Medicare and Medicaid Programs; Calendar Year 2026 Home Health Prospective Payment System (HH PPS) Rate Update; Requirements for the HH Quality Reporting Program and the HH Value-Based Purchasing Expanded Model; Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program Updates; DMEPOS Accreditation Requirements; Provider Enrollment; and Other Medicare and Medicaid Policies

Recognizing that the DMEPOS CBP generates additional savings for Medicare beyond reducing the payment amounts for DMEPOS items and services, we proposed that in determining whether the total amounts to be paid to contractors in a CBA are expected to be less than the total amounts that would otherwise be paid, in accordance with section 1847(b)(2)(A)(iii) of the Act, that CMS would not award a contract under the DMEPOS CBP if CMS determines the total amount paid under the DMEPOS CBP would be greater than all payments that would otherwise be made--inclusive of payments made pursuant to improper billing and any other expenses paid under the DMEPOS fee schedules. Accompanying this proposal, we proposed to modify under what circumstances CMS would not award a contract for a competition under 42 CFR 414.414(f) and modify the maximum bid amounts allowed for bids under 42 CFR 414.412.

We solicited comments on these proposals. 1. Background

Section 1847(b)(2)(A)(iii) of the Act prohibits the awarding of contracts to any entity unless the total amounts to be paid to contractors in a CBA are expected to be less than the total amounts that would otherwise be paid under the methodologies set forth in sections 1834 and 1842 of the Act. We emphasize that the language in the statute refers to “total amounts paid” and not to individual payment amounts. Other factors other than the specific dollar amount paid per item can impact the total amounts paid.

In the 2007 final rule (72 FR 18084) CMS implemented the DMEPOS CBP and established that bids submitted for each item in a product category could not exceed the payment that would otherwise be made under the existing fee schedule methodology (42 CFR 414.412(b)(2)). We stated that we would not accept any bid for an item that is higher than the current fee schedule amount for that item. This approach would ensure that the SPA for each item in a product category is equal to or less than our current fee schedule amount for that item. As noted in the rule, we implemented this policy in part out of concern that if contracts were awarded that allowed higher prices for some

items while lower prices for others, this could incentivize improperly shifting utilization to the higher-priced items, defeating the intent that the CBP create savings.

Section 1834(a)(1)(F)(ii) and (iii) of the Act requires the Secretary to use information on the payment determined under a DMEPOS competitive bidding program to adjust the DMEPOS fee schedule amounts in areas where competitive bidding is not in effect. Authority for adjusting payment amounts in a similar manner for OTS orthotics, lymphedema compression treatment items, and enteral nutrition is provided by sections 1834(h)(1)(H)(ii), 1834(z)(3)(B), and 1842(s)(3)(B) of the Act, respectively. In the final rule implementing these provisions, published in the Federal Register on November 6, 2014, and titled “Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies”, we noted that these adjusted fee schedule amounts would serve as the bid limit for future competitive bidding (79 FR 66120).

In the November 2016 final rule, we established an alternative “lead item” bidding method for submitting bids and determining SPAs for certain groupings of similar items (for example, walkers) with different features (wheels, folding, etc.) under the DMEPOS CBP (81 FR 77834). To conform with this change, the bid limit language at 42 CFR 414.412(b)(2) was updated to refer to “lead items.” Along with this change, the rule also changed the bid limit from the adjusted fee schedule amount to the unadjusted fee schedule amount. As the preamble to the rule noted, this change to bid limits was made to address concerns that use of adjusted fees as the bid limit may make the DMEPOS CBP unviable as cost pressures evolve over time (81 FR 77950). 2. Current Issues

As discussed previously, CMS announced that it would not award competitive bidding contracts for 13 product categories for Round 2021 that were previously competed because the payment amounts did not achieve expected savings. In addition to the changes proposed elsewhere in this rule, we believe that further changes to the bid limit provisions at Sec. 414.412(b)(2) through (5) and (9) through (12) and conditions for awarding contracts at Sec. 414.414(f) are needed to ensure both the continued viability of the DMEPOS CBP and adherence to the requirement for savings laid out in 1847(b)(2)(A)(iii) of the Act. We also believe that differing approaches to bid limits are needed for items that have been included in a previous round of competitive bidding and those that have not because the specific amounts that would otherwise be paid for the former are adjusted based on rates established under previous rounds of the DMEPOS CBP while the specific amounts that would otherwise be paid for the later have not yet been adjusted based on rates established under the DMEPOS CBP.

The expectation of savings has been at the heart of the DMEPOS CBP since its inception for good reason. In examining the first two rounds of bidding, the GAO found that among the products that had been part of the Round 1 Rebid, the Round 1 Recompete, and Round 2, the SPA continued to decrease with each competition for all products except for standard power wheelchairs (which decreased with the first round and remained below the pre CBP payment amount in subsequent rounds). The largest price decrease occurred with the initial round of bidding, with savings ranging from 20 to 50 percent as compared to the previous Medicare fee schedule payment amounts (https://www.gao.gov/assets/gao-15-63.pdf). With the Round 2 expansion of the program, SPAs were, on average, 45 percent less than the fee schedule amounts, and SPAs for the national mail order program for diabetes supplies were, on average, 72 percent less than the previous fee schedule amounts.

However, as explained in section VII.A.1 of this final rule, in addition to the price savings, there are two important benefits of the DMEPOS CBP that must be taken into consideration: guaranteed access for beneficiaries and reductions in improper utilization. Outside of the DMEPOS CBP, Medicare functions as an open network. Suppliers may choose which items to provide, and there is understandable market pressure to focus on more profitable or higher-volume items. Also, despite successful efforts to target waste, fraud, and abuse, it is often difficult to identify bad actors until claims patterns have demonstrated areas of concern. Within the DMEPOS CBP, instances of waste, fraud, and abuse are less likely to occur for two reasons: lower payment amounts reduce the profit to be made from improper payments, and the reduction in the number of suppliers and heightened scrutiny and monitoring of contract suppliers makes it more difficult for entities, particularly new entrants, intending to commit fraud to gain access to the program.

While it is difficult to put a dollar amount on the benefit of guaranteed access for beneficiaries, it is possible to quantify the impact the DMEPOS CBP has had on reducing improper utilization. In its study of the DMEPOS CBP Round 1 Rebid, the GAO found that the number of beneficiaries furnished DME items covered by the CBP decreased more in the competitive bidding areas than in non-competitive bidding areas (https://www.gao.gov/assets/gao-14-156.pdf), even as monitoring of medical outcomes and beneficiary complaints did not suggest any difficulties in beneficiary access. Although the specific decrease in utilization varied across product categories, this study found decreases of 10 to 20 percent attributable to the CBP. The GAO study of Round 2 found a 17 percent decrease in the number of beneficiaries receiving items covered by the DMEPOS CBP as compared to 6 percent in non-CBP areas (in the context of a broader enforcement program that saw over 580,000 providers lose billing privileges). Similar to Round 1, this decrease was not accompanied by any evidence that beneficiaries were unable to access needed equipment, and the competitive bidding areas experiencing the largest decreases in utilization were in states with historically high rates of fraud and abuse (https://www.gao.gov/assets/gao-16-570.pdf).

Given these findings, it is clear that the historic savings generated by the DMEPOS CBP come from two sources: the reduction in price that comes from the competitive bidding process and a reduction in improper utilization. Because the evidence suggests a 10 to 20 percent reduction in waste, fraud, and abuse is associated with the DMEPOS CBP, we believe that it is appropriate and consistent with 1847(b)(2)(A)(iii) of the Act to award contracts in a CBA even if the SPA is 10 percent higher than the adjusted fee schedule payment amount that would otherwise be paid for items included under previous rounds of the DMEPOS CBP, as long as the SPA does not exceed the unadjusted fee schedule amounts for the items and services or the fee schedule amounts in effect prior to the application of the fee schedule adjustments using the methodologies under 42 CFR 414.210(g). (a) Limits on SPAs

We solicited comments on a proposal to modify 42 CFR 414.414(f) to specify that a contract would not be awarded for a competition if the SPA for the lead item would be greater than the lesser of 110 percent of the adjusted fee schedule amount for the lead item, if applicable, or 100 percent of the unadjusted fee schedule amount for the lead item.

(b) Submission of Bids

For similar reasons, we solicited comments on a proposal for several modifications to 42 CFR 414.412 regarding the bid amounts submitted for competitions under a DMEPOS CBP to better ensure that total payments to contract suppliers would be no higher than the total payments that would otherwise be made for the items and services in the CBA.

We also solicited comments on a proposal to modify 42 CFR 414.412(b)(2) to expressly specify that the bid submitted for each lead item and product category included under the DMEPOS CBP for the first time must not exceed the unadjusted fee schedule amount for the lead item.

For items included in a prior competition, we solicited comments on a proposal to modify 42 CFR 414.412(b) to require that the bid submitted for each lead item and product category must not exceed, for the same CBA, the lesser of the most recent SPA for the item plus 10 percent or the unadjusted fee schedule amount for the item. If it has been more than one year since the most recent SPA was last paid due to a temporary gap in the CBP, we proposed that the bid for the lead item must not exceed the lesser of the most recent SPA for the item, adjusted by an inflation factor, plus 10 percent or the unadjusted fee schedule amount for the item. Updating the most recent SPA in this manner allows for the bid limit to address the possible effects of inflation since the most recent SPA was last paid.

We also solicited comments on a proposal that the inflation adjustment factor would be based on the percentage change in the Consumer Price Index for all Urban Consumers (CPI-U) from the mid-point of the 12-month period that the most recent SPA was in effect to the date that is 6 months prior to the date CMS announces the dates suppliers may register and submit bids under the applicable round of competition.

