants describe the item or service that is the subject of the code 
application, such as what the item or service does, how it is used, the 
patient population for which the item or service is clinically 
indicated; the medical benefit of the item or service to the patient, 
such as the clinical outcome resulting from the use of the item or 
service; and the reason why the applicant believes existing codes do 
not adequately describe the item or service.
    As explained in more detail later in this section, we propose at 
Sec.  414.10(d)(4) to assess: (1) Whether the subject item or service 
performs a significantly different clinical function compared to other 
items or services described by the HCPCS Level II code set; and (2) 
whether the use of the subject item or service results in a significant 
therapeutic distinction compared to the use of other similar items or 
services described by the HCPCS Level II code set. Furthermore, as 
discussed later in this section, we propose to consider whether a new 
HCPCS Level II code to separately identify the subject item or service 
is needed by Medicare to facilitate claims processing. These proposed 
factors balance our desire to facilitate patient access to innovative 
items or services with our consideration of CMS' objectives of 
maintaining a code set that is manageable for users and that meets the 
claims processing needs of Medicare.
(i) Significantly Different Clinical Function
    As previously discussed, codes generally represent categories of 
like items and services, grouped together at the broadest level, on the 
basis of performing the same or similar clinical function for a 
patient. In order to evaluate what code category is appropriate for an 
item or service, we need to evaluate the clinical function performed 
for the patient and how the item or service addresses their condition. 
Therefore, our evaluation of applications to add a code begins with 
identifying and assessing the clinical function of the item or service 
that is the subject of the code application. Broadly speaking, the 
clinical function performed by an item or service refers to what the 
item or service does for a patient. It can also be understood as the 
general function of the item or service in the body, or the intended 
purpose of the item or service in the delivery of care. Clinical 
function can also refer to the overall treatment provided to a patient 
through the use of the item or service. For example, the clinical 
function of positive airway pressure is respiratory ventilation, and 
the clinical function of an electrode is to conduct electricity. As 
explained earlier, applicants are requested to provide information to 
facilitate our assessment of clinical function, such as fully 
explaining what the subject item or service does, how it is used, and 
the patient population for which the item or service is clinically 
indicated.
    In most cases, items and services are developed in a way that is 
evolutionary or iterative--that is, they are developed in a way that 
results in new items or services that still retain similar features or 
functionalities as those performed by previous iterations or versions, 
such that they may not be so different from those already described by 
the code set. When evaluating whether a new code is appropriate for the 
subject item or service, we look to see if an existing code adequately 
captures the clinical function of the item or service, or whether the 
clinical function of the item or service is so distinct or dissimilar 
from the clinical functions performed by other items or services 
currently described by the HCPCS Level II code set that it cannot be 
categorized in an existing code category with other items or services. 
We believe a new code may be warranted if we determine that the subject 
item or service performs a clinical function that is not performed by 
any other items and services currently categorized in the HCPCS Level 
II code set--that is, a clinical function that is considered first-of-
kind for purposes of HCPCS Level II coding. Because the clinical 
function would not be performed by other items or services already 
categorized in the code set, there would be no existing HCPCS Level II 
code to describe such an item or service. Thus, consistent with our 
current practice, we propose at Sec.  414.10(d)(4)(i) that we would 
evaluate whether the item or service that is the subject of the code 
application performs a significantly different clinical function as 
compared to other items and services described by the HCPCS Level II 
code set, and that an item or service is considered to perform a 
significantly different clinical function if it performs a clinical 
function that is not performed by any other item or service currently 
described by the code set. If we determine that an item or service 
performs a significantly different clinical function, we further assess 
whether there is a claims processing need on the part of Medicare to 
identify that particular item or service based on its clinical function 
with a new code on a HIPAA standard claim. Thus, we propose at Sec.  
414.10(d)(5)(i) that a new code would be warranted if we determine that 
the item or service that is the subject of the code application 
performs a significantly different clinical function as compared to 
other items and services described by the HCPCS Level II code set, and 
we find there is a claims processing need to separately identify the 
item or service with a new code to facilitate payment under Medicare.
    An example of this can be shown by code Q0480, ``Driver for use 
with pneumatic ventricular assist device, replacement only,'' which at 
the time a

[[Page 70389]]

code was requested, was an item performing a first-of-kind clinical 
function not previously captured by the code set and for which there 
was a demonstrated claims processing need. This device was the first 
mechanical heart pump with replaceable external components authorized 
by FDA as a destination therapy so the patient would not have to remain 
in the hospital while awaiting a transplant, and we issued a new code 
to identify this device.
(ii) Significant Therapeutic Distinction
    Codes represent categories of similar items or services, grouped 
together at the broadest level, on the basis of performing the same or 
similar clinical function. Items or services identified in the same 
code may differ in some respects, for example in the mechanism of 
operation. We recognize that differences between items or services that 
perform the same or similar clinical function, such as a difference in 
mechanism of operation, may result in a significantly improved medical 
benefit or significantly different medical benefit for patients. We 
believe it is important for insurers to be able to differentiate and 
separately identify such items and services to facilitate claims 
adjudication. As such, and subject to CMS finding there is a claims 
processing need under proposed Sec.  414.10(d)(5)(i), we believe that 
when the item or service that is the subject of the code application 
operates differently than other similar items or services described in 
existing codes, and that difference in operation results in a 
significantly improved or significantly different medical benefit for 
patients (as defined later in the section), the difference between the 
subject item or service and other similar items or services would be 
meaningful enough to warrant a differential coding based on significant 
therapeutic distinction. Differential coding on the basis of 
significant therapeutic distinction also reflects our desire to 
facilitate patient access to the advantages and benefits of innovative 
items or services by ensuring codes are available to providers and 
suppliers to use.
    Under current guidance,\36\ a significant therapeutic distinction 
is shown when the subject item or service results in an improved 
medical benefit (for example, a significantly improved medical outcome 
or a significantly superior clinical outcome) when compared with the 
use of other similar items or services that would otherwise share an 
existing code category. Requests for modifications to the HCPCS Level 
II code set based on claims of significant therapeutic distinction are 
reviewed on a case-by-case basis, taking into consideration clinical 
information provided by the applicant and others that may support or 
refute the claim(s) made by the applicant. An applicant should provide 
the best available information in support of the claim(s). Greater 
weight is given to more methodologically rigorous and scientifically 
reliable evidence. Process indicators, such as improved compliance, 
convenience, and personal preference are considered significant 
therapeutic distinctions only to the extent that they result in 
demonstrably improved clinical outcomes.
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    \36\ See ``HCPCS Decision Tree For External Requests to Add or 
Revise Codes,'' available at https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Downloads/HCPCS_Decision_Tree_and_Definitions.pdf.
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    The application seeks information from the applicant to enable us 
to assess whether the subject item or service results in a significant 
therapeutic distinction. Applicants are requested to identify currently 
coded items or services that perform the same or similar medical 
function as the subject item or service. Applicants are then requested 
to identify the differences between the subject item or service or its 
operation and the currently coded items or services, which would result 
in a significantly improved medical outcome or significantly superior 
clinical outcome.
    In this proposed rule, we are proposing to broaden opportunities to 
identify a significant therapeutic distinction by also considering 
whether the use of the subject item or service results in a 
significantly different medical benefit, when compared with the use of 
other similar items or services described in the HCPCS Level II code 
set. Thus, we propose at Sec.  414.10(d)(4)(ii) that a significant 
therapeutic distinction is shown when the use of that item or service 
results in a significantly improved or significantly different medical 
benefit when compared with the use of other similar items or services 
described in the HCPCS Level II code set.
    We propose at Sec.  414.10(d)(4)(ii)(A) that we would determine 
that the use of an item or service results in a significantly improved 
or significantly different medical benefit when compared with the use 
of other similar items or services described in the HCPCS Level II code 
set if we find that it meets any of the criteria at proposed Sec.  
414.10(d)(4)(ii)(A), as further described later in the section. We note 
that proposed Sec.  414.10(d)(4)(ii)(A) sets forth a framework that is 
based on the same general criteria that CMS currently uses for 
determining substantial clinical improvement for purposes of the 
Inpatient Prospective Payment System (IPPS) New Technology Add-On 
Payment (NTAP) (42 CFR 412.87(b)(1)), subject to modifications that we 
are proposing for purposes of evaluating a significant therapeutic 
distinction claim for a HCPCS Level II code application. We believe 
that the same general framework used to evaluate whether a service or 
technology represents a substantial clinical improvement for purposes 
of the NTAP, as modified here, may also reasonably be used to evaluate 
whether the use of an item or service results in a significantly 
improved or significantly different medical benefit for the purpose of 
evaluating HCPCS Level II code applications. In both the HCPCS Level II 
context and the NTAP context, the framework allows for reaching a 
comparative determination about the therapeutic effect of a designated 
item or service, and whether this represents an advance over other 
items and services.
    While we believe the same framework used for determining 
substantial clinical improvement for purposes of the IPPS NTAP would be 
generally appropriate for determining significant therapeutic 
distinction (significantly improved or significantly different medical 
benefit) in the context of evaluating a HCPCS Level II code 
application, we are seeking comment, as indicated in the bullet points 
later in the section, regarding whether certain factors would 
appropriately apply in the context of evaluating HCPCS Level II code 
applications, or whether they should be modified or eliminated for the 
purpose of determining significant therapeutic distinction. As 
reflected in proposed Sec.  414.10(d)(4)(ii)(A), CMS would determine 
that the use of an item or service results in a significantly improved 
or significantly different medical benefit, when compared with the use 
of other similar items or services described in the HCPCS Level II code 
set, if it finds any of the following:
     The item or service that is the subject of the code 
application offers a treatment option for a patient population 
unresponsive to, or ineligible for, currently available treatments (for 
purposes of determining significant therapeutic distinction, this may 
include, for example, persons for whom currently available treatments 
may be contraindicated, such as persons who may be allergic to those 
treatments or for whom those treatments may be toxic or harmful based 
on compromised renal or liver function or other co-morbid condition; or 
for specific populations for whom a currently

[[Page 70390]]

available treatment or dosage is contraindicated, based on FDA-approved 
labeling, related to age, comorbid condition or concurrent treatment 
that could impact the results of the treatment; or for whom other 
treatments must be first tried and failed, as per FDA-approved 
labeling).
     The item or service that is the subject of the code 
application offers the ability to diagnose a medical condition in a 
patient population where that medical condition is currently 
undetectable, or offers the ability to diagnose a medical condition 
earlier in a patient population than allowed by currently available 
methods and there must also be evidence that use of the item or service 
to make a diagnosis affects the management of the patient. We are 
seeking public comment regarding whether and under what circumstances 
this factor might be appropriately applied to HCPCS Level II code 
applications. We note that diagnostic tests and lab tests are generally 
not coded in the HCPCS Level II code set. Diagnostic tests and lab 
tests are not typically administered in patients' homes; and when 
administered in a physician's office, they are included in the 
procedure, and would not be separately payable using HCPCS Level II 
codes, and therefore a HCPCS Level II code would not be needed for 
Medicare claims adjudication.
     A demonstration of one or more of the following outcomes.
    ++ A reduction in at least one clinically significant adverse 
event, including a reduction in mortality or a clinically significant 
complication.
    ++ A decreased rate of at least one subsequent diagnostic or 
therapeutic intervention.
    ++ A decreased number of future hospitalizations or physician 
visits.
    ++ A more rapid beneficial resolution of the disease process 
treatment including, but not limited to, a reduced length of stay or 
recovery time.
    ++ An improvement in one or more activities of daily living.
    ++ An improved quality of life.
    ++ A demonstrated greater medication adherence or compliance. With 
regard to this factor in particular, we are seeking comment regarding 
whether it is useful or appropriate to include improved medication 
adherence or compliance as a factor in evaluating HCPCS Level II code 
applications for non-drug, non-biological items and services for the 
purposes of determining significant therapeutic distinction. We note 
that medication adherence or compliance, by itself, is an interim 
measure, and not a clinical end point. While greater adherence or 
compliance might potentially lead to a clinical end point, those end 
points are already identified earlier in the list of outcomes. If CMS 
decides to adopt this factor as proposed, it would substantially modify 
the current standard CMS uses to evaluate whether the use of a non-
drug, non-biological item or service demonstrates a significant 
therapeutic distinction. Generally, process indicators (such as 
improved compliance) have been considered significant therapeutic 
distinctions only to the extent that they result in demonstrably 
improved clinical outcomes (for example, improved mortality or 
morbidity).
     The totality of the information otherwise demonstrates 
that the use of the item or service results in a significantly improved 
or a significantly different medical benefit, when compared with the 
use of other similar items or services described in the HCPCS Level II 
code set.
    When determining whether the use of the item or service results in 
a significantly improved or a significantly different medical benefit 
when compared with the use of other similar items or services described 
in the HCPCS Level II code set, we propose at Sec.  414.10(d)(4)(ii)(B) 
that we may consider instances where the use of the item or service may 
substantially improve or substantially change the medical benefit 
realized by a specific subpopulation of patients with the medical 
condition for whom the item or service is used, based on a common 
characteristic shared by the subpopulation (for example, allergic 
sensitivity to a currently available alternative treatment item) that 
impacts the medical benefit of the subject item or service. To offer 
another example, a significantly improved or significantly different 
medical benefit may be demonstrated where the use of an item or 
service, when compared to a currently available alternative item or 
service that is currently described in the HCPCS code set, provides a 
differential benefit to a subset of patients, based on patient 
characteristics typically needed to use the item or service (such as 
strength, functionality, and cognitive ability) and the manner in which 
the item or service is typically used. For example, certain prosthetics 
or orthotics, such as a heavy prosthetic leg with features that enable 
quicker gait, use on rough terrain, or on steep inclines might 
potentially be suitable for a strong patient, but may be more than a 
frail elderly patient could use or might need. A finding of 
significantly different medical benefit for such a prosthetic or 
orthotic item might be supported on the basis that the item provides a 
differential benefit for strong patients.
    In determining whether the use of item or service results in a 
significantly improved or a significantly different medical benefit 
when compared with the use of other similar items or services described 
in the HCPCS Level II code set, we propose at Sec.  414.10(d)(4)(ii)(C) 
that we would make this determination without regard to the prevalence 
among Medicare beneficiaries of the underlying medical condition 
treated or diagnosed by the item or service that is the subject of the 
code application. In particular, we would not consider a low prevalence 
rate for the underlying medical condition as a factor weighing against 
an item or service that is the subject of the code application, for the 
purpose of our evaluating whether there is a significantly improved or 
significantly different medical benefit associated with use of the item 
or service.
    Additionally, when determining whether the item or service would 
meet the criterion of conferring a significant therapeutic distinction, 
we propose at Sec.  414.10(d)(4)(ii)(D) that an item's designation 
under the FDA Breakthrough Devices Program and marketing authorization 
for the indication that received such designation will be given 
substantial weight in the consideration. Under this voluntary program, 
FDA evaluates certain devices and device-led combination products that 
``provide for more effective treatment or diagnosis of life-threatening 
or irreversibly debilitating human disease or conditions.'' 
37 38 When FDA grants a designation under the Breakthrough 
Devices Program, FDA has considered whether or not the underlying 
device (or device-led combination) meets one of several additional 
criteria, including the criterion of offering ``significant advantages 
over existing approved or cleared alternatives,'' as by ``reduc[ing] or 
eliminat[ing] the need for hospitalization, improv[ing] patient quality 
of life, facilitat[ing] patients' ability to manage their own care 
(such as through self-directed personal assistance), or establish[ing] 
long-term clinical efficiencies.'' \39\ In sum, we believe that when an 
FDA Breakthrough Devices designation has been granted, this strongly 
suggests that use of the device results in a significantly

[[Page 70391]]

improved medical benefit as compared to the use of other items and 
services for the purpose of meeting the significant therapeutic 
distinction factor under the HCPCS Level II code evaluation process. 
Therefore, proof that a device has received an FDA Breakthrough Devices 
designation will be given substantial weight as CMS considers whether 
the device meets the significant therapeutic distinction factor under 
the HCPCS Level II code evaluation process. As such, we propose at 
Sec.  414.10(d)(4)(ii)(D) that when an application to add a code 
relates to a device that has already received an FDA Breakthrough 
Device designation and marketing authorization for the indication for 
which the device was granted FDA Breakthrough Device designation, then 
proof of that FDA designation and authorization will be given 
substantial weight as CMS considers whether the device meets the 
significant therapeutic distinction factor proposed at Sec.  
414.10(d)(4)(ii). The aim of this proposal is to recognize that an FDA 
Breakthrough Device designation offers supporting evidence that can 
help to strengthen a claim of significant therapeutic distinction.
---------------------------------------------------------------------------

    \37\ 21 U.S.C. 360e-3.
    \38\ FDA, Final Guidance, Breakthrough Devices Program: Guidance 
for Industry and Food and Drug Administration Staff (December 18, 
2018). Available at: https://www.fda.gov/regulatory-information/search-fda-guidance-documents/breakthrough-devices-program.
    \39\ Ibid.
---------------------------------------------------------------------------

