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

Section 1847(b)(2) of the Social Security Act (Act) outlines the conditions for awarding a DMEPOS CBP supplier contract. Section 1847(b)(2)(A)(ii) of the Act specifies that CMS may not award a contract to any entity under the competition conducted in a competitive acquisition area unless the Secretary finds that the entity meets applicable financial standards specified by the Secretary, taking into account the needs of small providers.

Section 1847(a)(1)(F) of the Act applies to supplier feedback on missing financial documentation. Section 1847(a)(1)(F)(iv) of the Act defines a covered document as “a financial, tax, or other document required to be submitted by a bidder as part of an

original bid submission under a competitive acquisition program in order to meet required financial standards. Such term does not include other documents, such as the bid itself or accreditation documentation.” If a covered document is submitted to CMS by the covered document review date (CDRD) and one or more covered documents is missing, per section 1847(a)(1)(F)(i)(I) of the Act, the Secretary is required to provide notice no later than 45 days (in the first round of competition acquisition program as described in subparagraph (B)(i)(I)) or 90 days (in subsequent rounds of such programs) after the CDRD. Per section 1847(a)(1)(F)(ii)(I) and (II) of the Act, the CDRD is the date that is the later of 30 days before the final date specified by the Secretary for submission of bids under the program or the date that is 30 days after the first date specified by the Secretary for submission of bids under the program.

Section 1847(a)(1)(F)(i)(II) of the Act specifies that the Secretary may not reject the bid submission on the basis that any covered document is missing or has not been submitted on a timely basis, if all such missing documents identified in the notice provided to the bidding entity is submitted to the Secretary no later than 10 business days after the date of such notice. Per the limitations of this process in section 1847(a)(1)(F)(iii)(I)-(IV) of the Act, it applies only to the timely submission of covered documents, does not apply to any determination as to the accuracy or completeness of covered documents submitted or whether the documents meet applicable requirements, shall not prevent the Secretary from rejecting a bid based on any basis not described in clause (i)(II) of section 1847(a)(1)(F) of the Act, and shall not be construed as permitting a bidding entity to change bidding amounts or to make other changes in a bid submission.

In the 2006 proposed rule (71 FR 25675), CMS proposed that, as part of the bid selection process, the Request for Bids (RFB) will identify the specific information CMS requires to evaluate bidding entities, which may include: a bidding entity's bank reference that reports general financial condition, credit history, insurance documentation, business capacity and line of credit to successfully fulfill the contract, net worth, and solvency.

In the 2007 final rule (72 FR 18037), CMS agreed with comments that the proposed financial documentation would be too burdensome, particularly for small suppliers. Additionally, the final rule (72 FR 18037) stated that in order to obtain a sufficient amount of information about each bidding entity, while minimizing the burden on both bidding entities and the bid evaluation process, CMS would require, for the initial round of competition (what is referred to as the Original Round 1), bidding entities to submit certain schedules from their tax returns, a copy of the 10K filing report from the immediate 3 years immediately prior to the date on which the bid is submitted (if the supplier is publicly traded), certain specified financial statement reports such as cash flow statements, and a copy of its current credit report, which must have been completed within 90 days prior to the date in which the supplier submits its bid and must have been prepared by one of the following: Experian, Equifax, or TransUnion. The RFB has required a numerical credit score and/or rating being included with the credit report.

The covered documents described in the 2007 final rule were also outlined in the Original Round 1 RFB in accordance with 42 CFR 414.414(d), which states that each bidding entity must submit along with its bid \83\ the applicable covered documents specified in the RFB. For all subsequent rounds after the Original Round 1 (Round 1 Rebid through Round 2021), the covered documents were specified in the RFB for each applicable round, which included the tax return, income statement, balance sheet, statement of cash flows, and a credit report with a numerical credit score and/or rating.

\83\ Bid means an offer to furnish an item or items for a particular price and time period that includes, where appropriate, any services that are directly related to the furnishing of the item or items.

On January 16, 2009 we published in the Federal Register an interim final rule titled “Medicare Program; Changes to the Competitive Acquisition of Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) by Certain Provisions of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)” (hereafter referred to as the “2009 interim final rule”) (74 FR 2876) that codified the aforementioned process for reviewing covered documents in Sec. 414.414(d)(2).

Additionally, the 2006 proposed rule (71 FR 25675) and the 2007 final rule (72 FR 18037) stated that applying financial standards would assist CMS in assessing the expected quality of bidding entities, estimating the total potential capacity of winning contract suppliers, and ensuring that winning contract suppliers are able to continue to serve market demand for the duration of their contracts. We also stated that we would generally require that bidding entities submit the same types of information for subsequent competitions, but we might choose to add or delete specific document requests as we gather experience on what financial information most accurately predicts whether a suppler is financially stable enough to participate in the Medicare DMEPOS CBP (72 FR 18037). 2. Current Issues

CMS solicited comments on a proposal to reduce the number of covered documents that bidding entities are required to submit during the bid window and modify how CMS will evaluate and determine the financial standards for each bidding entity, while still ensuring that a bidder offered a contract is financially stable enough to participate in the Medicare DMEPOS CBP for the duration of the contract performance period. We believe a bidding entity's credit score is an up-to-date, reliable, and sufficient measure of the entity's ability to serve market demand for the duration of the contract performance period because data from Round 2021 shows that only 1.7 percent of bidding entities' Tax Identification Numbers (TINs) had a lower credit score, and 21.1 percent of those bidding entities' TINs no longer had an active location (otherwise known as a Provider Transaction Access Number (PTAN)) as of December 28, 2023--the specifics for how these percentages were calculated are described later in this section. This proposal would also align with CMS's focus on continuous process improvement and increase operational and policy efficiency and effectiveness for all aspects of the DMEPOS CBP, while ensuring the integrity of the program is not compromised.