We solicited comments on a proposal that the bid submitted for each lead item and product category included in a prior competition but made under a bid for a new CBA must not exceed the lesser of the adjusted fee schedule amount for the lead item plus 10 percent or the unadjusted fee schedule amount for the lead item. For the same reasons noted previously for adding 10 percent to the SPA for the lead item from a previous competition in the same CBA, we proposed to add 10 percent to the adjusted fee schedule amount for the lead item in this case since the adjusted fee schedule amounts are the amounts that would otherwise be paid and are based on SPAs from previous competitions.

Bidding entities would be educated that they would not be allowed to enter bids that are higher than these proposed limits. The SPAs going from one round to the next would not be able to exceed the 10 percent increase in payments that, as discussed previously, we believe would still allow contracts to be awarded in accordance with section 1847(b)(2)(A)(iii) of the Act.

We note that these proposals are different than the limits on SPAs described under “(a) Limits on SPAs” because adjusted fee schedule amounts may be calculated using multiple CBAs in the same region of the country or CBAs from across the country. As a result, the amount that would otherwise be paid in a CBA at the adjusted fee schedule rates could be higher than the previous SPAs from individual CBAs. Therefore, it is necessary to separately limit both the bids for individual CBAs as described here in addition to the overall SPAs as described in “(a) Limits of SPAs.”

As discussed in section VII.F.3 of this final rule, OTS back braces and OTS knee braces are currently delivered to beneficiaries from remote supplier locations that on average are hundreds of miles from the beneficiary's residence. We therefore solicited comments on a proposal to establish a nationwide or regional CBA(s) for items such as OTS back braces and OTS knee braces to be phased in at some point in the future. We solicited comments on a proposal to amend 42 CFR 414.412(b) to establish bid limits for OTS back braces and OTS knee braces for the first time they are phased in as the lead item in a product category under a nationwide or regional CBA(s). OTS back braces and OTS knee braces were included under the DMEPOS CBP in over 100 CBAs from 2021 through 2023 with SPAs calculated using maximum winning bid amounts. The fee schedule amounts for OTS back braces and OTS knee braces are adjusted based on the prices established under this round of the DMEPOS CBP. In accordance with regulations at 42 CFR 414.210(g)(1), the fee schedule amounts for nonrural areas within the contiguous United States are adjusted based on regional average SPAs limited by a national ceiling and floor. The average of the 2025 fee schedule amounts for nonrural areas for HCPCS level II code L0450 for example is $124.53. By comparison, the average of the 2025 adjusted fee schedule amounts for these items when furnished to beneficiaries in rural areas within the contiguous United States and areas outside the contiguous United States for HCPCS level II code L0450 is $184.76. The higher fee schedule amounts established for these areas in accordance with regulations at 42 CFR 414.210(g)(2)(ii) and (iii) account for higher costs of suppliers furnishing items in these areas. However, these items are being furnished mostly by mail to beneficiaries across the nation from remote supplier locations. The cost of shipping an item from a remote location to a beneficiary residing in a rural area is typically no higher than the cost of shipping an item from a remote location to a beneficiary residing in a nonrural area. Additional shipping and handling costs may be incurred in some cases for items that are shipped to an area outside the contiguous United States such as Alaska, Hawaii, or Puerto Rico, but there are very few beneficiaries living in these areas compared to areas within the contiguous United States. We solicited comments on a proposal that the bids submitted for an OTS back brace or an OTS knee brace included as a lead item in a product category in a nationwide or regional RID CBP for the first time cannot exceed the average of the nonrural fee schedule amounts that would otherwise apply to the item under subpart D of this part for the areas included in the nationwide or regional CBP.

While we believe this bid limit for items that have previously been part of competitive bidding is important in terms of balancing the benefits of the DMEPOS CBP with the statutory requirement for savings, we also recognize that it may be possible in the long term that the bid limit as previously described may, in fact, exceed the unadjusted fee schedule amounts for certain items. For this reason, we proposed a “fail-safe” to ensure that the bid limit would never exceed the unadjusted fee schedule amount. 3. Provisions of the Regulation

We proposed to amend 42 CFR 414.412 to amend paragraph (b)(2) to specify that this paragraph would apply to items included under the DMEPOS CBP for the first time, and to streamline the text by deleting the references to the application of Sec. Sec. 414.210(g), 414.105, and 414.1690. We proposed to renumber paragraphs (b)(3) through (b)(5) as (b)(6) through (b)(8), respectively. We proposed to add a new paragraph (b)(3) to set the bid limit for items that have been previously included under a competition for the same CBA with a SPA used to pay contract suppliers as the lesser of the most recent SPA for the item plus 10 percent or the unadjusted

fee schedule amount for the item. We proposed to add a new paragraph (b)(4) to specify that if it has been more than one year since the most recent SPA was last paid, the amount under (b)(3) would be adjusted by the percentage change in the CPI-U from the mid-point of the most recent 12-month period the SPA was in effect to the date that is 6 months prior to the date CMS announces the dates suppliers may register and submit bids under the current round of competition, plus 10 percent. Should either the most recent SPA plus 10 percent or the most recent SPA plus 10 percent and the increases for inflation for SPAs that have not been used for payment for more than one year exceed the unadjusted fee schedule amount for the lead item, the bid submitted would be limited to the unadjusted fee schedule amount. We proposed to add new paragraph (b)(5) to set the bid limit for items that have been previously included under the DMEPOS CBP but are being phased into a CBA where the items have never been bid as the adjusted fee schedule amount for the lead item plus 10 percent. If the adjusted fee schedule amount for the lead item plus 10 percent exceeds the unadjusted fee schedule amount for the lead item, the bid submitted would be limited to the unadjusted fee schedule amount for the lead item. We proposed to specify under new paragraph (b)(9) that the bid amounts submitted for rental of class II continuous glucose monitors included as a lead item in a product category in a RID CBP for the first time must not exceed the payment amount that would otherwise apply to the monthly fee schedule amount for the supplies for the class II continuous glucose monitor under subpart D of this part plus the average of the purchase fee schedule amounts that would otherwise apply to the class II continuous glucose monitor for the areas included in the RID CBP divided by 60. We proposed to specify under new paragraph (b)(10) that the bid amounts submitted for rental of insulin infusion pumps included as a lead item in a product category in a RID CBP for the first time must not exceed the nonrural adjusted fee schedule amount that would otherwise apply to the supplies and accessories for the insulin infusion pump under subpart D of this part for a 1-month period plus the total nonrural adjusted rental fee schedule amounts that would otherwise apply to the rental of the insulin pump for 13 months of continuous use under subpart D of this part divided by 60. We proposed to specify under new paragraph (b)(11) that the bid amounts submitted for an OTS back brace or OTS knee brace included as a lead item in a product category in a RID CBP for the first time cannot exceed the average nonrural payment amount that would otherwise apply to the item under subpart D of this part, with the application of Sec. 414.210(g), for the areas included in the RID CBP. We proposed to specify under new paragraph (b)(12) that the bid amounts submitted for all other items included as a lead item in a product category in a RID CBP for the first time must not exceed the average payment amount that would otherwise apply to the item under subpart C, D, or Q of this part for the areas included in the RID CBP.

We proposed to amend 42 CFR 414.414(f) to state that contracts cannot be awarded for a competition unless CMS determines the SPA to be paid to contract suppliers for the lead item would be no greater than the lesser of 110 percent of the adjusted fee schedule amount for the item, if applicable, or the unadjusted fee schedule amount for the lead item.

We solicited comments on these proposals to amend the regulations at Sec. 414.412(b)(2) through (5) and (9) through (12) to establish limits on bids submitted to better ensure savings under the DMEPOS CBP and at Sec. 414.414(f) for the purpose of implementing section 1847(b)(2)(A)(iii) of the Act and how we would make a determination that the total amounts to be paid to contract suppliers in a CBA are expected to be less than the total amounts that would otherwise be paid. We received 107 comments from individuals, manufacturers, suppliers, and industry associations. The following is a summary of the comments we received and our responses.

Comment: Many commenters expressed concern that the bid limit would force prices in the DMEPOS CBP to continue to decrease with each successive round to unsustainably low levels. Some of these commenters believe that there should be no bid limit at all.

Response: The bid limit helps to ensure that the DMEPOS CBP fulfills the statutory requirement for savings. Where items have been previously bid, the bid limit would allow prices to increase over time by as much as ten percent from the previous round, so long as they do not exceed the amount CMS would otherwise pay.

Comment: Many commenters believe that savings should be measured based off the unadjusted fee schedule amounts, rather than fee schedule amounts that have been adjusted for previous competitive bidding results. Many commenters believe that bid limits should be similarly tied to the unadjusted fee schedule amounts and that SPAs should be allowed to increase under the DMEPOS CBP. A commenter further proposed that savings be considered at a national level instead of being considered at the level of each competitive bidding area.

Response: We do not agree. We proposed that in determining whether the total amounts to be paid to contractors in a CBA are expected to be less than the total amounts that would otherwise be paid, in accordance with section 1847(b)(2)(A)(iii) of the Act, that CMS would not award a contract under the DMEPOS CBP if CMS determines the total amount paid under the DMEPOS CBP would be greater than all payments that would otherwise be made--inclusive of payments made pursuant to improper billing and any other expenses paid under the DMEPOS fee schedules (90 FR 29249). We believe it is important to take a look at savings holistically because reductions in improper billing are a key benefit of the DMEPOS CBP that could result in total amounts paid to contract suppliers in a CBA being less than the total amounts that would otherwise be paid even if the SPAs are higher than the fee schedule amounts that would otherwise be paid. This is because a certain number of suppliers who would engage in improper billing would not be awarded contracts under the DMEPOS CBP, which has a direct impact on the total amounts paid. By taking this holistic approach, SPAs would be allowed to increase under the DMEPOS CBP by more than the normal inflation adjustments. However, we do not believe that it would be consistent with the statute to expand this approach to a national level, as section 1847(b)(A)(iii) of the Act specifically refers to payments in a competitive acquisition area in defining the requirement for savings. Finally, section 1834(a)(1)(F) of the Act requires that the Medicare fee schedule amounts for DME be adjusted based on the results of the DMEPOS CBP; therefore, in the absence of future rounds of competitive bidding, the amounts that would otherwise be paid would be the adjusted fee schedule amounts. As was experienced under Round 2021 of the DMEPOS CBP, if the unadjusted fee schedule amount is used as the upper limit on the bids submitted for an item, the bid amounts could be significantly higher than the adjusted fee schedule amount for the item and could result in contracts not being awarded due to a failure to achieve savings.