    We propose at Sec.  414.10(d)(4)(ii)(E) that if an applicant seeks 
a new code on the basis that the use of the item or service results in 
a significant therapeutic distinction, the application must contain 
sufficient information and supporting documentation to support a claim 
of significant therapeutic distinction. We further propose at Sec.  
414.10(d)(4)(ii)(E) that CMS would consider the totality of the 
circumstances when making a determination that the use of an item or 
service results in a significantly improved or a significantly 
different medical benefit when compared with the use of other similar 
items or services described in the HCPCS Level II code set. It is 
important that applicants provide sufficient information and 
documentation so that we can understand the scientific basis for the 
applicant's claim of significant therapeutic distinction and perform an 
adequate, evidence-based assessment regarding whether this factor is 
met. Applicants should provide the best available information to 
support their claim of significant therapeutic distinction, including 
copies of all articles that result from systematic analysis of the 
available literature, as well as any unfavorable articles with 
appropriate rebuttal or explanation.
    Published or unpublished information from sources from within the 
United States or elsewhere may be submitted by the applicant to help 
substantiate their claim that the use of an item or service results in 
a significantly improved or a significantly different medical benefit, 
when compared with the use of other similar items or services described 
in the HCPCS Level II code set. Although we are not proposing to 
require specific types of support, greater weight will be given to more 
methodologically rigorous and scientifically reliable evidence. 
Information sources may include the following: Clinical trials, peer 
reviewed journal articles, study results, meta-analyses, consensus 
statements, white papers, patient surveys, case studies, reports, 
systematic literature reviews, letters from major healthcare 
associations, editorials and letters to the editor, public comments, 
and other appropriate information sources.
    Some examples of past findings that a claim of significant 
therapeutic distinction is not substantiated include where the 
applicant specified a clinical indication for, or associated a clinical 
indication with, the item or service that was not cleared, approved, or 
otherwise given marketing authorization by FDA, or that is not 
scientifically supported. Other examples of unsubstantiated claims of 
significant therapeutic distinction include claims for which the 
evidence provided is inconclusive or weak (anecdotal, or not 
methodologically rigorous or reliable); the supporting information 
provided does not include the actual product or service that is the 
subject of the code application; the supporting documentation or the 
applicant's claim is not specifically addressed in or conflicts with 
other information found in the information packet submitted for review; 
or the supporting information addresses interim measures and not 
clinical end points.
    We propose at Sec.  414.10(c), our evaluation of an application to 
add a code would be based on information contained in the application 
and supporting material, any comments received through the public 
meeting process as applicable, any information obtained from and 
evaluations conducted by federal employees or CMS contractors, and any 
additional research or information we may obtain independently that may 
support or refute the claims made or the evidence provided by the 
applicant.
    We propose at Sec.  414.10(d)(5)(i) that if we determine that (1) 
the item or service that is the subject of the application performs a 
significantly different clinical function when compared to other items 
or services described in the HCPCS Level II code set (as specified 
under Sec.  414.10(d)(4)(i)), or the use of the item or service results 
in a significant therapeutic distinction when compared to the use of 
other similar items or services described by the HCPCS Level II code 
set (as specified under Sec.  414.10(d)(4)(ii)), and (2) there is a 
claims processing need to separately identify the item or service with 
a new code to facilitate payment under Medicare, we would create a new 
code to identify the item or service.
    We also propose at Sec.  414.10(d)(5)(ii) that if the conditions in 
Sec.  414.10(d)(5)(i) are not met, we would not create a new code. 
Further, we propose at Sec.  414.10(d)(6) that if we find that 
revisions to the descriptor of an existing code category are 
appropriate to account for minor distinctions between the subject item 
or service and other items or services described by the existing code 
category and to clarify that the subject item or service is included in 
the existing code category, then we would revise the descriptor rather 
than add a new code.
    As proposed in Sec.  414.10(h), our evaluation of the applicant's 
code application may result in a coding decision that reflects the 
applicant's coding request in whole, in part, or with modification; or 
a denial of the coding request. Any coding action taken on an 
applicant's request would be set forth in the final coding decision.
(2) Proposed Evaluation Process for Drug or Biological Product 
Applications To Add a Code
    There is no HIPAA standard medical data code set designated for 
reporting drug or biological products for non-retail pharmacy 
transactions--that is, as described previously, products that are paid 
separately as drugs or biologicals. In non-retail pharmacy 
transactions, the choice of code set for drugs or biologicals is 
governed by specific payer needs. Drug or biological products for which 
providers or suppliers seek payment that is separate from payments for 
procedures or other bundled services might be reported on claims in 
non-retail pharmacy transactions using the National Drug Code (NDC) 
set, HCPCS Level II code set, or both, however the Medicare Part B 
claims payment system utilizes HCPCS level II codes to pay these 
claims. As stated in section IV.B. of this proposed rule, for the 
purposes of section IV of this proposed rule, the term ``products paid 
separately as drugs or biologicals'' refers to products that are 
separately payable under Medicare Part B (and potentially by other 
payers) as drugs or biologicals as that term is defined in section 
1861(t) of the Act. These products typically fall into one or more of 
the following three categories: (1) Products furnished incident to a 
physician's services under sections

[[Page 70392]]

1861(s)(2)(A) and (B) of the Act, excluding products that are usually 
self-administered (for example, tablets, capsules, oral solutions, 
disposable inhalers); (2) products administered via a covered item of 
DME; and (3) other categories of products for which there is another 
Part B benefit category as specified by statute or regulations (for 
example, drug or biological products described elsewhere in section 
1861(s) of the Act, such as immunosuppressive drugs (at section 
1861(s)(2)(J)); hemophilia blood clotting factors (at section 
1861(s)(2)(I)); certain oral anticancer drugs (at section 1861(s)(2)(Q) 
of the Act); certain oral antiemetic drugs (at section 1861(s)(2)(T) of 
the Act); pneumococcal pneumonia, influenza and hepatitis B vaccines 
(at section 1861(s)(10) of the Act). As described previously, for ease 
of reference, when discussing products paid separately as drugs or 
biologicals in this rule, we will generally refer to these as ``drug or 
biological products.''
    Similar to applications for non-drug, non-biological items or 
services, we believe it is important for CMS to first consider whether 
the drug or biological product that is the subject of an application to 
add a code is appropriate for the HCPCS Level II code set. Consistent 
with our current practice, we propose at Sec.  414.10(e)(1) that we 
would first determine whether, as a threshold matter, the subject drug 
or biological product is appropriate for the HCPCS Level II code set by 
assessing whether: (1) The product is not appropriate for inclusion or 
already coded in a different HIPAA code set, such as CPT[supreg]; (2) 
the product is primarily medical in nature; (3) if applicable, the 
product has the appropriate marketing authorization from FDA; and (4) 
there is a claims processing need on the part of Medicare to identify 
the item or service in the HCPCS Level II code set.
    CPT[supreg] codes and codes from other code sets do not frequently 
describe drug or biological products paid under Medicare Part B. Few 
CPT[supreg] codes are listed in the Medicare payment files, such as the 
ASP Drug Pricing files, where CPT[supreg] codes typically describe 
vaccines (influenza, pneumococcal pneumonia, and hepatitis B vaccines) 
that are paid under Part B based on their average wholesale price (AWP) 
per requirements in section 1842(o) of the Act. When CPT[supreg] codes 
do not adequately describe drug or biological products, HCPCS Level II 
codes have been developed and are used to bill for them, particularly 
when there is a Medicare program need for such codes. Also, CPT[supreg] 
codes that may describe drug or biological products may not be 
sufficiently precise to distinguish between situations where separate 
payment for a drug or biological product is necessary, such as certain 
hepatitis B immune globulin products approved under separate BLAs, that 
require separately calculated payment allowances under section 1847A of 
the Act (as operationalized by the program instruction that is 
discussed in the next paragraph). Separate billing and payment codes 
allow for the products approved under different BLAs to be paid 
separately, consistent with section 1847A of the Act. Also, in general, 
the CPT[supreg] code set focuses primarily on services, like 
procedures, rather than separately payable drugs that are used in 
Medicare Part B settings.
    Payment for most drug or biological products under Medicare Part B 
is described in section 1842(o) of the Act. This provision provides for 
payments based on the average wholesale price (AWP) for products such 
as vaccines, as well as payments based on section 1847A of the Act. 
Section 1847A of the Act includes payments based on the average sales 
price (ASP), and most Medicare Part B drugs are paid based on the ASP. 
Section 1847A of the Act defines terms such as multiple source drugs, 
single source drugs, and biologicals, and specifies how payment for 
each of them is to be determined, and also authorizes CMS to assign 
individual drug or biological products (for example products identified 
at the National Drug Code level) to billing and payment codes so that 
code-specific payment amounts may be assigned. Section 1847A is 
implemented by regulation at 42 CFR 414.904. However, section 
1847A(c)(5)(C of the Act) also permits the use of program instruction 
for the implementation of section 1847A of the Act, notwithstanding any 
other provision of law. In 2007, CMS issued a program instruction 
explaining how coding and pricing of multiple source drugs, single 
source drugs, and biologicals has been operationalized (https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Downloads/051807_coding_annoucement.pdf).
    Section 1847A of the Act and its corresponding regulations and 
program instructions have driven a claims processing program need for 
using HCPCS Level II codes to report Part B drug or biological products 
where CPT[supreg] codes do not exist or are insufficiently precise to 
be used for this purpose. CMS has made payment determinations for Part 
B drug or biological products identified in external coding 
applications on a case by case basis in accordance with statutory 
requirements, such as those in section 1847A(b) of the Act, that 
specify different payment amounts for single source drugs, multiple 
source drugs, and biologicals (including biosimilar biological 
products), and CMS has also made coding determinations to facilitate 
implementation of separate pricing of drug or biological products, as 
necessary, as discussed in the 2007 program instruction. For example, 
in that program instruction, CMS stated that ``the payment limit under 
Section 1847A for that biological product . . . will be based on the 
pricing information for products produced or distributed under the 
applicable FDA approval.'' Thus, a biological product with its own 
unique BLA that is administered incident to a physician's services and 
not bundled with payments for other services would typically be priced 
and paid under its own HCPCS code, meaning that CMS would typically 
assign NDCs associated with the product to a unique HCPCS code. Because 
most Part B drugs are paid using the methodologies in section 1847A of 
the Act, these provisions have driven Part B drug coding since the 
implementation of the Medicare Modernization Act. However, other 
statutory provisions, such as the requirement in Section 
1842(o)(1)(A)(iv) to base payment for certain vaccines on AWP, also 
create coding needs, for example the development of new codes or 
revisions of existing codes when existing CPT[supreg] codes are 
insufficiently precise for Part B payment.
    Once we determine that the HCPCS Level II code set is the 
appropriate code set for the product that is the subject of the 
application, we then evaluate an application to determine the 
appropriate HCPCS Level II coding action on the code application--that 
is, whether it would be appropriate to take coding action to add a new 
code to identify the subject product, or revise the descriptor of an 
existing code category to clarify that the subject product is captured 
by the existing code category, or to take no coding action due to the 
availability of an existing code category that adequately describes the 
subject product. We use the evaluation factors described in the bullet 
points later in this section to determine whether separate payment for 
the product may be made under Part B, how that payment is made (for 
example, separate payment under a specific statutory requirement), and 
the coding action appropriate to implement the payment (including 
facilitating separate payment, if necessary) based on statutory 
requirements, such as those in sections 1842(o) or 1847A of the Act, 
applicable

[[Page 70393]]

regulations pertaining to Part B drug payment such as 42 CFR part 414 
Subparts J and K, and program instructions pertaining to section 1847A 
of the Act, such as the 2007 guidance cited in this proposed rule.
    Consistent with our current practice, we propose at Sec.  
414.10(e)(2) that if CMS determines that the factors set forth in Sec.  
414.10(e)(1) are met, then CMS next determines, for purposes of claims 
processing (and payment), whether an existing code adequately describes 
a product, or whether a revision to the descriptor of an existing code 
category is appropriate, or whether a new code is necessary. In making 
this determination, we would consider applicable Medicare Part B 
statutory and regulatory payment requirements, program instructions, 
and information, such as the following: (1) Sections 1842(o) and 1847A 
of the Act; (2) 42 CFR part 414 subparts J and K; (3) program 
instructions implementing section 1847A of the Act; and (4) information 
from the code application and other applicable sources such as FDA, 
drug compendia, the manufacturer, and scientific literature. As noted 
previously, consistent with our current practice, we propose at Sec.  
414.10(c) that our evaluation of a code application would be based on 
information contained in the application and supporting material, any 
comments received through the public meeting process as applicable, any 
information obtained from and evaluations conducted by federal 
employees or CMS contractors, and any additional research or 
information we may obtain independently that may support or refute the 
claims made by or the evidence provided by the applicant. Consistent 
with the foregoing and as proposed at Sec.  414.10(e)(2)(iv), such 
research and information may be drawn from a range of outside sources 
relevant to the application, such as FDA, drug compendia, the 
manufacturer, and scientific literature. Based on such information and 
the statutory and regulatory requirements and payment instructions 
described in Sec.  414.10(e)(2), we would determine whether an existing 
code adequately describes a product for the purpose of claims 
processing (and payment), or whether a revision to the descriptor of an 
existing code category is appropriate, or whether a new code is 
necessary. This includes determining whether Medicare Part B billing 
and payment for the product can be accomplished under existing codes, 
whether revisions to existing codes are necessary, or whether new codes 
are necessary.
    As a whole, the information in the bullet points described later in 
this section is used to determine appropriate coding action for the 
product that is the subject of the code application. This information 
is obtained from the code applications (and information and 
documentation that is submitted with the code application) and from 
other sources such as FDA, drug compendia, the manufacturer (or 
applicant), and scientific literature. We propose at Sec.  414.10(e)(3) 
to evaluate each application to determine: (1) Whether the product is 
separately payable under Medicare Part B as a drug or biological 
product; and (2) whether the product is a single source drug, multiple 
source drug, biological, or biosimilar biological product for purposes 
of section 1847A of the Act, or if other specific payment provisions 
such as those in sections 1842(o)(1)(A) or (F) of the Act apply.
    While there is some overlap between the information used to make 
these determinations, the following paragraphs briefly describe how 
certain factors, that is information in the groups of bullet points 
later in this section, are used to make these determinations and 
describe the framework for the decision-making process on external code 
applications. Under this framework, the information in the groups of 
bullet points is assessed as a whole to determine a coding action, 
specifically whether to create a new code that would typically result 
in separate payment for a product provided that the product is covered 
under Part B, revise the descriptor of an existing code in response to 
an application, for example to make clear that the product in the 
application is described by an existing code or to better distinguish 
existing codes from a new code resulting from an application. 
Alternatively, we may decide to take no coding action, for example if 
the product is never or rarely paid separately under Part B.
    The following information is used primarily to determine whether 
the product is separately payable as a drug or biological under 
Medicare Part B, and is also used to begin the process of determining 
the appropriate coding action on an application for a drug or 
biological product:
     The active ingredient(s) and drug name(s) of the product 
and other potentially similar drug or biological products in existing 
Level II HCPCS codes.
     The product's labeling and description, including whether 
there are differences between the product and previously coded 
products, such as the salt form; whether the product includes any 
additional ingredients when compared to previously coded products; and 
the indications for which the product is used.
     Prescribing information, setting-of-use and other 
information found in FDA-required prescription drug labeling.
    The active ingredient(s), drug name(s), product labeling, and 
description assist CMS in first identifying the product. The active 
ingredient(s), drug name(s), product labeling and description also help 
to inform CMS's evaluation under Sec.  414.10 (e)(2), (e)(3) and 
(e)(4), and this information guides CMS in determining whether there 
are any comparable products that are described by existing Level II 
HCPCS codes.
    The prescribing information and setting of use information help CMS 
to understand where the product is used and whether the product is 
separately payable under Medicare Part B (and therefore whether a HCPCS 
Level II code is appropriate for the product). Some products are used 
in settings where drug or biological products generally are not 
separately payable under Medicare Part B and a HCPCS Level II code is 
not likely to be necessary. Examples of situations where a HCPCS Level 
II code would not be necessary include: Products furnished exclusively 
in an inpatient hospital and paid exclusively under Part A; products 
furnished in retail pharmacy, such as a self-administered drug, like an 
orally administered antihypertensive drug, that is not covered under a 
Part B benefit category. Such products would not require a HCPCS Level 
II code for separate payment under Medicare Part B. However, in cases 
where the information provided in response to the bullet points 
described previously is insufficient to allow CMS to determine whether 
the product is separately payable as a drug or biological under 
Medicare Part B, other information discussed later in the section, such 
as the route and method of administration, dosage, and frequency, may 
also be used by CMS to assist with a determination about whether the 
product is separately payable under Medicare Part B. This additional 
information may also potentially be used to distinguish the product 
from other potentially similar products that are not paid separately 
under Part B.
    In addition to the information in the previous bullet point list of 
items, the following information is used to help determine whether the 
product is a single source drug, multiple source drug, biological 
product, or biosimilar biological product for purposes of section 1847A 
or if other specific

[[Page 70394]]

payment provisions, such as those in sections 1842 (o)(1)(A) or (F) of 
the Act apply:
     FDA approval, including the date of approval and how the 
FDA regulates the product, for example whether it is approved as a 
drug, biological product, or biosimilar biological product.
     Therapeutic equivalence ratings as provided in section 
1847A(c)(6)(C), if applicable.
     Date of first sale in the United States.
     Active ingredient(s) and labeling information.
     Product information such as trade or brand name; 
nonproprietary drug name(s) and National Drug Code (NDC) or other 
applicable drug product identifier, if one exists.
     Packaging and labeling that indicates how the drug is 
supplied, including the How Supplied/storage and handling section in 
prescribing information.
    FDA approval information, therapeutic equivalence rating as 
provided in section 1847A(c)(6)(C) (if applicable), and date of first 
sale in the United States help us to determine whether the product may 
be paid under section 1847A of the Act and whether the product 
satisfies the definition of multiple source drugs, single source drugs, 
and biological products as the definitions have been operationalized by 
program instruction under the authority of section 1847A of the Act. 
While this information primarily pertains to products paid under 
section 1847A of the Act, it also helps us evaluate other products, 
such as flu, pneumococcal, and hepatitis B vaccines, which are paid 
based on AWP per section 1842(o) of the Act and to identify situations 
where it would be appropriate to add a new code or revise an existing 
code for such products to facilitate payment, for example if existing 
codes (including CPT[supreg] codes used for Part B vaccines) are not 
sufficiently clear or do not sufficiently distinguish between similar 
products that have significant price or payment differences and thus 
may be candidates for separate codes and payment determinations.
    The active ingredients and labeling information, product 
information such as trade or brand name(s); nonproprietary drug name(s) 
and National Drug Code (NDC) or other applicable drug product 
identifier, if one exists, and packaging and labeling that indicates 
how the drug is supplied also help us to accurately identify a product 
for the purpose of making a coding decision for that product. If a new 
code is necessary, for example when a product is approved under a new 
BLA, in most cases the active ingredient(s) will play a major role in 
the development of a code descriptor, and other information, such as 
packaging and other product information, can be used to refine the 
descriptor and to help select an amount of drug for the descriptor, as 
necessary. Also, all of this information can be used to determine if an 
existing code adequately describes the product without further revision 
or whether revisions would be necessary to the descriptor of an 
existing code to accommodate the product. For example, if a product 
that is the subject of a code application is described by an existing 
biological drug code, is approved under the same BLA as other products 
assigned to that code, and uses the same trade name, a new code would 
probably not be necessary because the existing code could be used 
without modification. However, at times a revision to the descriptor of 
one or more existing codes may be made, for example, to include a new 
trade name in the descriptor, to better distinguish between other 
similar codes.
    The following information is used to help CMS determine whether it 
is appropriate to add a new code or revise an existing code in 
situations where the information in the bullet points described 
previously is not sufficient to allow CMS to make a coding 
determination on an application. The following information is used to 
further clarify the similarities and differences between the products 
that are the subject of a code application and products described in 
existing codes, to determine whether the product that is the subject of 
a code application is adequately described by an existing code. The 
information helps CMS to determine whether it is appropriate to add a 
new code or revise an existing code(s) consistent with discussion in 
the previous paragraph, for the purpose of claims processing and 
facilitating payment under Medicare Part B:
     Indications for use.
     Mechanism of action.
     Dosage, frequency, route, and method of administration.
     Other drugs (including those with different proprietary 
names) that are marketed with the same active ingredient(s) or use the 
same drug name(s).
     FDA labeling and compendia information (aspects not 
already listed in previous bullet points, such as pharmacokinetics, 
contraindications, warnings, drug interactions, and adverse reactions).
     Billing information, like any third-party payers that pay 
for the product; any codes that are currently being billed to those 
payers for the product; and existing policies of third-party payers for 
reporting the product (if available) to compare how other payers are 
paying for the product.
    Drawing on all of the foregoing information and considerations, and 
consistent with our current review process, we propose at Sec.  
414.10(e)(4) that after reviewing an application to add a HCPCS Level 
II code for a drug or biological product, and after considering the 
factors listed in Sec.  414.40(e)(1) through (e)(3), CMS will then make 
a determination about whether the appropriate action is to add a code, 
revise a code, or take no coding action, in response to that 
application.
    In addition, we propose at Sec.  414.10(e)(5) to continue to use 
code descriptors with drug amounts that correspond to quantities of a 
drug or biological product that are smaller than, for example, the 
product's package size or usual adult dose, where appropriate. The 
quantities of drug or biological products described by HCPCS Level II 
code descriptors often vary. Some are based on the size of typical 
adult doses of a drug or biological product. Many older HCPCS Level II 
codes, particularly codes that became effective before the 
implementation of ASP-based payments, have code descriptors reflecting 
quantities that correspond to available package amounts, such as 500 mg 
for cefazolin. Cefazolin is an injectable first generation 
cephalosporin antibiotic that has been available for decades as an 
inexpensive generic product and can be billed under HCPCS code J0690, 
injection, cefazolin sodium, 500 mg. Dosage adjustments for typical 
adult doses of cefazolin are often made in increments of 500 mg, so the 
code descriptor quantity for cefazolin corresponds well to its 
frequently used doses (and their multiples, such as 1 gram, 1.5 grams, 
and 2 grams). However, many newer and much more expensive drug or 
biological products, such as those used to treat cancer, require 
weight-based dosing, and dosage adjustments for individuals are made in 
much smaller increments, such as a milligram or a fraction of a 
milligram. Thus, many newer HCPCS Level II codes have code descriptors 
reflecting quantities that are less than the smallest available package 
size. Decisions about the code descriptor quantities in these cases 
generally have been based on the factors discussed in the preceding 
bullet points, including indications, the active ingredient(s), dosage, 
and route of administration, packaging, and how the

[[Page 70395]]

drug is supplied as indicated in labeling. We propose to continue to 
use smaller quantities in the code descriptors for drug or biological 
products, as appropriate and discussed in this paragraph, to facilitate 
more accurate billing, particularly for products that must be dosed 
based on the patient's weight, and for products where dosing must be 
adjusted in small increments, due to factors such as age, a patient's 
ability to metabolize or excrete a drug, toxicity, or response. 
Improvements in billing accuracy by the use of smaller quantities in 
descriptors will also facilitate the accurate tracking of payments for 
discarded drugs (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c17.pdf section 40). In situations where the 
discarded drug policy does not apply, this approach can help minimize 
out of pocket costs for drugs that are not administered. For example, 
if the amount of drug or biological specified in the code descriptor 
for a single HCPCS billing unit of a drug uses a quantity of 500 mg and 
the patient is given 550 mg, that patient would be billed for two 
billing units or 1,000 mg of the drug. The use of a smaller quantity in 
the descriptor, such as 10 mg, would permit billing for exactly 550 mg.
b. Proposed Evaluation Process for Non-Drug, Non-Biological and Drug or 
Biological Applications To Revise an Existing Code
    An applicant may submit an application to revise an existing code 
if the applicant believes that the descriptor of an existing HCPCS 
Level II code does not adequately describe the item or service that is 
the subject of the code application, and that a modification to the 
long descriptor language (code text) would provide a better description 
of the category of items or services represented by the code. 
Applicants provide the language currently used in the descriptor of an 
existing HCPCS Level II code and the language that the applicant 
suggests to use as the descriptor.
    When evaluating whether the requested revision provides a better 
description of the category of items or services represented by a code, 
we consider whether there is a Medicare claims processing need for the 
requested revision. For example, a revision may be considered when a 
claims processing need has been identified to improve the descriptor to 
clarify that the existing code also describes a newer or different 
version of an item or service which performs the same clinical function 
as other items or services included in the existing code category.
    When evaluating applications to revise an existing code, we also 
consider whether the requested revision is appropriate given the nature 
and purpose of the HCPCS Level II code set. For example, we do not 
believe that a request to include information in the descriptor for the 
purposes of tracking or data analysis would be appropriate unless there 
is a Medicare claims processing need to do so, because the primary 
purpose of HCPCS Level II code set is to facilitate efficient claims 
processing. We also consider the nature of the code set, because HCPCS 
Level II codes generally represent categories of similar items or 
services, and are generally intended to describe an item or service 
provided or performed in way that is general enough so as not to be 
manufacturer specific. Where multiple like items or services are 
grouped together in a single HCPCS Level II code category, the 
corresponding descriptor uses language to describe the entire category 
of items or services at the collective, rather than product-specific, 
level. Thus, the suggested language should be applicable to the entire 
category of items or services, rather than only to the item or service 
that is the subject of the code application.
    We propose at Sec.  414.10(c) that our evaluation of an application 
to revise an existing code would be based on information contained in 
the code application and supporting material, any comments received 
through the public meeting process as applicable, any information 
obtained from and evaluations conducted by federal employees or CMS 
contractors, and any additional research or information we may obtain 
independently that may support or refute the claims made by or the 
evidence provided by the applicant. Consistent with our current 
practice, we propose at Sec.  414.10(f) that if we determine that the 
revised descriptor language suggested by the applicant would provide a 
more appropriate description of the category of items or services, as 
discussed earlier in this section, we would revise the descriptor 
accordingly. As proposed in Sec.  414.10(h), our evaluation of the 
applicant's code application may result in a coding decision that 
reflects the applicant's coding request in whole, in part, or with 
modification; or a denial of the coding request. Any coding action 
taken on an applicant's request would be set forth in the final coding 
decision.
c. Proposed Evaluation Process for Non-Drug, Non-Biological and Drug or 
Biological Applications To Discontinue an Existing Code
    To maintain a manageable and efficient coding system, HCPCS Level 
II codes that are no longer needed may be removed from the code set. An 
application to discontinue an existing code may be submitted when the 
applicant believes that an existing HCPCS Level II code is duplicative 
of another code or has become obsolete and should be removed from the 
HCPCS Level II code set.
    When evaluating applications to discontinue an existing code, we 
determine whether the code is duplicative of another code in the code 
set, or has become obsolete, and we have no further expectation that 
the same or similar item or service will be marketed at a later date, 
such that there is no longer a claims processing need to retain the 
existing code. A code that is duplicative of another code because it is 
superseded by a more specific code, for example, would no longer be 
utilized to process claims. The presence of a duplicative code could 
potentially result in erroneous billing.
    We also consider whether a code has become obsolete by evaluating 
the availability of the item or service, or category of items or 
services, described by the code. In order to avoid removing a code 
prematurely, we would first determine that each item or service 
described by the code is no longer marketed, and that there does not 
appear to be an intent to market. For example, before discontinuing a 
code for a product that has been discontinued, we would first determine 
that there is no remaining stock available--in other words, we would 
determine that the stock has been depleted, with no expectation of the 
stock being refilled, and thus there would be no need to retain the 
code for future claims processing. We would make this determination 
based on information provided by the applicant, as well as through 
information we gather from our own market surveillance and claims 
examination. Before making this determination or taking action on a 
particular application to discontinue a code, we also consider the 
possibility of the same or similar item or service reappearing on the 
market at a later date by the same or different manufacturer, and we 
may retain the code for a period of time for this reason.
    We propose at Sec.  414.10(c) that our evaluation of an application 
to discontinue an existing code would be

[[Page 70396]]

based on information contained in the application and supporting 
material, any comments received through the public meeting process as 
applicable, any information obtained from and evaluations conducted by 
federal employees or CMS contractors, and any additional research or 
information we may obtain independently that may support or refute the 
claims made by or the evidence provided by the applicant. Consistent 
with our current practice, we propose at Sec.  414.10(g) to discontinue 
an existing code when we find that the code is duplicative of another 
code or has become obsolete and we have no further expectation that the 
same or similar item or service will be marketed at a later date. As 
proposed in Sec.  414.10(h), our evaluation of the applicant's code 
application may result in a coding decision that reflects the 
applicant's coding request in whole, in part, or with modification; or 
a denial of the coding request. Any coding action taken on an 
applicant's request would be set forth in the final coding decision.
    We seek comment on the proposed processes described in this section 
for evaluating applications to add a code, to revise an existing code, 
and to discontinue an existing code.

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

A. Background

1. Benefit Category Determinations
    Medicare generally covers an item or service that--(1) falls within 
a statutory benefit category; (2) is not statutorily excluded from 
coverage; and (3) is reasonable and necessary for the diagnosis or 
treatment of illness or injury or to improve the functioning of a 
malformed body member as described in section 1862(a)(1)(A) of the Act. 
We make benefit category determinations (BCDs) based on the scope of 
Part B benefits identified in section 1832 of the Act, as well as 
certain statutory and regulatory definitions for specific items and 
services. Section 1832(a)(1) of the Act defines the benefits under Part 
B to include ``medical and other health services,'' including items and 
services described in section 1861(s) of the Act such as surgical 
dressings, and splints, casts, and other devices used for reduction of 
fractures and dislocations under paragraph (5), prosthetic devices 
under paragraph (8), leg, arm, back, and neck braces, artificial legs, 
arms, and eyes under paragraph (9), therapeutic shoes under paragraph 
(12), and durable medical equipment (DME) under paragraph (6) and as 
defined in section 1861(n) of the Act. The words ``orthotic(s)'' or 
``orthosis(es)'' are used in various parts of the statute and 
regulations instead of the word brace(s) but have the same meaning as 
brace(s). For example, section 1847(a)(2)(C) of the Act refers to 
``orthotics described in section 1861(s)(9)'' of the Act; however, 
section 1861(s)(9) of the Act describes ``leg, arm, neck, and back 
braces'' and does not use the word ``orthotics.'' Likewise, section 
1834(h)(4)(C) of the Act specifies that ``the term `orthotics and 
prosthetics' has the meaning given such term in section 1861(s)(9)'' of 
the Act; however, section 1861(s)(9) of the Act describes ``leg, arm, 
neck, and back braces'' and does not use the word ``orthotics.'' Also, 
the word ``prosthetic(s)'' is used in various parts of the statute and 
regulations to describe artificial legs, arms, and eyes referenced in 
section 1861(s)(9) of the Act, but it is important to note that these 
items are not the same items as the prosthetic devices referenced in 
section 1861(s)(8) of the Act. While the statutory definition of DME in 
section 1861(n) of this Act sets forth some items with particularity, 
such as iron lungs, oxygen tents, hospital beds, wheelchairs, and blood 
glucose monitors, whether other items and services are covered under 
the Medicare Part B DME benefit is based on our interpretation of the 
statute, which does not, for example, elaborate on the meaning of the 
word ``durable'' within the context of ``durable medical equipment.'' 
Therefore, we further defined DME in the regulation at 42 CFR 414.202 
as equipment that: (1) Can withstand repeated use; (2) effective with 
respect to items classified as DME after January 1, 2012, has an 
expected life of at least 3 years; (3) is primarily and customarily 
used to serve a medical purpose; (4) generally is not useful to a 
person in the absence of an illness or injury; and (5) is appropriate 
for use in the home. In conducting an analysis of whether an item falls 
within the DME benefit category, we review the functions and features 
of the item, as well as other supporting material, where applicable. 
For example, research and clinical studies may help to demonstrate that 
the item meets the prongs of the definition of DME at Sec.  414.202. 
For items to be considered DME, all requirements of the regulatory 
definition must be met. Additional details on the Medicare definition 
of DME are located in section 110.1 of the Medicare Benefit Policy 
Manual (CMS 100-02). The Medicare definitions for surgical dressings, 
splints, casts, and other devices used for reductions of fractures and 
dislocations, prosthetic devices, orthotics and prosthetics, and 
therapeutic shoes and inserts are located in sections 100, 120, 130, 
and 140, respectively, of the Medicare Benefit Policy Manual (CMS 100-
02).
    In situations where CMS has not established a BCD for an item or 
service, the BCD is made by the MACs on a case-by-case basis as they 
adjudicate claims. The MACs may have also addressed the benefit 
category status of an item or service locally in a written policy 
article. This proposed rule would apply to BCDs for all items and 
services described in section 1861(s) of the Act such as surgical 
dressings, and splints, casts, and other devices used for reduction of 
fractures and dislocations under paragraph (5), prosthetic devices 
under paragraph (8), leg, arm, back, and neck braces, artificial legs, 
arms, and eyes under paragraph (9), therapeutic shoes under paragraph 
(12), and DME under paragraph (6) and as defined in section 1861(n) of 
the Act.
2. Section 531(b) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554)
    Section 531(b) of BIPA mandated the establishment of procedures 
that permit public consultation on coding and payment determinations 
for new DME under Medicare Part B of title XVIII of the Act in a manner 
consistent with the procedures established for implementing coding 
modifications to ICD-9-CM. Accordingly, we host public meetings that 
provide a forum for interested parties to make oral presentations and 
to submit written comments in response to preliminary HCPCS coding and 
Medicare payment determinations for new DME items and services. A 
payment determination for DME items and services would include a 
determination regarding which of the paragraphs (2) through (7) of 
subsection (a) of section 1834 of the Act the items and services are 
classified under as well as how the fee schedule amounts for the items 
and services are established so that they are in compliance with the 
exclusive payment rules under sections 1834(a) and 1847(a) and (b) of 
the Act. The preliminary HCPCS coding and Medicare payment 
determinations for new DME items and services are made available to the 
public via our website prior to the public meetings. In addition, 
although this type of forum and opportunity for obtaining public 
consultation on preliminary HCPCS

[[Page 70397]]

coding and Medicare payment determinations for items and services other 
than new DME items is not mandated by the statute, we expanded this 
process for obtaining public consultation on preliminary coding and 
payment determinations to all HCPCS code requests for items and 
services in 2005, and since January 2005, we have been holding public 
meetings to obtain public consultation on preliminary coding and 
payment determinations for non-drug, non-biological items and services. 
As discussed in section IV., we propose to continue holding these 
public meetings for non-drug, non-biological items and services and, in 
limited circumstances, for drug or biological products (as defined and 
discussed in section IV of this proposed rule) that are associated with 
external requests for HCPCS codes. External requests for HCPCS codes 
are made by submitting a HCPCS application available on the CMS.gov 
website at the following address: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/Application_Form_and_Instructions.
    HCPCS Level II codes are used by Medicare, Medicaid, and other 
public health insurance programs and private insurers for the purpose 
of identifying items and services on health insurance claims. A code 
identifies and describes a category of items and services and the HCPCS 
Level II coding system and process is not used to make coverage or 
payment determinations on behalf of any insurer. Once a code describing 
a category of items and services is established, separate processes and 
procedures are used by insurers to determine whether payments for the 
item or service can be made, what method of payment, for example, 
purchase or rental, will be used to make payment for the item or 
service, and what amount(s) will be paid for the item or service. 
Whether or not an item falls under one of the Medicare benefit 
categories such as DME is a decision made by CMS or the MACs based on 
statutory and regulatory definitions, separate from the HCPCS Level II 
coding system and process for identifying items and services.
    In order to make a Medicare payment determination for an item or 
service, that is, to determine the statutory and regulatory payment 
rules that apply to the item or service and how to establish allowed 
payment amounts for the item or service, CMS must first determine 
whether the item or service falls under a benefit category, for example 
DME, and if so, which benefit category in particular. Therefore, since 
2001, the procedures established by CMS to obtain public consultation 
on national payment determinations for new DME items as mandated by 
section 531(b) of BIPA have also in effect been procedures for 
obtaining public consultation on national DME BCDs, or determinations 
about whether an item or service meets the Medicare definition of DME. 
Then in 2005, when these procedures were expanded to include requests 
for HCPCS codes for all items and services, they became in effect 
procedures for obtaining public consultation on BCDs and payment 
determinations for all items and services.

B. Current Issues

    In order to increase transparency and structure around the process 
for obtaining public consultation on benefit category and payment 
determinations for these items and services, we believe it would be 
beneficial to set forth in our regulations the process and procedures 
that have been used since 2001 for obtaining public consultation on 
BCDs and payment determinations for new DME and since 2005 for requests 
for HCPCS codes for items and services other than DME. As further 
discussed in section IV.A.2. of this proposed rule, we recently revised 
our coding cycle for requests for HCPCS Level II codes to implement 
shorter and more frequent coding application cycles.\40\ Beginning 
January 2020, for non-drug, non-biological items and services, we 
shortened the existing annual coding cycle to conduct more frequent 
coding cycles on a bi-annual basis and include public meetings to 
obtain consultation on preliminary coding determinations twice a year 
under these new bi-annual coding cycles. We believe that continuing to 
establish payment determinations, which, as a condition precedent, 
include BCDs, for new DME items and services and the other items and 
services described previously at these same bi-annual public meetings 
would be an efficient and effective way to address coding, benefit 
category, and payment issues for these new items and services and would 
prevent delays in coverage of new items and services.
---------------------------------------------------------------------------

    \40\ CMS, Announcement of Shorter Coding Cycle Procedures, 
Applications, and Deadlines for 2020, HCPCS--General Information. 
Available at: https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo.
---------------------------------------------------------------------------

C. Provisions of the Proposed Regulation

    We are proposing to set forth in regulations BCD and payment 
determination procedures for new DME items and services described in 
sections 1861(n) and (s)(6) of the Act, as well as the items and 
services described in sections 1861(s)(5), (8), (9), and (12) of the 
Act, that permit public consultation at public meetings. The payment 
rules for these items and services are located in 42 CFR part 414, 
subparts C and D, so we propose to include these procedures under both 
subparts C and D. We are proposing that the public consultation on BCDs 
and payment determinations would be heard at the same public meetings 
where consultation is provided on preliminary coding determinations for 
new items and services the requestor of the code believes are: DME as 
described in sections 1861(n) and (s)(6) of the Act; surgical 
dressings, splints, casts, and other devices as described in section 
1861(s)(5) of the Act; prosthetic devices as described in section 
1861(s)(8) of the Act; leg, arm, back, and neck braces (orthotics), and 
artificial legs, arms, and eyes (prosthetics) as described in section 
1861(s)(9) of the Act; or therapeutic shoes and inserts as described in 
section 1861(s)(12) of the Act. This proposal generally reflects the 
procedures that have been used by CMS since 2005, however, we are 
proposing to specifically solicit or invite consultation on preliminary 
BCDs for each item or service in addition to the consultation on 
preliminary payment and coding determinations for new items and 
services.
    Accordingly, we are proposing procedures under new Sec.  414.114 
for determining whether new items and services meet the Medicare 
definition of items and services subject to the payment rules at 42 CFR 
part 414 subpart C. This would include determinations regarding whether 
the items and services are parenteral and enteral nutrition (PEN), 
which are nutrients, equipment, and supplies that are categorized under 
the prosthetic device benefit, as defined at section 1861(s)(8) of the 
Act and covered in accordance with section 180.2 of Chapter 1, Part 3 
of the Medicare National Coverage Determinations Manual (Pub. 100-03). 
This would also include determinations regarding whether items and 
services are intraocular lenses (IOLs) inserted in a physician's 
office, which are also categorized under the prosthetic device benefit 
at section 1861(s)(8) of the Act. We would also use the proposed 
procedures to determine whether items and services are splints, casts, 
and other devices used for reduction of fractures and dislocations at 
section 1861(s)(5) of the Act. For the purpose of these proposed 
procedures and Sec.  414.114, we are proposing to establish the 
following definition:

[[Page 70398]]

    Benefit category determination means a national determination 
regarding whether an item or service meets the Medicare definition of a 
prosthetic device at section 1861(s)(8) of the Act or is a splint, 
cast, or device used for reduction of fractures or dislocations subject 
to section 1842(s) of the Act and the rules of this subpart and is not 
otherwise excluded from coverage by statute.
    We are also proposing procedures under new Sec.  414.240 for 
determining whether new items and services meet the Medicare definition 
of items and services subject to the payment rules at 42 CFR part 414 
subpart D. This would include determinations regarding whether the 
items and services are in the DME benefit category as defined at 
section 1861(n) of the Act and under 42 CFR 414.202. This would also 
include determinations regarding whether the items and services are in 
the benefit category for prosthetic devices that fall under section 
1861(s)(8) of the Act other than PEN nutrients, equipment and supplies 
or IOLs inserted in a physician's office. This would also include 
determinations regarding whether the items and services are in the 
benefit category for leg, arm, neck, and back braces (orthotics), and 
artificial legs, arms, and eyes (prosthetics) under section 1861(s)(9) 
of the Act. This would also include determinations regarding whether 
the items and services are in the benefit category for surgical 
dressings under section 1861(s)(5) of the Act or custom molded shoes or 
extra-depth shoes with inserts for an individual with diabetes under 
section 1861(s)(12) of the Act. For the purpose of these proposed 
procedures and Sec.  414.240, we are proposing to establish the 
following definition:
    Benefit category determination means a national determination 
regarding whether an item or service meets the Medicare definition of 
durable medical equipment at section 1861(n) of the Social Security 
Act, a prosthetic device at section 1861(s)(8) of the Social Security 
Act, an orthotic or leg, arm, back or neck brace, a prosthetic or 
artificial leg, arm or eye at section 1861(s)(9) of the Social Security 
Act, is a surgical dressing, or is a therapeutic shoe or insert subject 
to sections 1834(a), (h), or (i) of the Act and the rules of this 
subpart and is not otherwise excluded from coverage by statute.
    We are proposing that if a preliminary determination is made that a 
new item or service falls under one of the benefit categories for items 
and services paid in accordance with subparts C or D of 42 CFR part 
414, then CMS will make a preliminary payment determination regarding 
how the fee schedule amounts for the item or services would be 
established in accordance with these subparts, and, for items and 
services identified as DME, under which of the payment classes under 
sections 1834(a)(2) through (7) of the Act the item or service falls. 
We are proposing that the procedures for making BCDs and payment 
determinations for new items and services subject to the payment rules 
under subparts C or D of 42 CFR part 414 would be made by CMS during 
each bi-annual coding cycle and the proposed procedures under new 
Sec. Sec.  414.114 and 414.240 would include the following steps.
    First, at the start of the coding cycle, an analysis is performed 
by CMS to determine if the item or service is statutorily excluded from 
coverage under Medicare under any of the provisions at section 1862 of 
the Act, and, if not excluded by statute, the analysis looks to see if 
the item or service falls under a Medicare benefit category defined in 
the statute and regulations for any of the items or services subject to 
the payment rules under subparts C or D of 42 CFR part 414. Information 
about the item or service from several sources is considered as part of 
this analysis such as the description of the item or service in the 
HCPCS application, HCPCS codes used to bill for the item or service in 
the past, product brochures and literature, information on the 
manufacturer's website, information related to the FDA clearance or 
approval of the item or service for marketing or related to items that 
are exempted from the 510(k) requirements or otherwise granted 
marketing authorization by the FDA. This step could take anywhere from 
1- week to 1 or 2 months. For more complex items or services, the 
process may take several months, in which case public consultation on 
the benefit category and payment determinations would slip to a 
subsequent coding cycle.
    Second, if a preliminary determination is made by CMS that the item 
or service is an item or service falling under a benefit category for 
items and services paid for in accordance with subpart C or D of 42 CFR 
part 414, a preliminary payment determination is made by CMS regarding 
how the fee schedule amounts will be established for the item or 
service and what payment class the item falls under if the item meets 
the definition of DME. This step could take anywhere from 1-week to 1 
or 2 months. For more complex items or services, the process may take 
several months, in which case public consultation on the benefit 
category and payment determinations would slip to a subsequent coding 
cycle.
    Third, approximately 4-months into the coding cycle, the 
preliminary benefit category and payment determinations are posted on 
CMS.gov 2-weeks prior to the public meeting described under Sec.  
414.8(d) in which CMS receives consultation from the public on the 
preliminary benefit category and payment determinations made for the 
item or service. After consideration of public consultation on any 
preliminary benefit category or payment determinations made for the 
item or service, the benefit category or payment determinations are 
established through program instructions issued to the Medicare 
Administrative Contractors.
    It is important to note that even though a determination may be 
made that an item or service meets the Medicare definition of a benefit 
category, and fee schedule amounts may be established for the item or 
service, this does not mean that the item or service would be covered 
for a particular beneficiary. After a BCD and payment determination has 
been made for an item or service, a determination must still be made by 
CMS or the relevant local MAC that the item or service is reasonable 
and necessary for the treatment of illness or injury or to improve the 
functioning of a malformed body member, as required by section 
1862(a)(1)(A) of the Act.
    We seek public comment on our proposed process and procedures for 
making BCDs and payment determinations for new items and services paid 
for in accordance with subpart C or D of 42 CFR part 414. We note that 
our proposed approach does not affect or change our existing process 
for developing National Coverage Determinations (NCDs), which we can 
continue to use to develop NCDs both in response to external requests 
and internally-generated reviews. We further note that we are not 
limited to only addressing benefit categories in response to external 
HCPCS code applications and could decide to use the proposed process to 
address benefit categories in response to internally generated HCPCS 
coding changes as well.

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

    This section addresses classification and payment for CGMs under 
the Medicare Part B benefit for DME. We are proposing to replace a 
Ruling issued in January of 2017 (CMS-1682-R) with this new rule.

[[Page 70399]]

A. General Background

    DME is a benefit category under Medicare Part B, section 1861(n) of 
the Act defines ``durable medical equipment'' as including ``iron 
lungs, oxygen tents, hospital beds, and wheelchairs (which may include 
a power-operated vehicle that may be appropriately used as a 
wheelchair, but only where the use of such a vehicle is determined to 
be necessary on the basis of the individual's medical and physical 
condition and the vehicle meets such safety requirements as the 
Secretary may prescribe) used in the patient's home (including an 
institution used as his home other than an institution that meets the 
requirements of subsection (e)(1) of this section or section 
1819(a)(1)) of the Act, whether furnished on a rental basis or 
purchased, and includes blood-testing strips and blood glucose monitors 
for individuals with diabetes without regard to whether the individual 
has Type I or Type II diabetes or to the individual's use of insulin 
(as determined under standards established by the Secretary in 
consultation with the appropriate organizations) and eye tracking and 
gaze interaction accessories for speech generating devices furnished to 
individuals with a demonstrated medical need for such accessories; 
except that such term does not include such equipment furnished by a 
supplier who has used, for the demonstration and use of specific 
equipment, an individual who has not met such minimum training 
standards as the Secretary may establish with respect to the 
demonstration and use of such specific equipment. With respect to a 
seat-lift chair, such term includes only the seat-lift mechanism and 
does not include the chair.''
    In addition to this provision, in order to be covered, an item must 
meet the requirements of section 1862(a)(1)(A) of the Act, which 
precludes payment for any items and services that are not reasonable 
and necessary for the diagnosis or treatment of illness or injury or to 
improve the functioning of a malformed body member, and section 
1862(a)(6) of the Act, which precludes payment for personal comfort 
items.
    The Medicare program was created as part of the Social Security 
Amendments of 1965 (Pub. L. 89-97), and the Part B benefit payments for 
DME were initially limited to ``rental of durable medical equipment, 
including iron lungs, oxygen tents, hospital beds, and wheelchairs used 
in the patient's home (including an institution used as his home)'' in 
accordance with the definition of DME at section 1861(s)(6) of the Act. 
The Social Security Amendments of 1967 (Pub. L. 90-248) amended the 
statute to allow for payment on a purchase basis for DME in lieu of 
rental for items furnished on or after January 1, 1968. Section 144(d) 
of the Social Security Amendments of 1967 changed the language under 
section 1861(s) of the Act to ``durable medical equipment, including 
iron lungs, oxygen tents, hospital beds, and wheelchairs used in the 
patient' home (including an institution used as his home), whether 
furnished on a rental basis or purchased.'' Payments for purchase of 
expensive items of DME were limited to monthly installments equivalent 
to what would have otherwise been made on a rental basis, limited to 
the period of medical need and not to exceed the purchase price of the 
equipment.
    In 1975, Medicare program instructions in section 2100 of chapter 2 
of part 3 of the Medicare Carrier's Manual (HCFA Pub. 14-3) indicated 
that expenses incurred by a beneficiary for the rental or purchase of 
DME are reimbursable if the following three requirements are met: The 
equipment meets the definition of DME in this section; and the 
equipment is necessary and reasonable for the treatment of the 
patient's illness or injury or to improve the functioning of his 
malformed body member; and the equipment is used in the patient's home. 
The instructions also indicated that payment may also be made under the 
DME benefit category for repairs and maintenance of equipment owned by 
the beneficiary as well as expendable and non-reusable supplies and 
accessories essential to the effective use of the equipment. DME was 
defined under these program instructions from 1975 as equipment meeting 
four requirements (quoted later in the section verbatim and with text 
underscored as in the original instructions):
    Durable medical equipment is equipment which (a) can withstand 
repeated use, and (b) is primarily and customarily used to serve a 
medical purpose, and (c) generally is not useful to a person in the 
absence of an illness or injury; and (d) is appropriate for use in the 
home.
    All requirements of the definition must be met before an item can 
be considered to be durable medical equipment.
    Additional detailed instructions were provided in 1975 describing 
the underlying policies for determining whether an item meets the 
definition of DME and specifically addressed what the terms ``durable'' 
and ``medical equipment'' mean. The instructions indicated that an item 
is considered durable if it can withstand repeated use, that is, it is 
the type of item that could normally be rented, and that medical 
supplies of an expendable nature are not considered ``durable'' within 
the meaning of the definition. In order to be considered DME, the item 
must be able to be rented out to multiple patients and thus withstand 
repeated use. The instructions indicated that medical equipment is 
equipment primarily and customarily used for medical purposes and is 
not generally useful in the absence of illness or injury. The 
instructions indicated that in some cases information from medical 
specialists and the manufacturer or supplier of products new to the 
market may be necessary to determine whether equipment is medical in 
nature. Additional instructions provide examples of equipment which 
presumptively constitutes medical equipment, such as canes, crutches, 
and walkers, and equipment that is primarily and customarily used for a 
nonmedical purpose and cannot be considered DME even when the item has 
some remote medically related use, such as air conditioners. Equipment 
that basically serves comfort or convenience functions or is primarily 
for the convenience of a person caring for the patient, such as 
elevators, and posture chairs, do not constitute medical equipment. 
Similarly, physical fitness equipment, first-aid or precautionary-type 
equipment, self-help equipment, and training equipment are considered 
nonmedical in nature. These program instructions from 1975 are still in 
effect and are now located in section 110 of chapter 15 of the Medicare 
Benefits Policy Manual (CMS Pub. 100-02).
    The Social Security Amendments of 1977 (Pub. L. 95-142) amended the 
statute to mandate a ``rent/purchase'' program or payment methodology 
for DME; CMS would pay for each item furnished to each beneficiary on 
either a rental or purchase basis depending on which method was 
considered more economical. The decision regarding whether payment for 
DME was made on a rental or purchase basis was made by the Medicare 
Part B carrier (Medicare contractor) processing the claim. The rent/
purchase program was implemented from February 1985 through December 
1988.
    Section 2321 of the Deficit Reduction Act of 1984 (Pub. L. 98-369) 
moved the definition of DME from section 1861(s)(6) of the Act to 
section 1861(n) of the Act and included a more detailed definition of 
DME.
    Section 4062(b) of the Omnibus Budget Reconciliation Act (OBRA) of

[[Page 70400]]

1987 (Pub. L. 100-203) amended the statute to terminate the rent/
purchase program and add section 1834(a) to the Act with special 
payment rules for DME furnished on or after January 1, 1989. DME items 
were to be classified into different classes under paragraphs (2) 
through (7) of section 1834(a) of the Act, with specific payment rules 
for each class of DME. Section 1834(a) of the Act still governs payment 
for items and services furnished in areas that are not included in the 
competitive bidding program mandated by section 1847(a) of the Act. 
Section 1834(a)(2) of Act indicates that payment is made on a rental 
basis or in a lump sum amount for the purchase of an item the purchase 
price of which does not exceed $150 (inexpensive equipment) or which 
the Secretary determines is acquired at least 75 percent of the time by 
purchase (routinely purchased equipment) or which is an item specified 
under sections 1834(a)(2)(A)(iii) and (iv) of the Act. The term 
``routinely purchased equipment'' is defined in regulations at 42 CFR 
414.220(a)(2) as equipment that was acquired by purchase on a national 
basis at least 75 percent of the time during the period July 1986 
through June 1987.
    Medicare began covering blood glucose monitors under the DME 
benefit in the early 1980s and the test strips and other supplies 
essential for the effective use of the glucose monitor were also 
covered. Blood glucose monitors were expensive equipment within the 
meaning of section 1834(a)(2) of the Act but were routinely purchased 
(more than 75 percent of the time on a national basis) during the 
period July 1986 through June 1987. Therefore, payment was made on a 
fee schedule basis for blood glucose monitors based on the lower of the 
supplier's actual charge for the item or a state-wide fee schedule 
amount calculated for the item based on the average rental or purchase 
payment for the item in the state for the 12-month period ending on 
June 30, 1987. The rental and purchase fee schedule amounts are 
increased on an annual basis based on the provisions set forth in 
section 1834(a)(14) of the Act.
    The special payment rules for DME mandated by section 1834(a) of 
the Act were implemented via program instructions for all DME items 
other than oxygen and oxygen equipment on January 1, 1989. CMS 
established and implemented fee schedule amounts for inexpensive or 
routinely purchased items, for payment on a rental basis, payment on a 
lump sum purchase basis when the item is new, and payment on a lump sum 
purchase basis when the item is used. We also promulgated rules 
implementing the special payment rules for DME mandated by section 
1834(a) of the Act. For more information, see the October 9, 1991 and 
December 7, 1992 Federal Registers (56 FR 50821 and 57 FR 57675, 
respectively), and a July 10, 1995 final rule (60 FR 35492).
    We established a definition for DME items and services during this 
time at 42 CFR 414.202, which simply mirrored the general definition of 
DME established in 1975 via program instructions.
    Section 1861(n) of the Act was revised by section 4105(b)(1) of the 
Balanced Budget Act of 1997 (Pub. L. 105-33) to expand coverage of 
blood glucose monitors and test strips to patients with type II 
diabetes. As noted, these items had already been covered as DME 
(glucose monitoring equipment) and disposable supplies (test strips) 
since the early 1980s, but coverage was limited to patients with type I 
diabetes.
    We added to the definition of DME at 42 CFR 414.202 effective for 
items furnished after January 1, 2012, to require that the item have a 
minimum lifetime of 3 years in order to be considered DME. This 3 year 
minimum lifetime requirement was established in a final rule published 
in the November 10, 2011 Federal Register entitled: Medicare Program; 
End-Stage Renal Disease Prospective Payment System and Quality 
Incentive Program; Ambulance Fee Schedule; Durable Medical Equipment; 
and Competitive Acquisition of Certain Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (76 FR 70228 and 70314). This 
final rule included a discussion of how the 3-year minimum lifetime 
requirement (MLR) is applied to multicomponent devices or systems 
consisting of durable and nondurable components (76 FR 70291). In this 
rule, we noted that a device may be a system consisting of durable and 
nondurable components that together serve a medical purpose, and that 
we consider a multicomponent device consisting of durable and 
nondurable components nondurable if the component that performs the 
medically necessary function of the device is nondurable, even if other 
components that are part of the device are durable. In regards to the 
3-year MLR, the component(s) of a multicomponent device that performs 
the medically necessary function of the device must meet the 3-year MLR 
(76 FR 70291).
    In summary, DME is covered under Medicare Part B. DME is defined 
under section 1861(n) of the Act and Medicare claims for DME are paid 
in accordance with the special payment rules under section 1834(a) of 
the Act or under the competitive bidding program mandated by sections 
1847(a) and (b) of the Act. Rules related to the scope and conditions 
of the benefit are addressed at 42 CFR 410.38. Under Sec.  414.202, 
durable medical equipment means equipment which--
     Can withstand repeated use;
     Effective with respect to items classified as DME after 
January 1, 2012, has an expected life of at least 3 years;
     Is primarily and customarily used to serve a medical 
purpose;
     Generally is not useful to a person in the absence of an 
illness or injury; and
     Is appropriate for use in the home.
    All requirements of the definition must be met before an item can 
be considered to be DME.

B. Continuous Glucose Monitors

    On January 12, 2017, CMS issued CMS-1682-R articulating the CMS 
policy concerning the classification of continuous glucose monitoring 
systems as DME under Part B of the Medicare program. CMS-1682-R is 
available on the CMS.gov website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Rulings/CMS-Rulings.
    CMS-1682-R classified continuous glucose monitoring systems as 
``therapeutic continuous glucose monitors (CGMs)'' that meet the 
definition of DME if the equipment--
     Is approved by FDA for use in place of a blood glucose 
monitor for making diabetes treatment decisions (for example, changes 
in diet and insulin dosage);
     Generally is not useful to the individual in the absence 
of an illness or injury;
     Is appropriate for use in the home; and
     Includes a durable component (a component that CMS 
determines can withstand repeated use and has an expected lifetime of 
at least 3 years) that is capable of displaying the trending of the 
continuous glucose measurements.
    Under CMS-1682-R, in all other cases in which a CGM does not 
replace a blood glucose monitor for making diabetes treatment 
decisions, a CGM is not considered DME. CMS-1682-R also addressed the 
calculation of the fee schedule amounts for therapeutic CGMs in 
accordance with the rules at section 1834(a) of the Act and under 
regulations at 42 CFR, part 414, subpart D.
    CGMs are systems that use disposable glucose sensors attached to 
the patient to monitor a patient's glucose level on a continuous basis 
by either automatically transmitting the glucose readings from the 
sensor via a

[[Page 70401]]

transmitter to a device that displays the readings (``automatic'' 
CGMs), or by displaying the glucose readings from the sensor on a 
device that the patient manually holds over the sensor (``manual'' 
CGMs). Some CGMs are class III devices and require premarket approval 
by FDA, while some newer CGM models are class II devices that do not 
require premarket approval by FDA. The glucose sensor continuously 
measures glucose values in the interstitial fluid, the fluid around the 
cells (in contrast to blood glucose monitors which measure glucose 
values using fingertip blood samples). The sensor is a small flexible 
metal probe or wire that is inserted in the skin and has a coating that 
prevents the body's immune system from detecting and attacking the 
foreign probe. Once the coating wears off, which in current models 
takes place in 7 to 14 days, the sensor must be replaced for safety 
reasons. The glucose sensor generates a small electrical signal in 
response to the amount of sugar that is present (interstitial glucose). 
This electrical signal is converted into a glucose reading that is then 
displayed on a dedicated receiver (or type of monitor), an insulin 
infusion pump, or a compatible mobile device (smart phone, smart watch, 
tablet, etc.). The receiver displays the glucose measurements in the 
form of a graph so that the patient can visualize how their glucose 
measurements are trending.
    CMS-1682-R classifies CGM display devices as DME if they have been 
approved by FDA for use in making diabetes treatment decisions, such as 
changing one's diet or insulin dosage based solely on the readings of 
the CGM, that is, without verifying the CGM readings with readings from 
a blood glucose monitor. These CGMs are referred to as ``non-
adjunctive'' or ``therapeutic'' CGMs in CMS-1682-R. In contrast, CGMs 
that a patient uses to check their glucose levels and trends that must 
be verified by use of a blood glucose monitor in order to make diabetes 
treatment decisions are not currently classified as DME. These CGMs are 
referred to as ``adjunctive'' or ``non-therapeutic'' CGMs in CMS-1682-
R.