Comment: A commenter believes that the 10 percent margin was arbitrary and does not reflect market forces that would otherwise lead to higher prices. The commenter also claimed the reduction in utilization in previous rounds of the DMEPOS CBP was due to problems with patient access instead of a reduction in fraud associated with implementation of the DMEPOS CBP.

Response: The 10 percent margin for the bid limit and conditions for awarding contracts is based on the cited GAO reports that showed substantial reductions in utilization without any indication that beneficiaries were unable to access prescribed DMEPOS items. This is also supported by our own very frequent, thorough, and ongoing monitoring of health outcomes for beneficiaries in CBAs using the bid items or with conditions supporting the need for the bid items. As such, this percentage is meant to approximate the reduction in inappropriate use of DMEPOS associated with implementation of the DMEPOS CBP and help determine the total amounts expected to be paid to contract suppliers in a CBA for the purpose of implementing section 1847(b)(2)(A)(iii) of the Act.

Comment: A few commenters expressed concern that tying bid limits to the adjusted fee schedule amount with only a 10 percent margin does not reflect the true cost pressures suppliers have faced in recent years. Several commenters further expressed concern that the proposed bid limit would lead to beneficiary access problems due to either supplier bankruptcies or Medicare payment amounts below cost.

Response: Medicare fee schedule amounts are adjusted for annual inflation either by the CPI-U or the covered item update, as provided in the statute and regulations. We have proposed a further 10 percent margin for the bid limit as well as an annual inflation update for SPAs. We note that acceptance of contracts is voluntary, and in accordance with 42 CFR 414.412(g)(3)(ii), any supplier whose bid is above the median bid faces no penalty for refusing a contract. In addition, we have proposed adding a termination clause to the contracts for suppliers that would allow us to terminate the contracts if needed due to problems with beneficiary access to items and services due to a public health emergency (PHE) declared under Section 319 of the Public Health Services Act.

After consideration of the public comments, we are finalizing the proposed changes to Sec. 414.412(b) and Sec. 414.414(f). In determining whether the total amounts to be paid to contractors in a CBA are expected to be less than the total amounts that would otherwise be paid, in accordance with section 1847(b)(2)(A)(iii) of the Act, CMS will not award a contract under the DMEPOS CBP if CMS determines the total amount paid under the DMEPOS CBP is greater than all payments that would otherwise be made--inclusive of payments made pursuant to improper billing and any other expenses paid under the DMEPOS fee schedules.

Section 1847(a)(1) of the Act requires that the Secretary implement competitive bidding programs under which CBAs are established throughout the United States for contract award purposes for the furnishing under Medicare Part B of competitively priced DMEPOS items and services described in section 1847(a)(2) of the Act, including durable medical equipment and medical supplies described in section 1847(a)(2)(A). We proposed to revise the definition of “item” under Sec. 414.402 to include the medical supplies described in section 1847(a)(2)(A). We solicited comments on this proposal. 1. Background

Section 1847(a)(1)(B) of the Act authorizes the Secretary to phase in CBPs first among the highest cost and highest volume items and services or those items and services that the Secretary determines have the largest savings potential.

In the 2007 final rule we stated we would rely on several variables in determining the savings potential for specific items or categories of items. Those variables include annual allowed charges, annual growth in expenditures, number of suppliers, savings under the demonstrations, and various reports and studies conducted by CMS and other Federal agencies (72 FR 18025).

We received several comments in the 2007 final rule from commenters who believed that ostomy products and supplies do not meet the definition of DME and, therefore, are not part of the items and services subject to the CBPs described in section 1847(a)(2)(A) of the Act (72 FR 18023). We responded that we believe that section 1847(a)(2)(A) of the Act is ambiguous regarding whether ostomy products and supplies are to be included in the Medicare DMEPOS CBP because the term “medical supplies” in the section heading could be interpreted either to modify the term “durable medical equipment” (meaning that the medical supplies would have to be associated with the DME to be included), or to be a separate category of items that are not associated with DME. In addition, although the definition of “covered item” in section 1834(a)(13) of the Act means “durable medical equipment (as defined in section 1861(n) [of the Act]), including such equipment described in section 1861(m)(5) [of the Act] . . . ,” the term “such equipment” in section 1861(m)(5) of the Act could be interpreted to refer either to the term “durable medical equipment” or to the term “medical supplies” (which would include ostomy supplies) in that section. In light of these ambiguities, we stated that we believe we have discretion to interpret section 1847(a)(2)(A) of the Act to include or exclude ostomy products and supplies in the competitive bidding programs. We did not exercise our authority to include these items at that time and stated we would continue to review this issue.

Prior to enactment of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, Public Law 108-173, section 4319 of the Balanced Budget Act of 1997 (BBA), Public Law 105-33, authorized implementation of up to five demonstration projects of competitive bidding for Medicare Part B items, except physician services. In accordance with section 4319 of the BBA, we planned and implemented the DMEPOS Competitive Bidding Demonstration to test the feasibility and program impacts of using competitive bidding to set prices for DMEPOS. The demonstration was implemented at two sites: Polk County, Florida, and in the San Antonio, Texas, Metropolitan Statistical Area (MSA). The competitive bidding demonstrations, authorized under the BBA, were implemented successfully in both demonstration sites from 1999 to 2002, resulted in a substantial savings to the program, and offered beneficiaries sufficient access and quality products.

At the first site, Polk County, Florida, we conducted the first of two rounds of bidding in 1999. Five categories of DMEPOS were put up for bidding: oxygen equipment and supplies (required by statute); hospital beds and accessories; enteral nutrition formulas and equipment; urological supplies; and surgical dressings. A total of 16 contract suppliers began providing demonstration products in Polk County on October 1, 1999, and continued for 2 years. The second and final round of bidding in Polk County was conducted in 2001 for the same product categories minus enteral nutrition (Enteral nutrition was dropped to retain only product categories that are

overwhelmingly used in private homes). The second set of competitively bid payment amounts took effect in October 2001. As in round one, 16 suppliers were selected, of whom half had participated as winners previously. The new fee schedules developed from the bids in each round replaced the Statewide Medicare DMEPOS fees. The second round of the demonstration in Polk County ended in September 2002. Texas was the second site for the demonstration. In Bexar, Comal, and Guadalupe counties in the San Antonio MSA, we conducted bidding in 2000 for five kinds of DMEPOS: oxygen equipment and supplies; hospital beds and accessories; wheelchairs and accessories; general orthotics; and nebulizer drugs. Fifty-one suppliers were selected and began serving Medicare beneficiaries under the new fees in February 2001. The San Antonio site ended operations in December 2002, the statutorily required termination date in the BBA.

In each area of evaluation, the data indicated mostly favorable results for the Medicare program. The demonstration led to lower Medicare fees for almost every item in almost every product category in each round of bidding. Fee reductions varied by product category and item, resulting in a nearly 20 percent overall savings at each site. Statistical and qualitative data indicate that beneficiary access and quality of services were essentially unchanged. For urological supplies, the estimated savings rate for the first round of the demonstration in Polk County were $36,169, which were 18 percent, and Round 2 bidding in Polk County resulted in 9 percent savings (72 FR 18078). In the proposed rule, we stated the estimated savings rate for the first round of the demonstration in Polk County for urological supplies was $16,409 (90 FR 29252). To clarify, this was an annual estimated savings rate, from a 2002 report.\63\ The 2007 final rule provided an updated number of $36,169 (72 FR 18078), which included the savings rate from years 1 and 2 of Round 1 of the Polk County demonstration. The 2002 report noted that beneficiary surveys in Polk County did not indicate that beneficiaries using urological supplies experienced any negative impact on the quality of their equipment.

\63\ https://www.cms.gov/files/document/2rtcappendixpdf.

Multiple winners were selected in each product category in each round of bidding. In Polk County, non-demonstration suppliers in Round 1 bid successfully in Round 2. However, the falling number of bidders for urological supplies raised questions about the feasibility of bidding for products with low allowed charges. At the time, this product category did not have a single dominant product code, with the items with the highest allowed charges accounting for only 28 percent of total Medicare allowed charges for urological supplies. 2. Current Issues

There have been several reports detailing Medicare's excessive payment rates for items not included in the DMEPOS CBP. In 2018, the Medicare Payment Advisory Commission (MedPAC) released a report describing how Medicare expenditures for DMEPOS products excluded from the CBP have continued to grow.\64\ MedPAC discussed how “. . . some non-CBP DMEPOS products continue to generate high rates of improper payments, experience high utilization growth, and exhibit patterns of potential fraud and abuse.” In this report, MedPAC looked at ostomy, tracheostomy, and urological supplies (for example, catheters), and found two products for which Medicare's payment rates were 45 percent and 57 percent higher than private-payer rates. Specifically, intermittent urinary curved tip catheters under HCPCS Level II code A4352 were 57 percent more, whereby Medicare could save $37 million dollars if Medicare paid the median private-payer rate. Intermittent urinary straight tip catheters (HCPCS Level II code A4351) were 45 percent more, whereby Medicare could save $41 million dollars if Medicare paid the median private-payer rate.