C. Current Issues

    Beneficiaries are continuing to use adjunctive or ``non-
therapeutic'' CGMs to help manage their diabetes, and claims submitted 
for this equipment and its related supplies and accessories are being 
denied in accordance with CMS-1682-R. We believe classification of CGMs 
in general is an important issue to address again in notice and comment 
rulemaking. In this proposed rule we revisit the question of whether 
CGMs (both adjunctive and non-adjunctive), and their accessories and 
supplies meet the five requirements or prongs of the definition of DME 
at 42 CFR 414.202.
1. Requirements of DME Definition
(a) Ability To Withstand Repeated Use
    As discussed in CMS-1682-R, we view the receiver that converts the 
glucose readings from the disposable sensors and displays the readings 
in a graph showing the continuous change in the trend of glucose levels 
as the CGM component that performs the primary medical function of 
self-monitoring of glucose levels and that therefore, the receiver is 
the component that must be durable or withstand repeated use in order 
for the CGM as a whole to be classified as DME. The receiver for all 
CGM systems (both adjunctive and non-adjunctive) can be rented and used 
by successive patients to monitor the trending of glucose levels that 
are either transmitted to the device using disposable sensors or are 
read or received by the device when the patient holds the device near 
the sensor. Therefore, we believe this equipment meets the requirement 
to withstand repeated use; that is, equipment that could normally be 
rented and used by successive patients.
(b) Expected Life of at Least 3 Years
    This criterion under 42 CFR 414.202 further addresses the issue of 
``durability'' and provides a clear minimum timeframe for how long an 
item must last in order to meet the definition of DME. As noted 
previously, for multicomponent equipment (that is, a system of durable 
and nondurable components), the component that performs the medically 
necessary function of the equipment must be durable in order for the 
device to be considered DME. The blood glucose monitor reads the 
glucose level on the test strip and displays the reading for the 
patient. CGM receivers operate in a similar fashion and, unlike the 
glucose sensor component, which must be replaced every 7 to 14 days, we 
believe the receiver does meet the 3-year minimum lifetime requirement. 
In the case of one manufacturer, reliability analysis data from an 
engineering firm that evaluated the receiver component of the CGM 
system predicted a lifetime of greater than 3 years for the receiver. 
Therefore, we believe that the receiver, both for adjunctive and non-
adjunctive CGMs, has an expected life of at least 3 years.
(c) Primarily and Customarily Used To Serve a Medical Purpose
    As noted previously, in CMS-1682-R, we concluded that adjunctive 
CGMs are not primarily and customarily used to serve a medical purpose. 
We are proposing to change our determination with regard to whether 
adjunctive CGMs are primarily and customarily used to serve a medical 
purpose. The agency's determination that devices like these are not 
primarily and customarily used to serve a medical purpose has been 
rejected by several district courts. The district courts hearing these 
cases have rejected the determination that adjunctive CGMs are not 
primarily and customarily used to serve a medical purpose. See, e.g., 
Finigan v. Burwell, 189 F. Supp. 3d 201 (D. Mass. 2016); Whitcomb v. 
Hargan, Case No. 17-cv-14, 2017 U.S. Dist. LEXIS 216571 (E.D. Wis. Oct. 
26, 2017); Lewis v. Azar, 308 F. Supp. 3d 574 (D. Mass. 2018).
    CGMs are used by patients to monitor their glucose levels, which 
can help them to manage their diabetes and make diabetes treatment 
decisions such as determining what and when to eat and changes in 
insulin dosage. We are proposing that CGM systems that have not been 
approved by FDA for use in making these diabetes treatment decisions 
without the use of a blood glucose monitor but can be used to alert the 
patient about potentially dangerous glucose levels while they sleep, 
are primarily and customarily used to serve a medical purpose. We now 
believe that because adjunctive CGMs can provide information about 
potential changes in glucose levels while a beneficiary is sleeping and 
is not using a blood glucose monitor, these CGMs are primarily and 
customarily used to serve a medical purpose. Specifically, these CGMs 
serve a medical purpose by helping patients to avoid potential episodes 
of hypoglycemia or hyperglycemia, despite the fact that fingerstick 
blood glucose verification is still required for use in making diabetes 
treatment decisions. Currently, Medicare does not cover adjunctive CGMs 
because such CGMs are not DME, per CMS-1682-R. CMS is proposing to 
change this policy issued under CMS-1682-R; all CGMs (adjunctive and 
non-adjunctive) would be considered DME, effective April 1, 2021.
    (d) Generally Not Useful to a Person in the Absence of an Illness 
or Injury
    CMS has determined that both adjunctive and non-adjunctive/
therapeutic CGM systems are generally not useful to a person in the 
absence of an illness or injury because people who do not have diabetes 
generally would

[[Page 70402]]

not find a monitor that tracks their glucose levels to be useful. Thus 
far, Medicare's coverage policy for CGMs has supported the use of 
therapeutic CGMs in conjunction with a smartphone (with the durable 
receiver as backup), including the important data sharing function they 
provide for patients and their families.\41\ CMS previously concluded 
that therapeutic CGMs, when used in conjunction with a smartphone, 
still satisfied the definition of DME because the durable receiver, 
used as a backup, was generally not useful to a person in the absence 
of an illness or injury, even if the smartphone might be. CMS is now 
proposing that both therapeutic and non-therapeutic CGMs, when used in 
conjunction with a smartphone, satisfy the definition of DME because 
the durable receiver, used as a backup, is not generally useful to a 
person in the absence of an illness or injury. Medicare does not cover 
or provide payment for smartphones under the DME benefit. In order for 
Medicare to cover disposable glucose sensors, transmitters and other 
non-durable components of a CGM system, these disposable items must be 
used with durable CGM equipment that meets the Medicare definition of 
DME. If a Medicare beneficiary is using durable CGM equipment that 
meets the Medicare definition of DME, but also uses a smartphone or 
other non-DME device to display their glucose readings in conjunction 
with the covered DME item as described previously, Medicare will cover 
the disposable items since the beneficiary is primarily using their 
covered DME item to display their glucose readings. However, if the 
beneficiary is exclusively using a non-DME item like a smartphone to 
display glucose readings from disposable sensors, transmitters or other 
disposable CGM supplies, these disposable supplies cannot be covered 
since there is no covered item of DME in this scenario.
---------------------------------------------------------------------------

    \41\ https://www.cms.gov/Center/Provider-Type/Durable-Medical-Equipment-DME-Center.
---------------------------------------------------------------------------

(e) Appropriate for Use in the Home
    FDA has cleared or approved CGM systems as safe and effective for 
use by the patient in their homes similar to how blood glucose 
monitoring systems have been used in the home for many years. Both 
adjunctive and non-adjunctive CGMs are appropriate for use in the home 
for the same purpose that a blood glucose monitor is used in the home.
2. Fee Schedule Amounts for CGM Receivers/Monitors and Related 
Accessories
    Medicare payment for DME was made on a reasonable charge basis 
prior to 1989. The regulations related to implementation of the 
reasonable charge payment methodology are found at 42 CFR part 405, 
subpart E. The current Medicare payment rules for glucose monitors and 
other DME are located at section 1834(a) of the Act and mandate payment 
on the basis of fee schedule amounts beginning in 1989. Blood glucose 
monitors are classified as routinely purchased items subject to the 
payment rules for inexpensive and routinely purchased DME at section 
1834(a)(2) of the Act, which mandate payment for routinely purchased 
items on a purchase or rental basis using fee schedule amounts based on 
average reasonable charges for the purchase or rental of the item for 
the 12-month period ending on June 30, 1987, increased by the 
percentage increase in the consumer price index for all urban consumers 
(U.S. city average) for the 6-month period ending with December 1987. 
These base fee schedule amounts are increased on an annual basis based 
on the update factors located in section 1834(a)(14) of the Act, which 
includes specific update factors for 2004 through 2008 for class III 
devices described in section 513(a)(1)(C) of the Federal Food, Drug, 
and Cosmetic Act. Routinely purchased equipment is defined in the 
regulations at 42 CFR 414.220(a)(2) as ``equipment that was acquired by 
purchase on a national basis at least 75 percent of the time during the 
period July 1986 through June 1987.'' Section 1834(a)(1)(C) of the Act 
states that ``subject to subparagraph (F)(ii), this subsection must 
constitute the exclusive provision of this title [Title XVIII of the 
Act] for payment for covered items under this part [Medicare Part B] or 
under Part A to a home health agency.'' The fee schedule amounts for 
blood glucose monitors were revised in 1995 using special payment 
limits established in accordance with the ``inherent reasonableness'' 
authority at section 1842(s)(8) of the Act. The final notice (BPD-778-
FN) establishing special payment limits for blood glucose monitors was 
published in the January 17, 1995 Federal Register (60 FR 3405), with 
the payment limits updated on an annual basis using the DME fee 
schedule update factors in section 1834(a)(14) of the Act.
    Because certain CGMs have been granted marketing authorization by 
FDA to replace blood glucose monitors for use in making diabetes 
treatment decisions, we believe that CGMs represent a newer technology 
version of glucose monitors paid for by Medicare in 1986 and 1987. In 
addition, the CGM systems function similar to the blood glucose 
monitors in using disposable supplies or accessories, such as test 
strips or sensors, to measure glucose levels in a patient's body, 
either from the patient's blood or interstitial fluid, and using 
durable equipment to convert these glucose measurements in a way that 
they can be displayed on a screen on the equipment. Therefore, we 
believe that the CGM receivers/monitors must be classified as routinely 
purchased DME since they are a technological refinement of glucose 
monitors routinely purchased from July 1986 through June 1987. The 
alternative would be to classify CGM receivers/monitors as other items 
of DME under section 1834(a)(7) of the Act and pay for the equipment on 
a capped rental basis. We also believe the average reasonable charge 
data for blood glucose monitors from 1986 and 1987 can be used to 
establish the fee schedule amounts for CGM receivers/monitors in 
accordance with our regulations 42 CFR 414.238(b) since CGM receivers/
monitors are comparable to blood glucose monitors. We do not believe 
that the special payment limits established in 1995 for blood glucose 
monitors must apply to CGM receivers/monitors because these special 
payment limits were based on specific pricing information on the cost 
of blood glucose monitors. We therefore propose to continue using the 
fee schedule amounts established in CMS-1682-R based on the updated 
1986/87 average reasonable charges for blood glucose monitors as the 
fee schedule amounts for CGM receivers/monitors. As noted, section 
1834(a)(14) of the Act provides different annual update factors for 
class III DME versus other DME items and so the fee schedule amounts 
for class III CGM receivers are slightly higher (from $231.77 to 
$272.63 in 2020) than the fee schedule amounts for class II CGM 
receivers (from $208.76 to $245.59 in 2020).
    With regard to the fee schedule amounts for supplies and 
accessories for CGMs, we do not believe these supplies and accessories 
are comparable to the supplies and accessories for blood glucose 
monitors, and there is a significant difference in the cost, lifetimes, 
and types of supplies and accessories used with the various types of 
CGMs. Namely, some sensors last for 7 days while others last for 14 
days, some CGM systems require certain additional accessories such as 
transmitters or additional supplies such

[[Page 70403]]

as calibration supplies while others do not. We believe all CGM 
receivers essentially serve the same purpose as a blood glucose monitor 
in interpreting and displaying glucose levels from disposable supplies. 
However, the disposable supplies for CGMs are very different from the 
disposable supplies used with a blood glucose monitor, so we do not 
believe that the 1986/87 average reasonable charges for supplies used 
with a blood glucose monitor should be used to establish the fee 
schedule amounts for supplies used with a CGM. In addition, the 
supplies used with the three types of CGMs currently on the market are 
also very different. For this reason, we are proposing to separate 
payment for CGM supplies and accessories into three separate categories 
of supplies and accessories with different fee schedule amounts for 
each category. The current 2020 monthly fee schedule amounts of $222.77 
and $259.20 for supplies and accessories for CGM systems apply to all 
types of class II or class III CGMs, respectively, but were established 
based on supplier price lists for only one type of CGM system approved 
by FDA for use in making diabetes treatment decisions without the need 
to use a blood glucose monitor to verify the results (non-adjunctive 
CGMs). The supplier prices used to establish these fee schedule amounts 
were for non-adjunctive CGM systems that use a combination of sensors 
and transmitters to automatically send glucose measurements to the CGM 
receiver without manual intervention by the patient. We refer to this 
type of CGM system as a non-adjunctive system, or a system that both 
replaces a blood glucose monitor for use in making diabetes treatment 
decisions, and can alert the patient about dangerous glucose levels 
while they sleep based on the automatic transmission of the glucose 
readings to the receiver on a 24-hour basis. The fee schedule amounts 
of $222.77 and $259.20 for supplies and accessories for class II and 
class III CGMs, respectively, increased by the fee schedule update 
factor for 2021, would continue to apply to the supplies and 
accessories for automatic, non-adjunctive CGMs effective April 1, 2021.
    As aforementioned, adjunctive and ``non-therapeutic'' CGMs also 
work with disposable batteries, sensors, and transmitters to 
automatically send glucose readings to the receiver on a 24-hour basis, 
but have not been granted marketing authorization for use in place of a 
blood glucose monitor. As such, if a beneficiary uses one of these 
CGMs, the beneficiary and program would still incur expenses associated 
with use of blood glucose monitors and supplies. To avoid a situation 
where the beneficiary and program would pay twice for glucose 
monitoring supplies needed to accurately assess glucose levels, we 
propose to establish the fee schedule amounts for supplies and 
accessories for adjunctive CGMs based on supplier prices for the 
sensors and transmitters minus the fee schedule amounts for the average 
quantity and types of blood glucose monitoring supplies used by 
insulin-treated beneficiaries who would be more likely to qualify for 
coverage of a CGM system based on a need to more closely monitor 
changes in their glucose levels. The adjunctive CGM system is not 
replacing the function of the blood glucose monitor and related 
supplies and therefore only provides an adjunctive or added benefit of 
alerting the beneficiary when their glucose levels might be dangerously 
high or low. Since the adjunctive CGM system cannot function alone as a 
glucose monitor for use in making diabetes treatment decisions, we are 
proposing to reduce the payment for the adjunctive CGM system by the 
amount that is paid separately for the blood glucose monitor and 
supplies that are needed in addition to the adjunctive CGM system and 
are not needed in addition to the non-adjunctive CGM systems. 
Currently, Medicare is allowing coverage and payment for 135 test 
strips and lancets per month for insulin-treated beneficiaries using 
blood glucose monitors. Using the 2020 mail order fee schedule amounts 
for 50 test strips, divided by 50 and multiplied by 135, plus the 2020 
mail order fee schedule amounts for 100 lancets, divided by 100 and 
multiplied by 135, plus the 2020 mail order fee schedule amounts for a 
monthly supply of batteries, calibration solution, and lancet device, 
plus the 2020 fee schedule amount for the blood glucose monitor divided 
by 60 months (5-year lifetime) results in a 2020 monthly allowance of 
$34.35, which reflects what Medicare currently pays per month for an 
insulin-treated diabetic beneficiary. Based on supplier invoices and 
other prices, a 2020 monthly price for supplies and accessories used 
with class II or class III adjunctive CGMs would be calculated to be 
$209.97 and $233.12 respectively. Subtracting the monthly cost of the 
blood glucose monitor and supplies of $34.35 from the monthly cost of 
the supplies and accessories for class II adjunctive CGMs results in a 
net price of $175.62 ($209.97 - $34.35 = $175.62) for the monthly 
supplies and accessories used with a class II adjunctive CGM after 
backing out the cost of the separately paid blood glucose supplies. 
Subtracting the monthly cost of the blood glucose monitor and supplies 
of $34.35 from the monthly cost of the supplies and accessories for 
class III adjunctive CGMs results in a net price of $198.77 ($233.12 - 
$34.35 = $198.77) for the monthly supplies and accessories used with a 
class III adjunctive CGM after backing out the cost of the separately 
paid blood glucose supplies. Thus we are proposing 2020 fee schedule 
amounts of $175.62 and $198.77 (to be increased by the 2021 fee 
schedule update factor yet to be determined) for use in paying claims 
in 2021 for the monthly supplies and accessories for use with class II 
and class III adjunctive CGMs respectively. Reducing the payment amount 
for supplies and accessories used with adjunctive CGMs by the average 
monthly payment for the blood glucose monitor and supplies that 
Medicare and the beneficiary will still have to pay for avoids a 
situation where the beneficiary and the program pay twice for glucose 
testing supplies and equipment.
    Finally, a third type of CGM system currently on the market is non-
adjunctive but does not automatically transmit glucose readings to the 
CGM receiver and therefore does not alert the patient about dangerous 
glucose levels while they sleep. We refer to this as a manual, non-
adjunctive CGM system. We propose to establish 2020 fee schedule 
amounts of $46.86 (for class II devices) and $52.01 (for class III 
devices) for the monthly supplies and accessories for this third 
category, which only uses disposable batteries and sensors, based on 
supplier prices for the supplies and accessories for this category of 
CGMs.
    Again, we believe that the types of CGM supplies and accessories 
used with the three different types of CGM systems currently on the 
market warrants three separate fee schedule amounts for the different 
monthly supplies and accessories for these three types of systems.

C. Provisions of the Proposed Rule

    We are proposing to classify all CGM systems that use a receiver 
that meets the definition of DME as DME. We are proposing that a CGM 
system would need to be granted marketing authorization by FDA, but its 
FDA-required labeling would not need to indicate that the CGM is 
appropriate or indicated for use in place of a blood glucose monitor 
for making diabetes treatment decisions in order to be classified as 
DME. Therefore, we are now proposing to classify CGM systems

[[Page 70404]]

that are adjunctive and non-adjunctive as DME. We are also proposing to 
establish Medicare fee schedule amounts for CGM receivers/monitors 
using 1986/87 average reasonable charges for comparable blood glucose 
monitors updated in accordance with section 1834(a)(14) of the Act. 
Finally, we propose to establish separate monthly fee schedule amounts 
for calendar year 2021 for the supplies and accessories used with the 
three different types of class II and class III CGMs on the market as 
of the date of publication of this proposed rule based on the following 
amounts with the addition of the applicable update factors for 2021 to 
be determined later this year: $222.77 (class II) and $259.20 (class 
III) for supplies and accessories necessary for the effective use of 
automatic, non-adjunctive CGMs; $175.62 (class II) and $198.77 (class 
III) for supplies and accessories necessary for the effective use of 
automatic, adjunctive CGMs; and $46.86 (class II) and $52.01 (class 
III) for supplies and accessories necessary for the effective use of 
manual, non-adjunctive CGMs.

VII. Expanded Classification of External Infusion Pumps as DME

    In section 5012 of the 21st Century Cures Act, Congress amended 
section 1861(s)(2) of the Act, and added subsections 1834(u) and 
1861(iii) of the Act, to establish a new Medicare home infusion therapy 
services benefit to cover certain professional services associated with 
the provision of home infusion therapy. Congress defined ``home 
infusion drug[s]'' at section 1861(iii)(3)(C) of the Act as ``a 
parenteral drug or biological administered intravenously, or 
subcutaneously for an administration period of 15 minutes or more, in 
the home of an individual through a pump that is an item of durable 
medical equipment (as defined in subsection (n)),'' excluding insulin 
pump systems and self-administered drugs or biologicals on a self-
administered drug exclusion list. See 42 U.S.C. 1395x(iii)(3)(C).
    In light of the new Medicare home infusion therapy services benefit 
to cover certain professional services associated with the provision of 
home infusion therapy, we propose to expand the scope of the Medicare 
Part B benefit for durable medical equipment (DME) by revising the 
interpretation of the ``appropriate for use in the home'' requirement 
within the definition of DME at 42 CFR 414.202 specifically for certain 
drugs or biologicals infused in the home using an external infusion 
pump. It is important to note that the home infusion therapy benefit is 
only available when a drug or biological is administered through an 
external infusion pump that is an item of DME. In addition, drugs or 
biologicals administered through an external infusion pump that is an 
item of DME can be covered under the Medicare Part B benefit for DME as 
supplies necessary for the effective use of the external infusion pump.
    In order for an external infusion pump and associated supplies to 
be covered under the Part B DME benefit, the pump must, among other 
statutory and regulatory requirements, be ``appropriate for use in the 
home.'' See 42 CFR 414.202. In practice, CMS has interpreted this 
requirement within the definition of DME at 42 CFR 414.202 as limiting 
coverable DME items to those items which can be used by a patient or 
caregiver in the home without the assistance of a healthcare 
professional. We propose to interpret this requirement to be met for an 
external infusion pump if: (1) The Food and Drug Administration (FDA)-
required labeling requires the associated home infusion drug to be 
prepared immediately prior to administration or administered by a 
health care professional or both; (2) a qualified home infusion therapy 
supplier (as defined at Sec.  486.505) administers the drug or 
biological in a safe and effective manner in the patient's home (as 
defined at Sec.  486.505); and (3) the FDA-required labeling specifies 
infusion via an external infusion pump as a possible route of 
administration, at least once per month, for the drug. We will use the 
first requirement in our proposed standard to identify the drugs or 
biologicals that a beneficiary or caregiver or both is unable to safely 
and effectively administer in the home, per the FDA-required labeling. 
The second requirement addresses the necessary services furnished by a 
qualified home infusion therapy supplier, which are covered by Medicare 
under the home infusion therapy benefit, and which would provide for 
the safe and effective administration of the drug or biological in the 
home. Our justification for the third requirement in our proposed 
standard is based on our belief that the FDA-required labeling must 
specify that a drug may be infused via an external infusion pump on a 
regular basis or over a set period of time at prescribed intervals 
because DME is a rental benefit. Medicare payment for an external 
infusion pump classified as DME is typically made over the course of 13 
months under a capped rental payment; title for the pump transfers to 
the beneficiary after 13 months of continuous use. Medicare payment for 
drugs or biologicals infused through an item of DME is typically made 
consistent with section 1847A of the Act. Therefore, we propose that in 
a situation in which a beneficiary or caregiver or both is unable to 
safely and effectively administer certain drugs or biologicals, the 
external infusion pump through which such drugs or biologicals are 
administered could satisfy the definition of DME if all three of the 
requirements described previously are met. The drug or biological could 
then be covered as a supply under the DME benefit.
    Related to the third requirement in our proposed standard, we are 
seeking comment on our proposed plan to take into account whether the 
FDA required labeling specifies infusion via an external infusion pump 
as a possible route of administration, at least once per month, for the 
drug; we welcome input on alternative standards or factors DME MACs 
could use when making this determination.
    If finalized, the proposed change would result in a greater number 
of drugs or biologicals being covered as supplies under the DME 
benefit. The proposed change could also affect home infusion therapy 
services. We solicit comments on our proposal to reinterpret the 
``appropriate for use in home'' requirement at 42 CFR 414.202, which 
would expand beneficiary access to drugs or biologicals infused in the 
home using and external infusion pump.
    In particular, we solicit comment on whether our proposal would be 
adequate to expand access to medically appropriate home infusion drugs 
administered through external infusion pumps and home infusion therapy 
furnished by qualified home infusion therapy suppliers. We note that in 
order to receive services under the Medicare home infusion therapy 
benefit, section 1861(iii)(2)(B) of the Act requires the individual to 
be under a plan of care that describes the type, amount, and duration 
of home infusion therapy services and such plan must be established and 
reviewed by a physician in coordination with the furnishing of home 
infusion drugs. Therefore, the patient's physician must coordinate, as 
needed, with the DME supplier and a qualified home infusion therapy 
supplier (if different from the DME supplier) when establishing and 
reviewing the home infusion therapy plan of care. Additionally, we 
solicit public comment with regard to whether there are any additional 
issues that CMS should consider to ensure effective and safe delivery 
of home infusion drugs

[[Page 70405]]

administered through an external infusion pump to beneficiaries in 
their homes. We note that the DME and home infusion therapy benefit 
categories are separate Medicare benefit categories defined by statute, 
which may be quite different from how home infusion drugs administered 
through external infusion pumps are covered, delivered, and paid for 
under private insurance arrangements and private networks of providers. 
We further note that Medicare beneficiaries generally have choices 
regarding their site of care treatment options. If drug infusion 
therapy in the home setting is an available option to a beneficiary, 
coordination among physicians, home infusion therapy suppliers, and DME 
suppliers is important to achieving positive health outcomes.
    Increased access and choice for beneficiaries in need of home 
infusion drugs is an important component of moving towards increased 
value-based care. We request comment on whether the proposed change 
would be adequate to further this objective.
    We note that this proposal, if finalized, would necessitate updates 
to the local coverage determinations for external infusion pumps by the 
DME MACs. The DME MACs update local coverage determinations upon 
receipt and review of an LCD reconsideration request. The DME MACs have 
instructions about LCD reconsideration requests on their websites, and 
we anticipate that manufacturers, suppliers, and others would approach 
the DME MACs in this manner requesting that drugs or biologicals be 
included in the LCDs for external infusion pumps. This proposal, if 
finalized, should not be construed as CMS staff and Medical Officers 
taking on the responsibility for evaluating requests and making 
determinations on which drugs or biologicals satisfy the ``appropriate 
for use in the home'' criteria in addition to or in lieu of DME MAC 
process for updates to LCDs. Consistent with long standing practice, 
the DME MACs are responsible for maintaining the list of eligible drugs 
that can be infused using an external infusion pump. In summary, we 
welcome comments on these issues and in particular--
     On our proposal to interpret the ``appropriate for use in 
home'' requirement at 42 CFR 414.202, which would expand beneficiary 
access to drugs or biologicals infused in the home using an external 
infusion pump;
     On whether our proposal would be adequate to expand access 
to medically appropriate home infusion drugs administered through 
external infusion pumps and home infusion therapy furnished by 
qualified home infusion therapy suppliers;
     With regard to whether there are any additional issues 
that CMS should consider to ensure effective and safe delivery of home 
infusion drugs administered through an external infusion pump to 
beneficiaries in their homes;
     On whether the proposed change would further the objective 
of moving towards increased value-based care; and
     On our proposed plan to take into account whether the FDA-
required labeling specifies infusion via an external infusion pump as a 
possible route of administration, at least once per month, for the 
drug; we welcome input on alternative standards or factors DME MACs 
could use when making this determination.

VIII. Exclusion of Complex Rehabilitative Manual Wheelchairs and 
Certain Other Manual Wheelchairs From the DMEPOS CBP

    The Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94) 
was signed into law on December 20, 2019. Section 106(a) of the Further 
Consolidated Appropriations Act, 2020 (Pub. L. 116-94) amends section 
1847(a)(2)(A) of the Act to exclude complex rehabilitative manual 
wheelchairs, certain manual wheelchairs described by HCPCS codes E1235, 
E1236, E1237, E1238, and K0008 or any successor codes, and related 
accessories from the DMEPOS CBP. We are therefore proposing to make 
conforming changes to the definition of ``item'' under Sec.  414.402 to 
reflect that these wheelchairs and related accessories are excluded 
from the DMEPOS CBP. We are proposing to edit the definition of item in 
Sec.  414.402 to exclude ``power wheelchairs, complex rehabilitative 
manual wheelchairs, manual wheelchairs described by HCPCS codes E1235, 
E1236, E1237, E1238, and K0008, and related accessories when furnished 
in connection with such wheelchairs''.
    In addition, section 106(b) of the Further Consolidated 
Appropriations Act, 2020 mandates that, during the period beginning on 
January 1, 2020 and ending June 30, 2021, the adjustments to the 
Medicare fee schedule amounts for certain DME based on information from 
competitive bidding programs not be applied to wheelchair accessories 
(including seating systems) and seat and back cushions furnished in 
connection with complex rehabilitative manual wheelchairs (HCPCS codes 
E1161, E1231, E1232, E1233, E1234 and K0005) and certain manual 
wheelchairs currently described by HCPCS codes E1235, E1236, E1237, 
E1238, and K0008. We are implementing the changes to the fee schedule 
amounts for these items through program instructions based on the 
discretion provided by the Further Consolidated Appropriations Act, 
2020.

IX. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by OMB under 
the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.).
    As stated earlier, this rule proposes to continue certain existing 
code application policies and processes and proposes several new coding 
policies and procedures. However, the new policies and procedures will 
not have any effect on existing requirements and burden estimates. 
Specifically, proposed Sec.  414.8, Sec.  414.9, Sec.  414.10, Sec.  
414.114, and Sec.  414.240 all make reference to the Level II HCPCS 
code application process. The information collection requirements 
associated with the aforementioned proposed regulations are currently 
approved under OMB control number 0938-1042 as part of the information 
collection request ``Healthcare Common Procedure Coding System 
(HCPCS)--Level II Code Modification Request Process (CMS-10224).

X. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

XI. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), the Congressional 
Review Act (5 U.S.C. 801-808), and Executive Order 13771

[[Page 70406]]

on Reducing Regulation and Controlling Regulatory Costs (January 30, 
2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A Regulatory Impact Analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). These proposed regulations are not economically significant 
within the meaning of section 3(f)(1) of the Executive Order.
    However, OMB has determined that the actions are significant within 
the meaning of section 3(f)(4) of the Executive Order. Therefore, OMB 
has reviewed this proposed rule, and the Departments have provided the 
following assessment of their impact.

A. Regulatory Review Cost Estimation

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed rule, we 
should estimate the cost associated with regulatory review. Thus, using 
the 2019 wage information from the Bureau of Labor Statistics (BLS) 
https://www.bls.gov/oes/current/oes119111.htm for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this rule is $111.00 per hour, including overhead and fringe benefits. 
For manufacturers of DMEPOS products, DMEPOS suppliers, and other 
DMEPOS industry representatives, we assume the same cost of reviewing 
this rule. Assuming an average reading speed for those very familiar 
with the topic matter, we estimate that it would take approximately 5 
hours for the medical and health service managers or industry 
representatives to review this proposed rule. For each entity that 
reviews this proposed rule, the estimated cost is $555.00 (5 hours' x 
$111.00 per hour.) Therefore, we estimate that the total cost of 
closely reviewing this proposed rule is $360,750 ($550.00 x 650 
reviewers).\42\ Due to the uncertainty involved with accurately 
quantifying the administrative costs of reviewing this rule, we solicit 
comments on this assumption.
---------------------------------------------------------------------------

    \42\ 650 represents a little more than 2 percent of the 2018 
number of DME suppliers.
---------------------------------------------------------------------------

    We acknowledge that this assumption may understate or overstate the 
costs of reviewing this proposed rule. It is possible that not all 
commenters or DME suppliers will review this proposed rule in detail, 
and it is also possible that some reviewers will choose not to comment 
on the proposed rule. For these reasons, we anticipate that a little 
more than 2 percent of the 2018 DME suppliers (650) may review the 
proposed rule. We further assume that some DME entities will read 
summaries from trade newsletters, trade associations, and trade law 
firms within the normal course of staying up with current news, 
incurring no additional cost. We solicit comments on this assumption.

B. Detailed Discussion of Impacts by Major Provisions

1. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Fee Schedule Adjustments
    The Office of the Actuary has determined that the proposed 
regulations would neither increase nor decrease spending from what is 
assumed in the FY 2021 President's Budget. In November 2019 when the 
budget baseline was estimated based on historic trends the same level 
of spending in CBAs and also non-CBAs from 2021 onwards. In other 
words, no explicit assumption for changing this provision was made in 
the President's budget baseline.
    In addition, we seek comments on three alternatives to our proposal 
that would have fiscal impacts. The first alternative is to pay fully 
adjusted fee schedule rates in all areas except super rural areas or 
non-contiguous areas and pay 120 percent of the fully adjusted rates in 
super rural areas and non-contiguous areas. The Office of the Actuary 
estimates that this alternative would generate $2.4 billion in Medicare 
savings and $0.2 billion in Medicaid savings over 5 years against the 
FY 2021 President's Budget baseline assuming that the PHE ends by 
January 2021. second alternative is to adjust fee schedule amounts for 
items and services furnished in non-CBAs between 2021 and 2023 based on 
a 75/25 blend of adjusted and unadjusted rates and phase in the full 
fee schedule adjustments beginning January 1, 2024. The Office of the 
Actuary estimates that this alternative would generate $1.8 billion in 
Medicare savings and $0.1 billion in Medicaid savings over 5 years 
against the FY 2021 President's Budget baseline assuming the PHE ends 
by January 2021. The third alternative addresses a possible payment 
methodology for certain product categories that were essentially 
removed from Round 2021 of the CBP. Under this alternative, we would 
continue the fee schedule adjustment transition rules at Sec.  
414.210(g)(9) and fee schedule adjustment rules at Sec.  414.210(g)(10) 
for items and services furnished in non-CBAs and CBAs or former CBAs, 
respectively, for items and services that are essentially removed from 
Round 2021 of the CBP. Under this alternative, the current fee schedule 
adjustment methodologies would continue until the next time these items 
and services are recompeted under the CBP. OACT has estimated that the 
changes made to the CBP under previous rulemaking (83 FR 57020) would 
have a minimal impact against the FY 2021 President's Budget baseline; 
therefore, continuing to use rates set under previous rounds of the CBP 
to adjust fee schedule amounts would likewise have a minimal impact 
against the FY 2021 President's Budget baseline since those rates are 
in line with what OACT assumed would be spent as a result of Round 2021 
of the CBP.
    The first two alternatives were not proposed primarily due to the 
assumption that maintaining the current fee schedule adjustment 
methodology will provide for better access to DMEPOS items. The third 
alternative addresses a possible payment methodology for certain 
product categories that are essentially removed from Round 2021 of the 
CBP and the fee schedule amounts for such items and services furnished 
in CBAs, former CBAs, and non-CBAs.
2. DMEPOS Fee Schedule Adjustments for Items and Services Furnished in 
Rural Areas From June 2018 Through December 2018 and Exclusion of 
Infusion Drugs From the DMEPOS CBP
    No fiscal impact has been identified by the Office of the Actuary 
in the