\64\ https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun18_ch6_medpacreport_sec.pdf.

In August 2022, the HHS Office of Inspector General (OIG) released a report titled, “Reducing Medicare's Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of Dollars Each Year” (OEI-04-20-00620).\65\ The report found that “Medicare and its beneficiaries paid suppliers $407 million for intermittent urinary catheters in fiscal year 2020, more than 3 times the suppliers' estimated acquisition costs of $121 million.” Based on these findings, OIG recommended that CMS lower Medicare's payment rates for intermittent urinary catheters. OIG noted that CMS could incorporate such items into the DMEPOS CBP.

\65\ https://oig.hhs.gov/oei/reports/OEI-04-20-00620.pdf.

We have also seen significant growth in allowed charges for ostomy, tracheostomy, and urological supplies. In 2001, the second year of the demonstration in Polk County, total allowed charges for intermittent urinary curved tip catheter HCPCS Level II code A4352 were $1,779,928 while total allowed charges for intermittent urinary straight tip catheters HCPCS Level II code A4351 were $5,753,184. Total allowed charges have increased significantly for these items in 2022, to $344,012,449 for HCPCS Level II code A4352 and $153,606,517 for HCPCS Level II code A4351. Medicare allowed charges for ostomy supplies have also grown significantly. For instance, total allowed charges for HCPCS Level II code A4407 for ostomy skin barriers increased from $12,990,011 in 2003 to $37,478,467 in 2022. Additionally, reviews performed by OIG and CMS contractors have identified high improper payment rates for urological supplies (including intermittent urinary catheters) that did not meet Medicare requirements.\66\ We also published in the Federal Register on September 27, 2024 a Medicare Shared Savings Program final rule (89 FR 79152), in which we discussed significant, anomalous, and highly suspect (SAHS) billing activity for certain intermittent urinary catheters on Medicare DMEPOS claims in CY 2023. We finalized several proposals as a result of this SAHS billing activity, one of which was to specify in the Shared Savings Program regulations at 42 CFR 425.670(b) that CMS has determined that the billing of HCPCS codes A4352 (Intermittent urinary catheter; Coude (curved) tip, with or without coating (Teflon, silicone, silicone elastomeric, or hydrophilic, etc.), each) and A4353 (Intermittent urinary catheter, with insertion supplies) represents SAHS billing activity for CY 2023 that would have caused significantly inaccurate and inequitable payments and repayment obligations in the Shared Savings Program if not addressed (89 FR 79158).

\66\ https://oig.hhs.gov/documents/audit/10169/A-09-22-03019.pdf.

Further information about this urinary catheter fraud that CMS identified in 2023 can be found in a CMS case study titled “Urinary Catheter Case Study: CMS' Swift Action Saves Billions”.\67\ In sum, CMS identified a concerning rise in urinary catheter billings attributed to a small group of 15 DMEPOS supply companies that had recently changed ownership. Through investigative work, CMS determined that people with

Medicare did not receive catheters from these DMEPOS companies and were not billed directly, physicians did not order these supplies, and the supplies were not needed. While CMS took swift action to protect people with Medicare and the Medicare program in this situation,\68\ including ostomy, tracheostomy, and urological supplies in the DMEPOS CBP may mitigate such situations in the future.

\67\ https://www.cms.gov/files/document/cpi-urinary-catheter-case-study.pdf.

\68\ Using fraud prevention tools, CMS stopped over 99% of the payments to the small group of potential bad actors before they went out the door. There was no impact to legitimate suppliers providing medically necessary services to people with Medicare. CMS revoked enrollment of the 15 potential bad actors from Medicare between late 2023 and 2024, meaning they are no longer able to bill Medicare for services and cannot re-enroll for up to 10 years. CMS also replaced hundreds of thousands of Medicare Beneficiary Identifiers (MBIs) that were used to file the suspicious claims, changed the MBIs of the most at-risk people with Medicare, and completed changing all impacted MBIs in March 2024.

We solicited comments on our proposal that the medical equipment set forth at section 1861(m)(5) of the Act, namely home health medical supplies (including catheters, catheter supplies, ostomy bags, and supplies related to ostomy care, and certain covered osteoporosis drugs) be included in the list of items CMS may subject to the DMEPOS CBP. In general, section 1847(a)(1)(A) of the Act states the Secretary must establish and implement competitive bidding for covered items. In identifying the scope of covered items subject to the DMEPOS CBP, section 1847(a)(2) of the Act relies on section 1834(a)(13) of the Act, which defines covered items as durable medical equipment, as defined at section 1861(n) of the Act (including supplies used in conjunction with durable medical equipment), and certain equipment described in section 1861(m)(5) of the Act used to furnish home health services, such as catheters, catheter supplies, ostomy bags, and supplies related to ostomy care, and certain covered osteoporosis drugs. Consequently, we believe that ostomy, tracheostomy, and urological supplies are included within the scope of section 1847(a)(2)(A) of the Act that CMS may select for competitive bidding. We no longer believe that section 1847(a)(2)(A) of the Act is ambiguous regarding whether ostomy products and supplies are to be included in the Medicare DMEPOS CBP.

Additionally, the Conference Report for the MMA of 2003 (H. Rept. 108-391) says, “The Secretary would be required to establish and implement competitive acquisition programs for durable medical equipment, medical supplies, items used in infusion, drugs and supplies used in conjunction with durable medical equipment, medical supplies, home dialysis supplies, blood products, parental nutrition, and off the-shelf orthotics (requiring minimal self-adjustment for appropriate use) that would replace the Medicare fee schedule payments.” \69\ Here, “medical supplies”, twice mentioned, is a distinct category from “durable medical equipment” and from “drugs and supplies used in conjunction with durable medical equipment”.

\69\ https://www.congress.gov/108/crpt/hrpt391/CRPT-108hrpt391.pdf.

We solicited comments on a proposal to add equipment described in section 1861(m)(5) of the Act, including ostomy, tracheostomy, and urological supplies to the definition of “Item” as Sec. 414.402(6). We also solicited comments on a proposal to add Sec. 414.408(g)(6) to specify medical equipment, including ostomy, tracheostomy, and urological supplies are purchased items for which the SPA is calculated based on the bids submitted and accepted. We received comments on this proposal.

Comment: Many commenters raised legal concerns regarding the proposed revision to the definition of item under 42 CFR 414.402 and inclusion of ostomy, tracheostomy, and urological supplies in the DMEPOS CBP.

Response: We appreciate the comments. Section 1847(a)(1)(A) of the Act requires the Secretary to establish competitive bidding for items and services, including 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 1834(a)(13) of the Act defines a covered item as durable medical equipment (as defined in section 1861(n) of the Act), including such equipment described in section 1861(m)(5) of the Act, but not including implantable items that may be paid as part of hospital outpatient department services. Section 1861(m)(5) of the Act includes “medical supplies (including catheters, catheter supplies, ostomy bags, and supplies related to ostomy care . . .)[.]” Section 1834(h)(1)(E) of the Act provides that payment for ostomy supplies, tracheostomy supplies, and urologicals shall be made under Section 1834(a) of the Act. Therefore, we believe the competitively priced items and services described in section 1847(a)(2)(A) of the Act include these medical supplies in addition to DME.

Comment: Many commenters expressed support for the proposal of revising the definition of item to include medical supplies such as urological supplies, highlighting concerns about high costs and the need for equitable pricing. These commenters noted disparities in charges between private insurance and Medicare and see competitive bidding as a way to reduce costs for taxpayers by lowering Medicare payment amounts for these items and services. A commenter emphasized the significance of ensuring a consistent supply and fair pricing, especially for individuals on fixed incomes who depend on these essential products. Several commenters recognized the importance of competitive bidding and cost containment efforts by Medicare/HHS, but noted it is crucial that any bidding process does not restrict product selection or the availability or quality of necessary products. Another commenter expressed support for phasing in ostomy, tracheostomy, and urological supplies under the DMEPOS CBP, indicating that such an action could lead to lower Medicare costs and improved efficiency, citing prior reports from the HHS Office of the Inspector General that noted these payments were significantly higher than private payer rates. A commenter stated that overpaying for these and the other proposed items unnecessarily increases both Medicare spending and beneficiary cost sharing. The commenter also stated that CMS should implement the proposed change and review other items currently excluded from CBP as potential candidates for the program.

Response: We agree that phasing in these items and services under the DMEPOS CBP could lead to lower costs for Medicare beneficiaries and the program. We recognize the critical importance of ensuring that contract suppliers furnish the items prescribed by a physician or treating practitioner and will continue to evaluate, as part of our monitoring system, health outcomes data and beneficiary access to competitively bid items. Regarding the quality of competitively bid items, the competitive bidding nondiscrimination provision at 42 CFR 414.422(c) establishes clear standards for contract suppliers. This regulation requires that the items contract suppliers furnish to beneficiaries under the DMEPOS CBP are the same items that they furnish to their other customers, ensuring consistent quality across all patient populations.

Comment: Multiple commenters voiced concerns that including ostomy, tracheostomy, and urological supplies in the DMEPOS CBP could limit patient choice of brands and access to these essential medical supplies. A

commenter emphasized that restricting beneficiaries to specific suppliers would create barriers to accessing the products needed for effective condition management, noting that many ostomy products are similar but not identical, with variations in chemical composition and features critical for individual use. Several commenters cited the prior competitive bidding demonstrations in Polk County, Florida as proof that urological supplies are not well-suited for competitive bidding, contending that the demonstrations led to problems obtaining access to supplies, and safety and quality issues for beneficiaries. These commenters referenced the 2001 report Evaluation of Medicare's Competitive Bidding Demonstration for DMEPOS contracted by CMS (Contract Number 500-95-0061/T.O. #3),\70\ as well as the 2004 Final Report to Congress: Evaluation of Medicare's Competitive Bidding Demonstration for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies.\71\ These commenters stressed that patient preferences and individualized needs for specific brands are essential to ensuring quality care.