[[Page 70407]]

baseline of the FY 2021 President's Budget for these provisions 
promulgated in 2018.
3. Healthcare Common Procedure Coding System (HCPCS) Level II Code 
Application Process
    This rule proposes to continue certain existing code application 
policies and processes and proposes certain new coding policies and 
procedures that are assumed to have no determinable fiscal impact when 
measured against the FY 2021 President's Budget baseline.
4. Benefit Category and Payment Determinations for DME, Prosthetic 
Devices, Orthotics and Prosthetics, Therapeutic Shoes and Inserts, 
Surgical Dressings, Splints, Casts, and Other Devices Used for 
Reductions of Fractures and Dislocations
    This rule proposes to use the existing HCPCS public meeting process 
for BCDs for new items and services that are DME, prosthetic devices, 
orthotics and prosthetics, therapeutic shoes and inserts, surgical 
dressings, or splints, casts, and other devices used for reductions of 
fractures and dislocations with no additional administrative costs to 
CMS and no fiscal impact when measured against the FY 2021 President's 
Budget baseline. BCDs are necessary in order to make payment 
determinations for these new items and services. As an aside, the 
proposal to incorporate public consultation on BCDs and payment 
determinations for these new items and services into the HCPCS public 
meetings will not affect the ability of manufacturers to make these new 
items and services. We are proposing to use an already established 
process (HCPCS public meetings) that has been in use since 2001 for DME 
and 2005 for other items and services.
5. Classification and Payment for Continuous Glucose Monitors Under 
Medicare Part B
    This rule proposes to classify all CGMs as DME and addresses the 
payment for different types of CGMs. Because we do not anticipate 
changes in CGM utilization, this proposal is assumed to have no overall 
fiscal impact when measured against the FY 2021 President's Budget 
baseline.
6. Expanded Classification of External Infusion Pumps as DME
    This proposed rule would expand the scope of the Medicare Part B 
benefit for DME by revising the interpretation of the ``appropriate for 
use in the home'' requirement in the definition of DME at 42 CFR 
414.202 specifically for certain drugs or biologicals infused in the 
home using an external infusion pump if: (1) The Food and Drug 
Administration (FDA)-required labeling requires the associated home 
infusion drug to be prepared immediately prior to administration or 
administered by a health care professional or both; (2) a qualified 
home infusion therapy supplier (as defined at Sec.  486.505) 
administers the drug or biological in a safe and effective manner in 
the patient's home (as defined at Sec.  486.505); and (3) the FDA-
required labeling specifies infusion via an external infusion pump as a 
possible route of administration, at least once per month, for the 
drug. It is important to note that the home infusion therapy benefit is 
only available when a drug or biological is administered through an 
external infusion pump that is an item of DME. In addition, drugs or 
biologicals administered through an external infusion pump that is an 
item of DME can be covered under the Medicare Part B benefit for DME as 
supplies necessary for the effective use of the external infusion pump. 
The fiscal impact of this proposal against the FY 2021 President's 
Budget is estimated to be a small savings to Medicare in CY 2021.
    Beneficiaries have continued access in the outpatient setting to 
the drugs or biologicals that would be covered as supplies under the 
DME benefit if this proposal is finalized. Medicare pays for the drugs 
or biologicals using the same methodology regardless of the setting in 
which they are administered. However, Medicare would be responsible for 
a smaller portion of the total costs of administration if this proposal 
is finalized and a beneficiary chooses to receive home infusion rather 
than infusion in an outpatient setting because the beneficiary would be 
responsible for a larger portion of the total costs in the home 
setting, since there is no cap on the beneficiary cost-sharing for DME 
as there is in the hospital outpatient setting. The Medicare payments 
for the external infusion pump, supplies, and professional services 
(labor) in the home setting is higher than in the outpatient setting, 
however, the overall impact on Medicare costs is a small savings if the 
beneficiary chooses the home setting over the hospital outpatient 
setting. In the outpatient setting, Medicare pays for the supplies, 
including the costs associated with the use of an external infusion 
pump, and the professional service in a single payment to the facility. 
The pump is owned by the facility and not paid for separately by 
Medicare. Under this proposal, our reinterpretation of the 
``appropriate for use in the home'' requirement would result in more 
external infusion pumps and supplies, including the drugs or 
biologicals, being paid for under the DME benefit, while the 
professional service component of home infusion would be paid under the 
home infusion therapy services benefit. Medicare payment for an 
external infusion pump classified as DME is typically made over the 
course of 13 months under a capped rental payment; title for the pump 
transfers to the beneficiary after 13 months of continuous use. 
Medicare would continue to make a monthly payment for supplies (such as 
tubing, catheters, and the infusion drugs) for the appropriate use of 
the external infusion pump for as long as the beneficiary has a medical 
need for such supplies.
    The estimated impact of this proposed policy is based on current 
utilization, by reviewing Medicare hospital outpatient claims, of the 
only product known by CMS at this time that is available in the 
outpatient setting through the use of an external infusion pump and 
could also be prescribed by a physician for use in the home setting: 
Patisiran. In 2019, 128 beneficiaries utilized this drug and total 
Medicare payments to facilities for furnishing patisiran was roughly 
$26 million. The number of beneficiaries that would shift settings, if 
this proposal is ultimately finalized, is unknown but a reasonable 
assumption is that 50 percent--or 64 beneficiaries--would shift 
settings. CMS estimates that approximately $235,000 per year in 
Medicare payment would be paid under the home infusion therapy benefit, 
as CMS estimates home infusion therapy supplier claims would be paid at 
the category 3 level for those drugs as described in the CY 2020 Home 
Health Prospectve Payment System (HH PPS) final rule (84 FR 60618) for 
the home visit. More specifically, CMS estimates that in 2021, a home 
infusion therapy supplier would come to the home of each of the 64 
beneficiaries for one initial visit at a category 3 level of $320 in 
payment and 16 subsequent visits at a category 3 level of $266 in 
payment per visit, in the first year, if this proposal is finalized. 
CMS also estimates that $18 million would be paid to DME suppliers, 
predominantly based on the costs of the drug and payment for the 
external infusion pumps. The net impact to Medicare, accounting for 
enrollment growth and projected payment updates, is estimated to be a 
savings of roughly $3 million in CY 2021 if this proposal is finalized. 
This savings is largely attributable to the differential in cost 
sharing between the hospital outpatient setting and the home, as 
described below. Please note

[[Page 70408]]

that this estimate reflects no assumption for induced utilization of 
this product or for other products that could meet the definition of 
DME currently or that may come to market in the future. CMS asks for 
public comment on other products that could qualify under this proposed 
revised interpretation of the definition of DME to further inform our 
estimates.
    We further note the impact on the beneficiary. The beneficiary, in 
consultation with the physician that develops the plan of care, would 
have the opportunity to select the home or outpatient setting for 
infusion, if this proposal is finalized. A fiscal impact on a 
beneficiary is that the Medicare payments for external infusion pump 
rental occur in the first 13 months of treatment in the home setting, 
which may increase up front outlays in cost-sharing for beneficiaries. 
In addition, hospital outpatient cost sharing is capped at the 
inpatient deductible, which is currently $1,408 per service line (which 
in this case is for each administration of patisiran every 3 weeks). 
DME, including DME supplies like the drug, and the home infusion 
therapy benefit have a 20 percent cost sharing, which does not have a 
cap (or maximum amount). We estimate that patisiran, for example, would 
have cost sharing of more than $70,000 per year per beneficiary in the 
home setting compared to approximately $24,000 in the hospital 
outpatient setting. We note that many beneficiaries may have 
supplemental coverage, like Medigap insurance, from a third-party payer 
that may mitigate this cost sharing. Infusion of patisiran would also 
continue to be available in an outpatient setting subject to the per 
service cap at the inpatient deductible. CMS is also aware that 
premedication drugs may be necessary to safely and effectively 
administer certain infusion drugs, and that intravenous forms of the 
premedication drugs are covered in the hospital outpatient payment. CMS 
notes that premedication drugs would not be covered as supplies 
necessary for the use of the external infusion pump under the DME 
benefit, and therefore, if administered intravenously in the home, are 
estimated to cost a beneficiary a total of $3-19 out of pocket per 
treatment session. We note that some premedication drugs may also have 
an oral form and could be covered under Part D or be over-the-counter 
and non-covered by Medicare.
    We seek public comment on the proposed policy, particularly in 
regard to information about other infusion drugs or biologicals that 
may be covered as supplies under the DME benefit if this proposal is 
finalized. We also seek comment on the out-of-pocket costs for 
beneficiaries who would elect to receive infusion drugs or biologicals 
in the home rather than the outpatient setting.
7. Exclusion of Complex Rehabilitative Manual Wheelchairs and Certain 
Other Manual Wheelchairs From the DMEPOS CBP
    This rule proposes conforming changes to the regulations at 42 CFR 
414.402 to revise the definition of ``item'' at 42 CFR 414.402 under 
the CBP to exclude complex rehabilitative manual wheelchairs and 
certain other wheelchairs from the CBP and is estimated to have no 
fiscal impact and is considered in the baseline of the FY 2021 
President's Budget.

C. Regulatory Flexibility Act (RFA)

    This proposed rule does not impose a significant impact on small 
entities or DMEPOS suppliers. As a result, the RFA does not apply to 
this proposed rule. Nevertheless, the discussion later in this section 
aims to describe why the proposed rule does not impose a significant 
impact on small entities. The RFA requires agencies to analyze options 
for regulatory relief of small entities, if a rule has a significant 
impact on a substantial number of small entities. For purposes of the 
RFA, we estimate that almost all DMEPOS suppliers are small entities as 
that term is used in the RFA (include small businesses, nonprofit 
organizations, and small governmental jurisdictions). The great 
majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the Small Business Administration (SBA) definition of a 
small business (having revenues of less than $8.0 million to $41.5 
million in any 1 year).
    According to the SBA's website at https://www.sba.gov/content/small-business-size-standards, DME suppliers may fall into either the North 
American Industrial Classification System (NAICS) code 532291 and Home 
Health Equipment Rental code 44610, Pharmacies and Drug Stores. The SBA 
defines Pharmacies and Drug Stores as businesses having less than $30 
million and Home Health Equipment Rental as businesses having less than 
$35 million in annual receipts.

                                    Table 5--DMEPOS Suppliers Size Standards
----------------------------------------------------------------------------------------------------------------
                                                                SBA size standard/small
       NAICS (6-digit)          Industry subsector description      entity threshold      Total small businesses
                                                                       (million)
----------------------------------------------------------------------------------------------------------------
446110.......................  Pharmacies and Drug Stores.....                      $30                   18,526
532291.......................  Home Health Equipment Rental...                       35                      673
----------------------------------------------------------------------------------------------------------------
Source: 2012 Economic Census.

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

                                 table 6--DMEPOS Suppliers Concentration Ratios
                          [Pharmacies and drug stores and home healh equipment rental]
----------------------------------------------------------------------------------------------------------------
                Firm size (by receipts)                      Firm count      % of small firms   Total Avg. Rev.
----------------------------------------------------------------------------------------------------------------
SMALL FIRMS............................................             19,199              100.0        159,052,305
    <100,000...........................................                808                4.2             93,936
    100,000-499,999....................................              2,267               11.8            570,733
     500,000-999,999...................................              2,056               10.7          1,463,023

[[Page 70409]]

 
     1,000,000-2,499,999...............................              5,915               30.8          3,341,895
     2,500,000-4,999,999...............................              5,158               26.9          6,986,859
     5,000,000-7,499,999...............................              1,654                8.6         11,667,724
     7,500,000-9,999,999...............................                598                3.1         17,453,816
     10,000,000-14,999,999.............................                444                2.3         22,420,998
     15,000,000-19,999,999.............................                157                0.8         27,573,076
     20,000,000-24,999,999.............................                 71                0.4         20,211,074
     25,000,000-29,999,999.............................                 46                0.2         20,377,955
    30,000,000-34,999,999..............................                 25                0.1         26,891,217
LARGE FIRMS:
    Receipts >$35 Million..............................                326                 NA          2,962,532
----------------------------------------------------------------------------------------------------------------
SOURCE: 2012 County Business Patterns and 2012 Economic Census.
* Total average revenue data are not included for the Home Health Equipment Rentals (NAICS 532291) for firms
  greater than 20,000,000 in receipts). Moreover, no revenue data are available for large firms in Home Heath
  Equipment Rentals Industry.

    As can be seen in Table 6, almost all DMEPOS suppliers are small 
entities as that term is used in the RFA.\43\ Additionally, Table 6 
shows the disproportionate impacts among firms, and between small and 
large firms. In Table 6, both industries, Pharmacies and Drug Stores 
and Home Health Equipment, Rental firm size (by receipts), firm count, 
% of small firms, and total average revenue were aggregated to 
determine the DMEPOS concentration ratios. Keep in mind, there are 
missing data. See footnotes. Nevertheless, the great majority of DMEPOS 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the SBA definition of a small business (having revenues 
of less than $35 million (see the Small Business Administration's 
website at https://www.sba.gov/content/small-business-size-standards).
---------------------------------------------------------------------------

    \43\ Note, the entire population of DMEPOS suppliers is not 
known at this time. However, based on our experience, the majority 
of DMEPOS suppliers are covered in the two industries identified.
---------------------------------------------------------------------------

    For purposes of the RFA, approximately 98 percent of pharmacies and 
drugs stores and home health equipment rental industries are considered 
small businesses according to the Small Business Administration's size 
standards with total revenues of $35 million or less in any 1 year. 
Individuals and states are not included in the definition of a small 
entity.
    This rule does not affect health care enterprises operated by small 
government entities such as counties or towns with populations 50,000 
or less. The Department of Health and Human Services generally uses a 
revenue impact of 3 to 5 percent as a significance threshold under the 
RFA. The RFA threshold analysis, therefore, indicates that there is not 
a significant economic impact on a substantial number of small 
entities. We do not believe that this threshold will be reached by the 
requirements in this rule. Recall, the only cost presented is the 
regulation review cost of $555 per reviewing firm, which is considered 
to be a very insignificant cost for the firms.
    Since we are uncertain if we have accounted for all the DMEPOS 
suppliers, we are asking for public comments. We anticipate that 
additional DMEPOS suppliers not accounted for in this rule are minimal; 
hence, we do not believe that this regulation will result in a 
significant impact on a substantial number of small entities. 
Therefore, the Secretary certifies that this proposed rule will not 
have a significant economic impact on a substantial number of small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 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 for Medicare 
payment regulations and has fewer than 100 beds. We are not preparing 
an analysis for section 1102(b) of the Act because we have determined, 
and the Secretary certifies, that this rule will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2020, that 
threshold is approximately $156 million. This rule will have no 
consequential effect on state, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on state and 
local governments, preempts state law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on state 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    Executive Order 13771, entitled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017 and requires that the 
costs associated with significant new regulations ``shall, to the 
extent permitted by law, be offset by the elimination of existing costs 
associated with at least two prior regulations.'' This proposed rule's 
designation under Executive Order 13771 will be informed by comments 
received.
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by OMB.

List of Subjects in 42 CFR Part 414

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

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

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

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


[[Page 70410]]


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

0
2. Section 414.8 is added to subpart A to read as follows:


Sec.  414.8   Healthcare Common Procedure Coding System (HCPCS) Level 
II code application cycles and procedures.

    (a) Scope. This section sets forth coding cycles and procedures for 
external code applications requesting revisions to the HCPCS Level II 
code set maintained by CMS for the following:
    (1) Non-drug, non-biological items and services. For purposes of 
Sec. Sec.  414.8, 414.9, and 414.10, non-drug, non-biological items and 
services are items and services that Medicare (and potentially other 
payers) typically pay separately, as well as certain items and services 
that are not covered under Medicare, and that are described as the 
following:
    (i) Medical and surgical supplies, such as splints and casts 
described in section 1861(s)(5) of the Act and therapeutic shoes 
described in section 1861(s)(12) of the Act.
    (ii) Dialysis supplies and equipment such as those described in 
section 1861(s)(2)(F) of the Act.
    (iii) Ostomy and urological supplies such as those described in 
section 1861(s)(8) of the Act.
    (iv) Surgical dressings, such as those described in section 
1861(s)(5) of the Act.
    (v) Prosthetics (artificial legs, arms, and eyes) such as those 
described in section 1861(s)(9) of the Act and prosthetic devices such 
as those described in section 1861(s)(8) of the Act.
    (vi) Orthotics (leg, arm, back, and neck braces) such as those 
described in section 1861(s)(9) of the Act.
    (vii) Enteral/parenteral nutrition such as those described in 
section 1842(s)(2) of the Act.
    (viii) Durable Medical Equipment (and related accessories and 
supplies other than drugs), such as oxygen and oxygen equipment, 
wheelchairs, infusion pumps, and nebulizers such as described in 
sections 1861(s)(6) and 1861(n) of the Act.
    (ix) Vision items and services, such as prosthetic lenses described 
in 1861(s)(8) of the Act.
    (x) Other items and services that are statutorily excluded from 
Medicare coverage for which CMS or other government or private insurers 
have identified a claims processing need for a HCPCS Level II code, 
such as hearing aids which are excluded from coverage by section 
1862(a)(7) of the Act.
    (2) Drug or biological products. For purposes of Sec. Sec.  414.8, 
414.9, and 414.10, these are products that are separately payable by 
Medicare under Part B as drugs or biologicals as that term is defined 
in section 1861(t) of the Act.
    (b) Coding cycles. HCPCS Level II coding cycles begin with the 
submission deadlines for code applications described in paragraph (c) 
of this section, followed by a preliminary recommendation and public 
meeting as specified in paragraphs (d) and (e) of this section, and the 
issuance of a final decision described in paragraph (e) of this 
section. Coding cycles begin no less frequently than--
    (1) Bi-annually for non-drug, non-biological items and services; 
and
    (2) Quarterly for drug or biological products.
    (c) Code application deadlines. HCPCS Level II code application 
submission deadlines are established on the CMS website or in another 
manner and are --
    (1) In or around January and June of each year for non-drug, non-
biological items and services; and
    (2) In or around January, April, June, and September each year, for 
drug or biological products.
    (d) Public meetings. (1) Public meetings are held to provide the 
public with notice of, and the opportunity for public input on code 
applications and preliminary recommendations described in paragraph 
(e)(1) of this section under consideration by CMS; and for CMS to 
gather public input regarding these applications and preliminary 
recommendations.
    (2) Public meetings are held during each bi-annual coding cycle.
    (3) Subject to paragraph (e)(3) of this section, public meetings 
are held for all code applications for non-drug, non-biological items 
and services.
    (4) Subject to paragraph (e)(3) of this section, public meetings 
are held for drug or biological product code applications only under 
the following circumstances:
    (i) The code application is one that was resubmitted for 
reevaluation as provided in Sec.  414.9(b).
    (ii) A decision on the code application is delayed under paragraph 
(e)(3) of this section, and CMS determines it presents program, policy, 
or implementation concerns or complexities, or otherwise raises 
questions that public input could help to address.
    (e) Preliminary recommendations, final decisions, and effective 
dates.
    (1) Preliminary recommendations. CMS issues preliminary 
recommendations, which may include questions or requests for additional 
information that could help in reaching a final decision, on code 
applications for items and services included in the public meeting 
agenda. Except as provided in paragraph (e)(3) of this section and 
Sec.  414.9(b)(3)(i), preliminary recommendations are posted on the CMS 
website or issued in another manner, prior to the public meetings 
described in paragraph (d) of this section.
    (2) Final decisions. Except as provided in paragraph (e)(3) of this 
section, final decisions are posted on the CMS website or issued in 
another manner within approximately--
    (i) Six months of the application deadline for non-drug, non-
biological items and services; and
    (ii) Three months of the application deadline for drug or 
biological products.
    (3) Delays in making preliminary recommendations or final 
decisions. (i) CMS may delay a preliminary recommendation and therefore 
a final decision, or delay a final decision alone, one or more times 
into a subsequent coding cycle where a code application raises complex 
or significant issues or considerations and CMS determines that 
additional time is needed to evaluate the code application. Such 
circumstances may include, but are not limited to, situations where the 
code application involves a significant policy or claims processing 
consideration, or requires in-depth clinical or other research.
    (ii) For code applications (including code applications for drug or 
biological products) that are resubmitted for reevaluation and placed 
on a public meeting agenda in accordance with Sec.  414.9(b)(3), CMS 
may also delay issuing a preliminary recommendation, a final decision, 
or both into a subsequent quarterly coding cycle.
    (iii) Decisions to delay a preliminary recommendation or final 
decision are issued by CMS, either on the CMS website or in another 
manner, at the same time that CMS issues the preliminary 
recommendations or final decisions, as applicable, for other 
applications during a coding cycle.
    (4) Coding changes are effective approximately 3 months after the 
issuance of the final coding decision.
0
3. Section 414.9 is added to subpart A to read as follows:


Sec.  414.9  HCPCS Level II code application requirements.