\70\ https://www.cms.gov/priorities/innovation/files/migrated-medicare-demonstration-x/karon_2001_1.pdf.

\71\ https://www.cms.gov/priorities/innovation/files/migrated-medicare-demonstration-x/cms_rtc.pdf.

Several commenters underscored the consequences of reduced supplier choice and diminished patient support. Multiple commenters noted that the DMEPOS CBP could disrupt long-standing patient-supplier relationships and incentivize suppliers to stock only the lowest-cost products. They cautioned that such changes may undermine critical services like product fitting, insurance paperwork, and emergency replacements, while limiting access to clinically optimal items.

Response: We recognize the concerns of the commenters and believe that the existing requirements under the DMEPOS CBP, along with other requirements under the Medicare Part B program, will ensure that beneficiaries have access to the most appropriate ostomy, tracheostomy, and urological supplies for their medical condition. Per regulations at 42 CFR 414.422(e)(1), a contract supplier cannot refuse to furnish items and services to a beneficiary residing in a CBA if they request those items from the contract supplier. The DMEPOS CBP also has a safeguard that is part of the supplier's contract and regulations at 42 CFR 414.420, that ensures that beneficiaries have access to specific brands of items under the program. Further, the nondiscrimination clause at 42 CFR 414.422(c) requires that the contract supplier furnish the same choice of items to Medicare beneficiaries that they provide to other customers. Medicare beneficiaries who are dual eligibles in Medicaid-funded Home and Community-Based Services programs who receive items from contract suppliers under the DMEPOS CBP must also be offered the same choice in supplies.

We also note that under the DMEPOS Quality Standards with which, per 42 CFR 414.414(c), suppliers must comply in order to participate in the DMEPOS CBP, the supplier is charged with obtaining and providing appropriate quality items to beneficiaries as well as implementing a program that promotes the safe use of these items. The supplier also must provide comprehensive training, information and instructions to beneficiaries on use, maintenance and safety, with materials tailored to individual needs and abilities for safe and effective use of all provided items.

We do not agree with the commenters that prior competitive bidding demonstrations for urological supplies provide evidence that ostomy, tracheostomy and urologicals are not well suited for inclusion in a competitive bidding program. The Final Report to Congress: Evaluation of Medicare's Competitive Bidding Demonstration for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (2004) found that beneficiary access and quality of services were essentially unchanged because of the new demonstration payment system.\72\ The 2004 report noted that the urological category in Polk County, Florida had relatively low allowed charges and a small number of suppliers even before the demonstration began. The report observed that unless “designs to bolster participation can be developed, such small-volume DMEPOS categories may represent lower-priority areas for conducting competitive bidding, not only in terms of the limited savings potential on a small dollar base but also in terms of a category's competitive potential.” The Report's evaluation of whether product categories, including the urological category, were “not as well suited” for bidding as other demonstration product categories was based on the items having relatively low allowed charges and a low number of suppliers. The Report also cautioned that its evaluations on the suitability of particular product categories “should not be taken as definitive for guiding future bidding initiatives.” As referenced in Table 45 of the proposed rule, the 2024 Medicare allowed charges for the urological supplies category furnished from remote supplier areas was $1,214 million, demonstrating significant growth in this category since the demonstrations. In addition, urological supplies are typically furnished to beneficiaries from remote supplier locations or locations that are hundreds of miles on average from the beneficiary residence where items are delivered, suggesting a significant change in delivery method since the demonstrations. As with previous competitive bid Rounds, CMS will continue to closely monitor access to competitively bid items in real time.

\72\ https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reports/downloads/rtc_dmepos.pdf.

After consideration of the public comments, we are finalizing the proposed changes to paragraph (6) of the definition of “item” in 42 CFR 414.402 and 414.408(g)(6). We are making one technical change to the regulation text in paragraph (6) of the definition of “item” at Sec. 414.402. Tracheostomy supplies are “supplies related to ostomy care” as described under section 1861(m)(5) of the Act. We are changing the language in paragraph (6) of the definition of “item” at Sec. 414.402 from “Other medical equipment described in section 1861(m)(5) of the Act, including ostomy, tracheostomy, and urological supplies” to “Other medical equipment described in section 1861(m)(5) of the Act, including supplies related to ostomy care and urological supplies” to align with the language under section 1861(m)(5) of the Act.

We solicited comments on a proposal to establish definitions for “remote item delivery CBP” and “remote item delivery item.” A remote item delivery CBP is similar to a mail order CBP except that items furnished on a non-mail basis would not be excluded from the remote item delivery CBP as they are under a mail order CBP. 1. Background

In a September 2004 report (GAO-04-765), GAO recommended that we consider using mail delivery for items that can be provided directly to beneficiaries in the home as a way to implement a DMEPOS competitive bidding strategy. The report stated that “Because MMA authorizes CMS to designate the geographic areas for competition for different items, designating the entire country as the competitive area for selected items is a possibility.” The GAO noted that

demonstration suppliers provided surgical dressings, urological supplies, and inhalation drugs to beneficiaries by mail.\73\ Additionally, the GAO noted that the MMA states that areas within metropolitan statistical areas (MSAs) that have low population density should not be excluded from competition if a significant national market exists through mail order for a particular item or service. The GAO went on to say that “in contrast to conducting competitive bidding on a piecemeal basis in multiple geographic areas, a consolidated nationwide approach would allow CMS to more quickly implement competitive bidding on a large scale.” The GAO also stated that “this approach would enable companies that provide, or demonstrate the ability to provide, nationwide mail-order service to compete for Medicare beneficiaries' business.” In the report we stated that CMS would explore the feasibility of GAO's recommendation to consider using mail-order delivery for items that could be provided directly to beneficiaries in the home, as a way to implement a national competitive bidding strategy.

\73\ https://www.gao.gov/assets/gao-04-765.pdf.

In response, we have continued to review and evaluate avenues to expand mail delivery for items under the DMEPOS CBP. In the 2006 proposed rule (71 FR 25669), we stated that our data shows that a significant percentage of certain items such as diabetes testing supplies (blood glucose test strips and lancets) are furnished to beneficiaries by national mail order supplier and proposed to establish a nationwide or regional competitive bidding program, effective for items furnished on or after January 1, 2010, for the purpose of awarding contracts to suppliers to furnish these items across the nation or region to beneficiaries who elect to obtain them through the mail order outlet. Specifically, we proposed in Sec. [thinsp]414.410(d)(2) and Sec. [thinsp]414.412(f) and (g) to establish a nationwide competitive bidding program or regional competitive bidding programs for the purpose of awarding contracts to suppliers to furnish these items across the nation or region to beneficiaries who elect to obtain them through the mail. We proposed that the national or regional CBAs under the Medicare DMEPOS CBP would be phased in after CY 2009, and payment would be based on the bids submitted and accepted for the furnishing of items through mail order throughout the nation or region. Suppliers that furnish these items through mail order on either a national or regional basis would be required to submit bids to participate in any CBP implemented for the furnishing of mail order items.

In the 2007 final rule (72 FR 18018), we finalized these proposals and specified that our data indicated that over 60 percent of Medicare expenditures for diabetes supplies are for items furnished by nationwide mail order suppliers. In the 2007 final rule (72 FR 18018), we stated that any national or regional mail order CBP that we might choose to implement starting in CY 2010 would be limited to the furnishing of items “through the mail.” The 2007 final rule included the addition of definitions under Sec. [thinsp]414.402 related to nationwide or regional CBPs.

A national mail order CBP was implemented for diabetes testing supplies (supplies for blood glucose monitors) from July 1, 2013, through December 31, 2018. Prior to implementing this national mail order program, as part of a final rule published in the Federal Register on November 29, 2010, titled “Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011” (75 FR 73567), we established definitions for “mail order item” and “non-mail order item” in Sec. [thinsp]414.402. These definitions were established to clarify that a mail order item is not limited to an item that is literally furnished through the mail (United States Postal Service) and includes any item delivered to the beneficiary, whereas a non-mail order item was an item the beneficiary picked up in person at a local pharmacy or other supplier storefront. The definition for “mail order item” is “any item (for example, diabetes testing supplies) shipped or delivered to the beneficiary's home, regardless of the method of delivery.” The definition for “non- mail order item” is “any item (for example, diabetes testing supplies) that a beneficiary or caregiver picks up in person at a local pharmacy or supplier storefront.” Non-mail order diabetes testing supplies were not included under the national mail order program. However, the fee schedule amounts for these items are established based on the payment amounts determined for the items under the national mail order program in accordance with section 1834(a)(1)(H) of the Act. 2. Current Issues

Medicare claims data shows that several high-volume categories of items subject to the DMEPOS CBP are furnished to beneficiaries throughout the nation from remote supplier locations. As shown in table FF-32, the national average distance between the beneficiary address and supplier location is several hundred miles for the lead items in seven, high volume categories of items. The average delivery distance was measured based on the distance between the beneficiary residence and supplier location for all claims with dates of service in calendar year 2024 for the “lead item” in the category of items, or the item with the highest total nationwide Medicare allowed charges in 2024 of any item in the category. BILLING CODE 4120-01-P

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We solicited comments on a proposal that items like those listed in table FF-32 that are generally furnished from remote supplier locations should be included under a remote item delivery CBP that does not exclude non-mail order items as is the case under a mail order CBP.

\74\ Average distance is the distance (miles) between the supplier's practice address and the benficiary's mailing address, totaled across all claims, divided by the number of claims. The supplier's address is identified by matching the Supplier Number (billing number assigned by the Medicare Enrollment Contractor) in claims data (variable name SUPLRNUM) to the corresponding identifier in PECOS data and selecting the latest address associated with the supplier from PECOS. For OTS knee and back brace average distance, average distance is the distance (miles) between the supplier's practice address and the beneficiary's mailing address, totaled across all non-CBA claims, divided by the number of non-CBA claims. CBA claims are excluded when calculating OTS knee and back average distance because in certain areas of the country these items were included under Round 2021. As these CBAs were limited to MSA boundaries, contract suppliers for these areas might have focused on serving only these areas and including these CBA claims could have skewed the national average distance.

Rather than implementing hundreds of local CBPs and CBAs and placing unnecessary burden on the bidding program and suppliers, we believe the easiest and best way to implement CBPs for remotely delivered items such as these is to include them under product categories in one nationwide “RID” CBP or several large regional “RID” CBPs, which would consist of all areas where a beneficiary resides or receives covered items under the product categories, with limited exceptions as explained later in this section. This is consistent with the findings of a report from the GAO from September 2004 \75\ that discussed the use of national CBAs as a way to streamline the implementation of the CBP. Listed in table FF-33 are the current HCPCS Level II codes for several product categories we believe should be included under a future RID CBP(s) because they are typically furnished to beneficiaries from remote supplier locations, or locations that are hundreds of miles on average from the beneficiary residence where the items are delivered. This table is for illustration purposes only. The actual product categories to be phased in under a RID CBP(s) would be designated through program instructions or by other means in accordance with existing regulations at Sec. 414.406(d).

\75\ https://www.gao.gov/assets/gao-04-765.pdf.

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Specifically with regard to certain codes for lower volume items under the OTS Upper Extremity Braces and OTS Back Braces product categories, the average delivery distances were less than 100 miles as shown in tables FF-11 and 12. Although it does not appear that the braces falling under these codes are currently being delivered from remote locations, we still believe that they could be furnished by nationwide or regional contract suppliers. However, we solicited comments on whether there is any reason that these codes should not be furnished on a mail order basis from remote supplier locations and instead should only be furnished on a non-mail order basis. The alternative would be to exclude codes that have a national average delivery distance of less than 100 miles and include them in future nationwide or regional competitions if the delivery distance for these codes increases to more than 100 miles. Excluding the items would mean that contract suppliers would not be required to furnish these braces, and we are concerned that this could potentially affect access to these items. However, contract suppliers would have discretion to furnish the items to beneficiaries on a non-mail order basis in addition to furnishing the items on a mail order basis, but contract suppliers would not be required to furnish the items on a non-mail order basis.

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BILLING CODE 4120-01-C

In the case of a RID CBP, the bid items would be delivered by the contract supplier to the beneficiary from a remote location, for example, through the mail. Items may be furnished to beneficiaries who come into the local storefront of a contract supplier, but we believe that most contract suppliers would have a limited number of local storefronts and therefore these occurrences would be rare. Again, contract suppliers would have discretion to furnish the items to beneficiaries on a non-mail order basis in addition to furnishing the items on a mail order basis, but contract suppliers would not be required to furnish the items on a non-mail order basis.

We believe that situations where a beneficiary loses or is temporarily without supplies that Medicare has already paid for are rare. Claims for replacement supplies furnished from a

supplier in these situations would be denied because Medicare has already paid for supplies for the time when the replacement supplies are needed. The supplier of the replacement supplies would likely have the beneficiary sign an Advance Beneficiary Notice of Noncoverage (ABN), form CMS-R-131, making the beneficiary liable for the cost of the replacement supplies in the event the claim is denied. The beneficiary can appeal the denial of the claim for the replacement supplies, indicating the reason why the replacement supplies were needed, and the claim denial could potentially be overturned on appeal. We solicited comments on our proposal that for supplies included under a RID CBP, these situations would continue to be handled the way they are now, through the claim appeals process. We also solicited comments on our proposal that obtaining replacement supplies from a local storefront owned by a non-contract supplier in these rare situations would not be a reason to deny a claim if it is determined that paying the claim for the replacement supplies would otherwise be reasonable. 3. Provisions of the Regulation

We solicited comments on our proposal to phase in a nationwide RID CBP or regional RID CBPs, to be defined under Sec. 414.402, for product categories including items such as those listed in table FF-32 that typically are furnished to beneficiaries from remote supplier locations or locations that are hundreds of miles on average from the beneficiary residence under a future round of the DMEPOS CBP. The term “Remote item delivery competitive bidding program” would be defined under Sec. 414.402 to mean “a competitive bidding program wherein contract suppliers are responsible for furnishing remote item delivery items under a product category to all Medicare beneficiaries regardless of where they live in the CBA. The CBA could be one nationwide CBA that includes all areas (all States, territories, and the District of Columbia) or a CBA covering a specific region of the country.” The term “Remote item delivery item” would be defined under Sec. 414.402 to mean “an item falling under a remote item delivery competitive bidding program that may be shipped or delivered to a beneficiary's home, regardless of the method of delivery, or picked up at a local pharmacy or supplier storefront if the beneficiary or caregiver for the beneficiary chooses to pick the item up in person.” The product categories to be phased in under a RID CBP(s) would be designated through program instructions or by other means in accordance with existing regulations at 42 CFR 414.406(d). Contract suppliers serving a nationwide or regional RID CBP would be responsible for furnishing the items on either a mail order or non-mail order basis under the product category to all Medicare beneficiaries, regardless of where they live in the CBA. If a beneficiary who resides in a CBA receives an item in person at a local supplier storefront, that supplier would need to be a contract supplier for the item.

Items furnished to beneficiaries from remote supplier locations, such as those listed in table FF-33 would be furnished in a nationwide RID CBP or regional RID CBPs that include both mail order and non-mail order items, and not under a “mail order” program that only includes mail order items.

We solicited comments on these provisions.

Comment: A commenter supported the proposal but included some recommendations for monitoring the program, such as geographic analysis and beneficiary complaint data to monitor supplier performance in the RID CBP. The commenter also suggested using partnerships (for example, UPS, Amazon, USPS) to test delivery in rural/underserved regions and flagging suppliers overusing the RID CBP in ways inconsistent with patient demographics.

Response: We appreciate the support and agree about the need for monitoring. We have an established monitoring system and analyze reports regularly. We discuss some of this monitoring work in prior rules, such as in the final rule entitled “Medicare Program; Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Policy Issues, and Level II of the Healthcare Common Procedure Coding System (HCPCS); DME Interim Pricing in the CARES Act; Durable Medical Equipment Fee Schedule Adjustments To Resume the Transitional 50/50 Blended Rates To Provide Relief in Rural Areas and Non-Contiguous Areas,” published on December 28, 2021 (86 FR 73871). Additional information about our DMEPOS CBP health status monitoring work can also be found on the CMS website: https://www.cms.gov/medicare/payment/fee-schedules/dmepos-competitive-bidding/health-status-monitoring. As we have noted, the items listed in table FF-32 are being delivered from remote supplier locations and suppliers are able to use the means of delivery that works best for their company (for example, U.S. Postal Service, Federal Express, United Parcel Service). We have not received information that beneficiaries have not received orders due to use of specific delivery methods or couriers. Finally, as with all parts of the Medicare program, we will monitor contract suppliers to detect instances of waste, fraud, and abuse under the DMEPOS CBP.

Comment: Several commenters were concerned the proposal would cause small DME suppliers to close, change long-standing supplier relationships, and make it difficult for suppliers to meet beneficiary demand at lower prices. These commenters were also concerned about the quality of items and services provided under a RID CBP, and what action beneficiaries can take if they are unsatisfied with the quality of the items and services provided. Some commenters were concerned that if the quality of items were to decrease or there were delays in receiving the equipment, it would lead to more out of pocket expenses for beneficiaries who choose to purchase products from non-DMEPOS CBP suppliers, or cause more hospitalizations for those who choose to go without the lower quality items offered by the contract suppliers. Many commenters stated beneficiaries would lose access to effective, timely local support. Some commenters stated this proposal may also present issues after a natural disaster when time-sensitive support is critical.

Response: We appreciate the concerns and share the goal of ensuring beneficiary access to quality DMEPOS items and services under the DMEPOS CBP. The DMEPOS CBP helps ensure access to medically necessary items by requiring contract suppliers to furnish items to any beneficiary who maintains a permanent residence in, or who visits, the CBA and who requests those items from that contract supplier, as required by 42 CFR 414.422(e)(1). This will allow beneficiaries to have additional information about the product they will be obtaining and utilizing. Additionally, as directed under section 1847(b)(6)(D) of the Act, CMS will continue to ensure that small suppliers, meaning a supplier generates gross revenue of $3.5 million or less in annual receipts including Medicare and non-Medicare revenue, have the opportunity to participate in a competitive bidding program. The special rules at Sec. [thinsp]414.414(g) establish a goal of awarding at least 30 percent of the total number of contracts to small suppliers.