    (a) Timely and complete applications. To be considered in a given 
HCPCS Level II coding cycle specified in Sec.  414.8(b), a code 
application must be timely and complete. Code applications that are not 
timely and complete are declined by CMS but may be submitted

[[Page 70411]]

by the applicant in a subsequent coding cycle.
    (1) Applications are timely if submitted to CMS by the applicable 
code application submission deadline specified by CMS on its website or 
in another manner, for a given application cycle identified in Sec.  
414.8(c), or as provided in paragraph (a)(3) of this section.
    (2) To be complete, an application must contain the following by 
the applicable code application submission deadline:
    (i) All applicable information and documentation specified in this 
section, and meet all administrative elements specified by the 
application instructions issued by CMS and posted on the CMS website.
    (ii) FDA documentation of the item's current classification, as 
applicable, as well as FDA marketing authorization documentation, or 
the regulation number under 21 CFR parts 862 through 892 for a device 
exempted from the premarket notification requirement. If a device 
exceeds the limitations to the exemptions under 21 CFR parts 862 
through 892 of the device classification regulations, the appropriate 
marketing authorization documentation must be submitted as part of the 
application.
    (iii) For applications for non-drug, non-biological items or 
services that are not subject to marketing authorization under the 
Federal Food, Drug, and Cosmetic Act (FD&C Act) or Public Health 
Service Act (PHSA) to be considered complete, evidence that the item or 
service is available in the United States market for use and purchase 
at the time of the relevant HCPCS Level II code application submission 
deadline specified by CMS.
    (3) For biosimilar biological products, CMS allows a 10-business 
day extension past the code application deadline to provide a complete 
application as specified in paragraph (a)(2) of this section. This 
extension applies only if the following criteria are met:
    (i) The marketing authorization documentation is dated between the 
first day of the extension period and no later than the last day of the 
extension period.
    (ii) The applicant submits a complete application to CMS by the 
last day of the extension period.
    (b) Application resubmission and reevaluation. (1) An applicant who 
is dissatisfied with a final coding decision on an initial code 
application may resubmit their application for reevaluation by CMS no 
more than two times. Any application resubmitted for reevaluation by 
CMS must be timely and complete in accordance with paragraph (a) of 
this section and must include the following:
    (i) A description of the previous application submission(s).
    (ii) A copy of the prior final code decision(s) with respect to the 
application.
    (iii) An explanation of the reason for disagreement with the prior 
final coding decision(s).
    (2) For applications resubmitted a second time for reevaluation by 
CMS, in addition to the information and documentation required in 
paragraph (b)(1) of this section, the application must include any 
significant new information as described in paragraphs (b)(1)(i) and 
(ii) of this section.
    (i) Any significant new information which would include information 
that was not previously submitted to CMS with respect to the 
application that directly relates to the reason for the prior final 
coding decision(s) and could potentially change the final coding 
decision.
    (ii) An explanation of how the significant new information 
addresses and directly relates to the reason(s) for the prior final 
coding decision(s) and supports the request for a different coding 
decision.
    (3) An application that is resubmitted for reevaluation under this 
paragraph (b) is included on an agenda for a public meeting as 
described in Sec.  414.8(d) and receives a preliminary recommendation 
as described in Sec.  414.8(e)(1).
    (i) An application for a drug or biological product that is 
resubmitted for reevaluation will not be included in a public meeting 
or receive a final decision in the quarterly cycle in which the 
application is submitted.
    (ii) Preliminary recommendations and final decisions for 
applications that are resubmitted for reevaluation may be delayed as 
described in Sec.  414.8(e)(3).
0
4. Section 414.10 is added to subpart A to read as follows:


Sec.  414.10  HCPCS Level II Processes for evaluating code 
applications.

    (a) Scope. This section sets forth the processes for evaluating 
external HCPCS Level II code applications for drug or biological 
products and non-drug, non-biological items and services, as described 
in Sec.  414.8.
    (b) Coding request. An applicant may submit an external HCPCS Level 
II code application to request the addition of a code, revision of an 
existing code, or discontinuation of an existing code.
    (c) Sources of information. CMS' evaluation of a code application 
is based on information contained in the application and supporting 
material, any comments received through the public meeting process as 
applicable, any information obtained from and evaluations conducted by 
federal employees or CMS contractors, and any additional research or 
information obtained independently by CMS that may support or refute 
the claims made or the evidence produced by the applicant.
    (d) Evaluation of non-drug, non-biological applications to add a 
code.
    (1) Except as provided in paragraph (d)(2) of this section, a 
request to add a code is further evaluated under paragraph (d)(4) of 
this section if CMS determines the following--
    (i) The item or service is not appropriate for inclusion in or 
already coded in a different HIPAA standard medical data code set, such 
as CPT[supreg], ICD, or CDT[supreg];
    (ii) The item or service is primarily medical in nature;
    (iii) If applicable, the item has the appropriate marketing 
authorization from FDA, or is exempt from premarket notification 
requirements; and
    (iv) There is a claims processing need on the part of Medicare to 
identify the item or service in the HCPCS Level II code set.
    (2) If paragraphs (d)(1)(i), (ii), or (iii) of this section are not 
met, but paragraph (d)(1)(iv) of this section is met, a request to add 
a code is further evaluated under paragraph (d)(4).
    (3) If neither paragraph (d)(1) nor (2) of this section is met, CMS 
does not further evaluate the application under paragraph (d)(4) and 
does not modify the HCPCS Level II code set.
    (4) If paragraph (d)(1) or (d)(2) of this section is met, CMS 
determines if the item or service that is the subject of the code 
application--
    (i) Performs a significantly different clinical function compared 
to other items or services described in the HCPCS Level II code set. An 
item or service is considered to perform a significantly different 
clinical function if it performs a clinical function that is not 
performed by any other item or service currently described in the HCPCS 
Level II code set; or
    (ii) Results in a significant therapeutic distinction compared to 
the use of other similar items or services described in the HCPCS Level 
II code set. An item or service is considered to show a significant 
therapeutic distinction when the use of that item or service results in 
a significantly improved or a significantly different medical benefit 
when compared with the use of other similar items or services described 
in the HCPCS Level II code set.
    (A) CMS determines that the use of the item or service confers a

[[Page 70412]]

significantly improved or significantly different medical benefit when 
compared with the use of other similar items or services described in 
the HCPCS Level II code set, if it finds any of the following:
    (1) The item or service offers a treatment option for a patient 
population unresponsive to, or ineligible for, currently available 
treatments.
    (2) The item or service offers the ability to diagnose a medical 
condition in a patient population where that medical condition is 
currently undetectable, or offers the ability to diagnose a medical 
condition earlier in a patient population than allowed by currently 
available methods and there must also be evidence that use of the item 
or service to make a diagnosis affects the management of the patient.
    (3) A demonstration of one or more of the following outcomes:
    (i) A reduction in at least one clinically significant adverse 
event, including a reduction in mortality or a clinically significant 
complication.
    (ii) A decreased rate of at least one subsequent diagnostic or 
therapeutic intervention.
    (iii) A decreased number of future hospitalizations or physician 
visits.
    (iv) A more rapid beneficial resolution of the disease process 
treatment including, but not limited to, a reduced length of stay or 
recovery time.
    (v) An improvement in one or more activities of daily living.
    (vi) An improved quality of life.
    (vii) A demonstrated greater medication adherence or compliance.
    (4) The totality of the information otherwise demonstrates that the 
use of the item or service results in a significantly improved or a 
significantly different medical benefit when compared with the use of 
other similar items or services described in the HCPCS Level II code 
set.
    (B) In determining whether the use of the item or service results 
in a significantly improved or significantly different medical benefit 
when compared with the use of other similar items or services described 
in the HCPCS Level II code set, CMS may consider instances where the 
use of the item or service may substantially improve or substantially 
change the medical benefit realized by a specific subpopulation of 
patients with the medical condition for whom the item or service is 
used, based on a common characteristic within the subpopulation that 
impacts the medical benefit of the subject item or service.
    (C) In determining whether the use of the item or service results 
in a significantly improved or significantly different medical benefit 
when compared with the use of other similar items or services described 
in the HCPCS Level II code set, CMS makes this determination without 
regard to the prevalence among Medicare beneficiaries of the underlying 
medical condition treated or diagnosed by the item or service that is 
the subject of the code application.
    (D) An item's designation under the FDA Breakthrough Devices 
Program and marketing authorization for the indication covered by the 
FDA Breakthrough Devices designation are given substantial weight in 
determining whether the item meets the significant therapeutic 
distinction factor at paragraph (d)(4)(ii) of this section.
    (E) An application must contain sufficient information and 
supporting documentation to support a claim of significant therapeutic 
distinction. The totality of the circumstances is considered when 
making a determination that the use of an item or service confers a 
significantly improved or a significantly different medical benefit 
when compared with the use of other similar items or services described 
in the HCPCS Level II code set.
    (5)(i) If the item or service that is the subject of the code 
application meets either of the two factors set forth in paragraph 
(d)(4)(i) or (ii) of this section, and CMS determines there is a claims 
processing need to separately identify the item or service with a new 
code to facilitate payment under Medicare, then CMS creates a new code.
    (ii) If the conditions in paragraph (d)(5)(i) of this section are 
not met, CMS does not create a new code.
    (6) If CMS finds that revisions to the descriptor of an existing 
code category are appropriate to account for minor distinctions between 
the subject item or service and other items or services described by 
the existing code category and to clarify that the item or service is 
included in the existing code category, then CMS revises the descriptor 
rather than add a new code.
    (e) Evaluation of drug or biological applications to add a code. 
(1) When evaluating a request to add a code for a drug or biological 
product, CMS first determines if--
    (i) The product is not appropriate for inclusion or already coded 
in a different HIPAA code set, such as CPT[supreg];
    (ii) The product is primarily medical in nature;
    (iii) If applicable, the product has the appropriate marketing 
authorization from FDA; and
    (iv) There is a claims processing need on the part of Medicare to 
identify the item or service in the HCPCS Level II code set
    (2) If CMS determines that the factors set forth in paragraph 
(e)(1) of this section are met, then CMS next determines, for the 
purpose of claims processing (and payment), whether an existing code 
adequately describes a product, or whether a revision to the descriptor 
of an existing code category is appropriate, or whether a new code is 
necessary. In making the determination in this paragraph, CMS considers 
applicable Medicare Part B statutory and regulatory payment 
requirements, program instructions, and information such as the 
following:
    (i) Sections 1842(o) and 1847A of the Act.
    (ii) 42 CFR part 414 Subparts J and K.
    (iii) Program instructions implementing section 1847A of the Act.
    (iv) Information from the code application and other applicable 
sources such as FDA, drug compendia, the manufacturer, and scientific 
literature.
    (3) When evaluating a request to add a code for a drug or 
biological product, CMS determines if the product that is the subject 
of the code application --
    (i) Is separately payable under Medicare Part B as a drug or 
biological product; and
    (ii) Is a single source drug, multiple source drug, biological, or 
biosimilar biological product under section 1847A of the Act, or if 
other specific payment provisions such as those in sections 
1842(o)(1)(A) or (F) of the Act apply.
    (4) After reviewing an application to add a code for a drug or 
biological product, and after considering the factors listed in 
paragraphs (e)(1) through (3) of this section previously, CMS will then 
make a determination about whether the appropriate action is to add a 
code, revise a code, or take no coding action, in response to the 
application for that product.
    (5) CMS may assign code descriptors with drug amounts that 
correspond to smaller quantities of the product to facilitate more 
accurate billing.
    (f) Evaluation of non-drug, non-biological and drug or biological 
applications to revise an existing code. If CMS determines that the 
revised descriptor suggested by the applicant would provide a more 
appropriate description of the category of items or services, CMS 
revises the descriptor accordingly.
    (g) Evaluation of non-drug, non-biological and drug or biological 
applications to discontinue an existing code. If CMS determines that an 
existing code is duplicative of another code, or has become obsolete 
and CMS has no further expectation that the same or

[[Page 70413]]

similar item or service will be marketed at a later date, CMS 
discontinues the code.
    (h) Coding decision. CMS's evaluation of a code application may 
result in a coding decision that reflects an applicant's coding request 
in whole, in part, or with modification; or a denial of the coding 
request. Any coding action taken on an applicant's coding request is 
set forth in the final coding decision.
0
5. Section 414.114 is added to subpart C to read as follows:


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

    (a) Definitions. For the purpose of this subpart:
    Benefit category determination means a national determination 
regarding whether an item or service meets the Medicare definition of a 
prosthetic device at section 1861(s)(8) of the Act or is a splint, 
cast, or device used for reduction of fractures or dislocations subject 
to section 1842(s) of the Act and the rules of this subpart and is not 
otherwise excluded from coverage by statute.
    (b) General rule. The procedures for determining whether new items 
and services addressed in a request for a HCPCS Level II code(s) or by 
other means meet the definition of items and services that may be 
covered and paid for in accordance with this subpart are as follows:
    (1) At the start of a HCPCS coding cycle, CMS performs an analysis 
to determine if the item or service is statutorily excluded from 
coverage under Medicare under section 1862 of the Act, and, if not 
excluded by statute, whether the item or service is parenteral or 
enteral nutrients, supplies, and equipment covered under the prosthetic 
device benefit, splints and casts or other devices used for reductions 
of fractures or dislocations, or IOLs inserted in a physician's office 
covered under the prosthetic device benefit.
    (2) If a preliminary determination is made that the item or service 
is parenteral or enteral nutrients, supplies, and equipment covered 
under the prosthetic device benefit, splints and casts or other devices 
used for reductions of fractures or dislocations, or IOLs inserted in a 
physician's office covered under the prosthetic device benefit, CMS 
makes a preliminary payment determination for the item or service.
    (3) CMS posts preliminary benefit category determinations and 
payment determinations on CMS.gov approximately 2 weeks prior to a 
public meeting described under Sec.  414.8(d).
    (4) After consideration of public consultation provided at a public 
meeting described under Sec.  414.8(d) on preliminary benefit category 
determinations and payment determinations for items and services, CMS 
establishes the benefit category determinations and payment 
determinations for items and services through program instructions.
0
6. Section 414.210 is amended by--
0
a. Revising paragraphs (g)(1)(v) and (g)(2); and
0
b. Adding paragraph (g)(9)(vi).
    The revisions and addition read as follows:


Sec.  414.210  General payment rules.

* * * * *
    (g) * * *
    (1) * * *
    (v) For items and services furnished before April 1, 2021, the fee 
schedule amount for all areas within a state that are defined as rural 
areas for the purposes of this subpart is adjusted to 110 percent of 
the national average price determined under paragraph (g)(1)(ii) of 
this section.
    (2) Payment adjustments for areas outside the contiguous United 
States and for items furnished on or after April 1, 2021 in rural areas 
within the contiguous United States using information from competitive 
bidding programs.
    (i) For an item or service subject to the programs under subpart F, 
the fee schedule amounts for areas outside the contiguous United States 
(Alaska, Hawaii, and U.S. territories) for items and services furnished 
from January 1, 2016 through December 31, 2020 are reduced to the 
greater of--
    (A) The average of the single payment amounts for the item or 
service for CBAs outside the contiguous United States.
    (B) 110 percent of the national average price for the item or 
service determined under paragraph (g)(1)(ii) of this section.
    (ii) For an item or service subject to the programs under subpart F 
of this part, the fee schedule amounts for areas outside the contiguous 
United States for items and services furnished on or after April 1, 
2021, or the date immediately following the duration of the emergency 
period described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-
5(g)(1)(B)), whichever is later, is adjusted to equal the sum of--
    (A) Fifty percent of the greater of the average of the single 
payment amounts for the item or service for CBAs outside the contiguous 
United States or 110 percent of the national average price for the item 
or service determined under paragraph (g)(1)(ii) of this section; and
    (B) Fifty percent of the fee schedule amount for the area in effect 
on December 31, 2015, increased for each subsequent year beginning in 
2016 by the annual update factors specified in sections 1834(a)(14), 
1834(h)(4), and 1842(s)(1)(B) of the Act, respectively, for durable 
medical equipment and supplies, off-the-shelf orthotics, and enteral 
nutrients, supplies, and equipment.
    (iii) For an item or service subject to the programs under subpart 
F of this part, the fee schedule amounts for rural areas within the 
contiguous United States for items and services furnished on or after 
April 1, 2021, or the date immediately following the duration of the 
emergency period described in section 1135(g)(1)(B) of the Act (42 
U.S.C. 1320b-5(g)(1)(B)), whichever is later, is adjusted to equal the 
sum of--
    (A) Fifty percent of 110 percent of the national average price for 
the item or service determined under paragraph (g)(1)(ii) of this 
section; and
    (B) Fifty percent of the fee schedule amount for the area in effect 
on December 31, 2015, increased for each subsequent year beginning in 
2016 by the annual update factors specified in sections 1834(a)(14), 
1834(h)(4), and 1842(s)(1)(B) of the Act, respectively, for durable 
medical equipment and supplies, off-the-shelf orthotics, and enteral 
nutrients, supplies, and equipment.
* * * * *
    (9) * * *
    (vi) For items and services furnished in all areas with dates of 
service on or after April 1, 2021, or the date immediately following 
the duration of the emergency period described in section 1135(g)(1)(B) 
of the Act, whichever is later, based on the fee schedule amount for 
the area is equal to the adjusted payment amount established under 
paragraph (g) of this section.
* * * * *
0
7. Section 414.240 is added to subpart D to read as follows:


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

    (a) Definitions. For the purpose of this subpart--
    Benefit category determination means a national determination 
regarding whether an item or service meets the Medicare definition of 
durable medical equipment at section 1861(n) of the Act,

[[Page 70414]]

a prosthetic device at section 1861(s)(8) of the Act and further 
defined under section 1834(h)(4) of the Act, an orthotic or leg, arm, 
back or neck brace, a prosthetic or artificial leg, arm or eye at 
section 1861(s)(9) of the Act, is a surgical dressing, or is a 
therapeutic shoe or insert subject to sections 1834(a), (h), or (i) of 
the Act and the rules of this subpart and is not otherwise excluded 
from coverage by statute.
    (b) General rule. The procedures for determining whether new items 
and services addressed in a request for a HCPCS Level II code(s) or by 
other means meet the definition of items and services paid for in 
accordance with this subpart are as follows:
    (1) At the start of a HCPCS coding cycle, CMS performs an analysis 
to determine if the item or service is statutorily excluded from 
coverage under Medicare under section 1862 of the Act, and, if not 
excluded by statute, whether the item or service is durable medical 
equipment, a prosthetic device as further defined under section 
1834(h)(4) of the Act, an orthotic or prosthetic, a surgical dressing, 
or a therapeutic shoe or insert.
    (2) If a preliminary determination is made that the item or service 
is durable medical equipment, a prosthetic device, an orthotic or 
prosthetic, a surgical dressing, or a therapeutic shoe or insert, CMS 
makes a preliminary payment determination for the item or service.
    (3) CMS posts preliminary benefit category determinations and 
payment determinations on CMS.gov approximately 2 weeks prior to a 
public meeting described under Sec.  414.8(d).
    (4) After consideration of public consultation provided at a public 
meeting described under Sec.  414.8(d) on preliminary benefit category 
determinations and payment determinations for items and services, CMS 
establishes the benefit category determinations and payment 
determinations for items and services through program instructions.
0
8. In Sec.  414.402, amend the definition ``Item'' by revising 
paragraph (1) introductory text to read as follows:


Sec.  414.402   Definitions.

* * * * *
    Item * * *
    (1) Durable medical equipment (DME) other than class III devices 
under the Federal Food, Drug and Cosmetic Act, as defined in Sec.  
414.202, group 3 complex rehabilitative power wheelchairs, complex 
rehabilitative manual wheelchairs, manual wheelchairs described by 
HCPCS codes E1235, E1236, E1237, E1238, and K0008, and related 
accessories when furnished in connection with such wheelchairs, and 
further classified into the following categories:
* * * * *

    Dated: July 23, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: August 19, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-24194 Filed 10-29-20; 4:15 pm]
BILLING CODE 4120-01-P