Regarding the concern about the RID CBP making it difficult for suppliers to meet beneficiary demand for beneficiaries at lower prices, it is up to the supplier to submit bids based on their own cost analysis and operational

capacity. Each supplier determines the price point at which they believe they can sustainably furnish items and services. As a reminder, in accordance with 42 CFR 414.414(b)(4), before awarding contracts, each bid is screened and evaluated to ensure that it is bona fide so that CMS can verify that the supplier can provide the product to the beneficiary for the bid amount. Additionally, the proposed provisions under 42 CFR 414.414(h) and (i) help ensure there are a sufficient number of suppliers to meet beneficiary demand. Regarding the concern about the quality of items and services furnished under a RID CBP, suppliers participating in the RID CBP must continue to follow the DMEPOS Quality Standards. These standards not only require suppliers to obtain and provide appropriate quality equipment, item(s), and service(s), but also require suppliers to deliver and set-up, or coordinate set-up with another supplier, all equipment and item(s) in a timely manner.\76\ We plan to continue closely monitoring health outcomes for beneficiaries under the DMEPOS CBP. We also will continue the use of our monitoring and complaint system under the DMEPOS CBP, which we finalized in the 2007 final rule (72 FR 18061). If a beneficiary has a problem getting needed DMEPOS items or services or is concerned about the quality of the items and services, they can reach out to their supplier, contact 1-800-MEDICARE, or contact the Competitive Acquisition Ombudsman (CAO) by asking the 1-800-MEDICARE representative to submit your complaint or inquiry to the CAO. The supplier standards under 42 CFR 424.57(c) address the requirements suppliers must follow with regards to complaints. For example, suppliers must answer questions and respond to complaints a beneficiary has about the Medicare-covered item that was sold or rented, maintain documentation of contacts with beneficiaries regarding complaints or questions, and have a complaint resolution protocol to address beneficiary complaints that relate to these supplier standards.

\76\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Downloads/Final-DMEPOS-Quality-Standards-Eff-01-09-2018.pdf.

Finally, regarding concerns about access to local support, we note a RID CBP would be established for items already furnished primarily by suppliers from remote locations. Additionally, regarding the concerns about how a RID CBP may affect time-sensitive support after a natural disaster, the DMEPOS Quality Standards require that suppliers have a contingency plan that enables them to respond to emergencies and disasters or to have arrangements with alternative suppliers in the event that the supplier cannot service its own customers as the result of an emergency or disaster. We also note our proposal in Sec. 414.422, whereby if CMS determines that due to a PHE contract suppliers are unable to furnish certain items and services to beneficiaries in certain areas impacted by a PHE (PHE-impacted area) as required under their respective DMEPOS CBP supplier contracts, CMS would have the option to unilaterally terminate or modify each applicable DMEPOS CBP supplier contract to allow any Medicare enrolled DMEPOS supplier to furnish the applicable items and services to Medicare beneficiaries in the PHE-impacted area.

Comment: Several commenters expressed concerns about potential negative effects the remote method of delivery under the RID CBP may have on local suppliers and beneficiaries in rural and underserved areas. A commenter stated it is unclear if reimbursement will reflect the cost and responsibilities of hybrid delivery requirements (mail and in person). A few commenters noted that in a prior CBP demonstration, CMS found that beneficiaries wanted the choice to come to a storefront to obtain urological supplies, and this proposal would eliminate patient choice. Many commenters stated the RID CBP may hurt beneficiaries who rely on in-person fittings or education on proper usage, including beneficiaries who use off-the-shelf (OTS) orthotics, intermittent catheters, or ostomy items. A few commenters also stated this proposal would be especially concerning for older or vulnerable populations, who may lack resources or care to manage care remotely. Some commenters noted that many braces are dispensed immediately following surgery, and shifting to mail order delivery may disrupt and delay patient care. A commenter asked if contract suppliers would be required to maintain local storefronts and furnish the items on a non- mail order basis in addition to furnishing the items on a mail order basis.

Response: Thank you for the comments. As discussed in the proposed rule, a RID CBP would be established for items already furnished primarily by suppliers from remote locations (90 FR 29254). As we indicated in the proposed rule, we anticipate limiting RID CBPs to product categories that are typically furnished to beneficiaries from remote supplier locations, or locations that are hundreds of miles on average from the beneficiary residence where the items are delivered. Under a RID CBP, contract suppliers would not be required to furnish the items in local storefronts in addition to furnishing them from remote locations, but they can voluntarily maintain local storefronts to furnish these items as well as furnishing them from remote locations to beneficiaries in all parts of the country. We stated that we believe most contract suppliers would have a limited number of local storefronts and therefore these occurrences would be rare (90 FR 29260). If a supplier chooses to furnish items and services via mail and in person, it is up to them to factor in the costs of doing so in their bid amount. We do not believe it is necessary to furnish these items in local storefronts and believe that beneficiaries in all areas would have access to the items furnished from remote supplier locations as is currently being done in a majority of cases now. Education will be provided for all beneficiaries, including those who are not adept at using mail order, on how to contact suppliers to arrange for delivery of items and services. The RID CBP is therefore a way to ensure access for all beneficiaries, including beneficiaries located in rural areas, and requires less government resources than the alternative of implementing thousands of local CBAs throughout the nation since the statute does not allow any areas to be excluded from the DMEPOS CBP for these items. We plan to closely monitor access and health outcomes under the RID CBP.

Regarding orthotics, while local DMEPOS suppliers certainly play a valuable role in the delivery of orthotic care, it is important to distinguish between custom-fitted and custom-fabricated orthotics, which require clinical expertise and in-person fitting, and OTS orthotics under section 1847(a)(2)(C) of the Act, which require minimal self-adjustment for appropriate use and do not require expertise in trimming, bending, molding, assembling, or customizing to fit the beneficiary. The RID CBP proposal is limited only to OTS orthotics that are appropriate for remote delivery. We agree that patient education is important, even for items furnished OTS. However, many OTS orthotics come with manufacturer-provided instructions, and per the DMEPOS Quality Standards, suppliers must provide clear, written or pictorial, and oral instructions related to the use, maintenance, infection control practices for, and potential hazards of equipment and/or item(s) as appropriate. In-person instruction, while beneficial, is not

always necessary to achieve appropriate outcomes for these devices particularly when the devices are low-risk, low-complexity, and clearly indicated by diagnosis. In accordance with section 1847(a)(7)(A) of the Act and regulations at 42 CFR 414.404(b)(1), physicians, treating practitioners, and hospitals may furnish competitively bid OTS orthotics without submitting a bid and being awarded a contract under the DMEPOS CBP, provided that certain conditions are satisfied. This applies when the items are furnished by the physician or treating practitioner to their own patients as part of their professional service or by a hospital to its own patients during an admission or on the date of discharge, and if the items are billed under a billing number assigned to the hospital, physician, the treating practitioner (if possible), or a group practice to which the physician or treating practitioner has reassigned the right to receive Medicare payment.

Comment: A commenter questioned if there will be a continuity-of- care exemption during the transition period to prevent abrupt disruptions in access.

Response: Thank you for the question about continuity-of-care protections during the transition period. Pursuant to section 1847(a)(4) of the Act, CMS intends, in the case of a covered item for which payment is made on a rental basis under section 1834(a) of the Act and in the case of payment for oxygen under section 1834(a)(5) of the Act, to allow rental agreements for the covered items and supply arrangements with oxygen suppliers entered into before the application of DMEPOS CBP for the item to be continued. In the case of any such continuation, the supplier involved would continue to provide for appropriate servicing and replacement.

Comment: A commenter stated the proposal did not define what “regional” means. Another commenter stated that a regional RID CBP should be no larger than a State.

Response: Thank you for the comment. As discussed in the proposed rule, the term “Remote item delivery competitive bidding program” would be defined under Sec. 414.402 to mean “a competitive bidding program wherein contract suppliers are responsible for furnishing remote item delivery items under the product category to all Medicare beneficiaries regardless of where they live in the CBA. The CBA could be one nationwide CBA that includes all areas (all States, territories, and the District of Columbia) or a CBA covering a specific region of the country.” Per 42 CFR 414.406(b), CMS designates through program instructions or by other means, each CBA in which a competitive bidding program may be implemented. We are not proposing in this rule which specific areas would be included under a RID CBP, but if regional RID CBPs are established, they could cover smaller regions such as a State, territory, or the District of Columbia, or they could cover larger areas such as a group or combination of States, territories, and/or the District of Columbia.

Comment: Several commenters responded to CMS' solicitation of comments on whether there is any reason that certain codes for lower volume items under the product categories for OTS upper extremity braces and OTS back braces should not be furnished on a mail order basis from remote supplier locations and instead should only be furnished on a non-mail order basis. A commenter stated the proposed OTS upper extremity braces were not previously included in competitive bidding, and new products should not be incorporated into an untested RID CBP. This commenter also stated that any RID CBP should at a minimum be limited to items delivered from remote locations with an average delivery distance of 100 miles or more. Another commenter recommended excluding all orthotics from the DMEPOS CBP and any RID CBP due to low volume and the necessity of in-person fitting.

Response: Thank you for the responses to our solicitation of comments. We note that while some OTS items under the upper extremity and back brace categories are considered low volume, low utilization alone should not be the basis for excluding them from a CBP. Contract suppliers must furnish all items in a product category regardless of how often they are needed, and so beneficiaries are guaranteed access to low volume items as well as high volume items under a CBP. It is important to clarify that the remote delivery model under consideration for orthotics is intended solely for OTS orthotics, products that do not require clinical customization, in-person fitting, or direct patient assessment. These items are standardized and designed to be used with minimal self-adjustment, making them suitable for secure and efficient remote fulfillment. As explained previously, OTS orthotics do not need to be furnished in person. While certain braces may not currently be furnished primarily through the mail, this does not mean that they cannot be furnished through the mail if they do not require in-person services. Some of the lower volume braces that also have average delivery distances of less than 100 miles may not be furnished often or at all by national mail order suppliers because they are not as profitable or are not as commonly needed as other braces. This does not mean they are not items that can be furnished on a mail order basis and by including them in the CBP contract suppliers would need to furnish them when they are needed. Additionally, we believe it is unnecessary to exclude items such as OTS upper extremity braces from the RID CBP just because they have not been included in any prior CBP. These are items that are typically furnished to beneficiaries from remote supplier locations and so we believe it makes the most sense to include them in a RID CBP as opposed to a local CBP. The RID CBP may be a new regulatory definition, but we have implemented a national CBA before through the national mail order DMEPOS competitive bidding program, and we have implemented numerous local CBPs throughout the country. A RID CBP would simply allow both forms of delivery under one CBP. We will keep these comments in mind as we decide whether to include these items in a future RID CBP.

Comment: Some commenters stated that mail-order distribution increases the risk of billing fraud.

Response: Thank you for the comments. As always, all future CBPs will be closely monitored for fraudulent activities or other abuses of the Medicare program.

Comment: Several commenters opposed the proposal because they believe that there will be mail order complications. Many commenters noted that the RID CBP could complicate or delay mail ordering, potentially creating a safety risk for patients. These commenters noted mail delays due to weather events or transit delays could have serious consequences to beneficiaries' health, including for patients with certain health conditions such as diabetes, sleep apnea, or urological needs. Another commenter noted the post office can also close for non- emergency reasons. A commenter stated the proposal would also complicate ordering, returns, and urgent replacements. A commenter suggested product recalls could also present a challenge if a supplier does not have alternate options readily available. Some commenters stated patients frequently come into their store because their supplies have been lost or delayed in the mail and that suppliers with local storefronts may be reluctant to serve beneficiaries whose supplies were delayed in being delivered by a mail order supplier. Another commenter stated CMS's assumptions about

delivery equivalency between rural and urban areas are not accurate in all cases--while the cost of shipping is comparable, the reliability and timeliness of delivery are not. The commenter stated that individuals in rural or underserved regions may face longer wait times, limited availability of preferred carriers, or difficulties resolving delivery issues without in-person assistance.

Response: Thank you for the comments. While there can be challenges with mail order delivery, it is also a very efficient, cost-effective and convenient means of delivery and we believe these benefits outweigh its challenges. Additionally, the items that would be included in the RID CBP are those items that are already furnished from remote supplier locations, and so mail order delivery of these items would not be new. Mail order also allows for items to reach rural or underserved regions that may not have any nearby in-person assistance to begin with. The DMEPOS Quality Standards, including timely delivery standards, require suppliers to deliver and set-up, or coordinate set-up with another supplier, all equipment and item(s) in a timely manner as agreed upon by the beneficiary and/or caregiver, supplier, and prescribing physician. If a beneficiary has a problem getting needed DMEPOS items or services or is concerned about the quality of the items and services, they can reach out to their supplier, contact 1-800-MEDICARE, or contact the Competitive Acquisition Ombudsman (CAO) by asking the 1- 800-MEDICARE representative to submit your complaint or inquiry to the CAO. The terms of the contracts under the DMEPOS CBP at 42 CFR 414.422(e)(1) require suppliers to serve all beneficiaries within the CBA. Suppliers must factor these geographic challenges into their service delivery plans and bid submissions. We will continue to monitor any effects on access as we implement future CBPs.

Comment: Many commenters commented on our proposal regarding situations where a beneficiary loses or is temporarily without supplies that Medicare has already paid for. Many commenters noted that this shifts liability to the beneficiary for delays outside of their control. Some commenters requested that beneficiaries should retain the freedom and ability to choose to obtain items either from a mail order supplier or from a non-mail order supplier. A commenter recommended adding provisions to allow beneficiaries to obtain items from local non-contract suppliers in urgent or emergent situations.

Response: Thank you for the comments. We will closely monitor the contract suppliers to ensure they are furnishing replacement supplies on a timely basis. We believe many situations where a beneficiary is without supplies would likely be due to lost or misplaced supplies. For example, when a beneficiary gets on a flight and forgets to bring their supplies. As we stated in the proposed rule, these types of situations are rare and are currently handled through the claims appeals process. We believe these situations are rare and can continue to be handled adequately through the claims appeals process under a RID CBP.

Comment: A commenter stated the RID CBP is duplicative of existing regional and national mail-order provisions because the CBP already includes provisions for regional and national mail order competitions. The commenter believed this would confuse beneficiaries.

Response: Thank you for the comment. We believe it is necessary to define a RID CBP as what we are proposing would include both mail order and non-mail order delivery. The current definition of national mail order DMEPOS competitive bidding program under 42 CFR 414.402 is only for mail order.

Comment: Several commenters opposed the proposal because of concerns with licensing. A few commenters stated the proposed bidding process would require state licenses and bid bonds to be obtained prior to submitting a bid, which would put more financial burden on small suppliers. Similarly, another commenter stated that state licensing requirements vary from state to state, and could impact a supplier's ability to serve beneficiaries in specific states. Another commenter noted most suppliers only maintain state licenses in areas where they operate, but under a national RID CBP, these DME suppliers would either need to take on the costs of obtaining and maintaining nationwide licensure or decline to participate in the program. A commenter noted that some states require a brick and mortar location to be owned by a supplier within that state before dispensing DME items within that state, and many suppliers will not acquire brick and mortar locations unless they know they are actually going to be dispensing DME in those states. A commenter noted that individual state orthotic licensing rules and regulations may limit the reasonable implementation of an orthotic RID CBP by prohibiting suppliers outside of the state from delivering orthoses in the state. A commenter requested that before implementing a RID CBP, CMS should identify state licensing requirements for bidders, provide advance notice to apply for these licenses, and eliminate any bids that do not meet licensing requirements. This commenter suggested that CMS should also work with state Boards of Pharmacy and DME (where applicable) to identify licensing requirements for drop shipping as a non-resident facility, since many suppliers will not have locations in every state.

Response: Thank you for the comments. Just like any other DMEPOS CBP, the RID CBP has the same statutory requirements regarding bid bonds and licensure. A bidding entity may not submit a bid(s) and be awarded a contract for a competition unless it obtains a bid surety bond for the CBA from an authorized surety on the Department of the Treasury's Listing of Certified Companies and provides proof of having obtained the bond by submitting a copy to CMS by the deadline for bid submission. The bid surety bond requirement discourages bidding entities from submitting unrealistic and non-serious bids that they cannot support, leading to more accurate bids. Additionally, this requirement helps ensure that bidding entities continue to accept contract offers as their bid surety bond will be forfeited if certain criteria are met. The bid surety bond requirement also contains a level of financial assurance as the approved surety company will typically conduct an underwriting process to evaluate a bidding entity's financial health, experience, and business practices prior to issuing a bid surety bond(s) to a bidding entity. Section 1847(b)(2)(A) of the Act, as implemented under 42 CFR 414.414, states CMS may not award a DMEPOS CBP supplier contract unless CMS finds that the bidding entity meets applicable State licensure requirements. Pursuant to the DMEPOS supplier standards at 42 CFR 424.57(c), a supplier must operate its business and furnish Medicare covered items in compliance with all applicable Federal and State licensure and regulatory requirements. To be eligible for a contract, a supplier must possess the applicable licenses by the close of the bid window. We have implemented a national CBA before through the national mail order DMEPOS competitive bidding program, and under this program suppliers had to have the applicable licenses for all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa. Not all states required

a license for mail-order diabetic supplies, but it was up to the supplier to confirm which states required a license to mail diabetic testing supplies, obtain those licenses, and submit them to what was then the National Supplier Clearinghouse (now called the National Provider Enrollment contractor). We also note that items that would be included in a RID CBP are items that are already furnished by national mail order suppliers and for States that have a requirement that the supplier maintain a physical location within or close to the State, regional RID CBPs can be established, if necessary, to address this situation if the national suppliers furnishing the items do not already have locations in or near these States.

Comment: A commenter noted HCPCS codes proposed for RID CBP inclusion may be subject to additional federal, state, and local regulatory policies, processes, and/or procedures. For example, in an RID CBP environment, meeting CMS prior-authorization requirements would be extremely challenging and further delay urgent orthotic needs.

Response: Thank you for the comment. Each HCPCS code has its own applicable policies, and it is up to the supplier to follow those policies and bill each HCPCS code appropriately. Without knowing which specific HCPCS codes or policies the commenter is referring to, we cannot predict what effect the RID CBP would have on those unspecified policies. Regarding prior-authorization, we are also unsure what part of the RID CBP environment would make prior-authorization challenging. Prior authorization has occurred under prior rounds of the CBP, including the most recent round for certain off-the-shelf back and knee braces. If the commenter is referring to how a potential national RID CBP may make prior authorization more challenging, as discussed in the proposed rule and above CMS envisions that a RID CBP would be for items and services that are generally furnished from remote supplier locations. In determining which items may fall under a nationwide RID CBP, we will consider whether suppliers typically furnish the item around the country or if they are typically furnished on a regional basis.

Comment: A commenter stated that the previous national mail order CBP for diabetic supplies failed.

Response: We do not agree. The national mail order CBP for diabetic testing supplies was successful in lowering excessive payment amounts and fraud while access to diabetic supplies and health outcomes remained stable or improved. The MedPAC has also found that the program dramatically reduced Medicare and beneficiary spending on diabetes testing supplies, while beneficiaries maintained broad access to test strips, health outcomes remained stable, and further found that program likely reduced abusive billing practices for test strips.\77\

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Comment: Several commenters recommended testing or implementing various demonstration of a RID CBP before implementing a national RID CBP. A commenter suggested delaying the implementation of the RID CBP by 2 years, allowing suppliers, manufacturers, and patients time to adapt to the new framework and give CMS the opportunity to conduct further impact assessments and stakeholder engagement. Some commenters also suggested engaging with the patient community, including stakeholders in niche categories before implementing a RID CBP.

Response: Thank you for the comments and recommendations. We will consider these as we work towards implementing a RID CBP in the future.

After consideration of the public comments received, we are finalizing our proposals to establish definitions for “remote item delivery competitive bidding program” and “remote item delivery item.” We are also finalizing our policy to continue using the claims appeals process to determine whether payment can be made for replacement of supplies by non-contract suppliers in cases where replacement of supplies is needed and the supplies cannot be delivered on a timely basis by a contract supplier.