Specifically, CMS solicited comments on a proposal to reduce the burden of submitting financial documentation from bidding entities by no longer requiring the submission of a tax return extract, income statement, balance sheet, and statement of cash flows. However, CMS would still require bidding entities to submit a credit report with a numerical credit score or rating from one of the approved credit reporting agencies during the bid window. This proposal will significantly reduce the burden on bidding entities as they will only be required to submit a credit report with a numerical credit score or rating.

To further clarify, CMS solicited comments on a proposal to require a bidding entity submit a business credit report with a numerical credit score or rating. However, there may be instances

where the bidding entity does not have a business credit report with a numerical credit score or rating if the entity has not been in operation long enough to generate a numerical score or rating. Bidding entities that are unable to generate a credit report with a numerical credit score or rating would be required to submit a business credit report showing no data or insufficient information to generate a credit score, in addition to a personal credit report with a numerical credit score or rating from the supplier's Authorized Official or Delegated Official listed in CMS' PECOS. If the individual's name on the credit report is not an Authorized Official or Delegated Official listed in PECOS, CMS will deem the personal credit report with a numerical credit score or rating unacceptable, and the supplier will not be eligible for a DMEPOS CBP supplier contract.

Commonly owned and/or commonly controlled bidding entities are prohibited from competing against themselves when submitting bids in the same competition. Therefore, when registration opens, commonly owned and/or commonly controlled bidding entities must register one time with a primary Provider Transaction Access Number (PTAN) which designates the primary location in the bidding system and identifies the entity responsible party for all contractual requirements (that is, the bidding entity). When the bid window opens, the bidding entity must submit one bid that includes all commonly owned and/or commonly controlled locations that would furnish the lead item and all non-lead items in the same competition. The legal business name (LBN) for the primary location will auto-populate in the bidding system on the Business Organization section of Form A. This LBN must be the same LBN on your bid surety bond(s). If awarded a contract, CMS will contract with the legal business entity identified by the LBN for the primary location.

Given the longstanding policy as specified in the Request for Bid Instructions, commonly owned and/or commonly controlled supplier organizations that submit separate bids for the same competition will have their bids for the competition disqualified.

Similarly, as specified in the Request for Bid Instructions, the bidding entity must attest in the bidding system that it is submitting one bid that includes all commonly owned and/or commonly controlled locations, and that it will furnish the lead item and all non-lead items in the same competition.

The bidding entity must upload a copy of its business' credit report showing the approved crediting agency, the numerical credit score or rating, the entity's name, and the date that the credit report was prepared not earlier than 90 calendar days prior to the opening of the bid window in a form and manner specified by CMS. If the numerical credit score or rating is generated separately from the credit report, the bidding entity's name and the date it was prepared must be shown on both the credit report and the numerical credit score or rating.

Bidding entities that are unable to generate either a credit report with a numerical credit score or rating would be required to submit a business credit report showing no data or insufficient information to generate a credit score or rating, and would be further required to submit a personal credit report with a numerical credit score or rating from the supplier's Authorized Official or Delegated Official listed in CMS' PECOS.

This proposal would also reduce the resources needed to review the submissions of covered documents and will streamline the evaluation of financial standards, while ensuring that the entities that are awarded a contract are financially stable enough to participate in the Medicare DMEPOS CBP for the duration of the contract performance period. In addition, bidding entities may have improved opportunity to receive a contract offer because they will no longer be disqualified due to errors in their submitted financial statements and tax return extracts, which would disqualify a bidding entity in previous rounds.

CMS analyzed all credit reports with a numerical credit score or rating from bidding entities that submitted a complete bid \84\ in the most recent round of the DMEPOS CBP (Round 2021), as well as Medicare supplier enrollment data, to evaluate if a bidding entity's credit report with a numerical credit score or rating is sufficient in determining the financial stability of a bidding entity and if they can fulfill its contractual obligations for the duration of the contract performance period. Specifically, CMS first determined which bidding entities submitted a complete bid for all product categories competed in Round 2021 (the analysis was not limited to the bidding entities that submitted a complete bid for the OTS Back Brace and OTS Knee Brace product categories that were included in Round 2021) to determine how many bidding entities (identified by TIN) were included on the submission of a complete bid. CMS identified 1,153 bidding entities' TINs and first determined how many of them were still in business as of December 28, 2023, by utilizing data from PECOS.

\84\ A complete bid is defined as a supplier submitting an approved Form A and a certified Form B in the DMEPOS Bidding System, as well as uploading at least one bid surety bond and at least one of the required financial documents in the DMEPOS CBP's secure portal, by the close of the window.

CMS found that 88.2 percent (1,017 of 1,153) of bidding entities' TINs still had at least one PTAN as of December 28, 2023. Because the Round 2021 bid window was open from July 16, 2019, through September 18, 2019, this means that 88.2 percent of the 1,153 Round 2021 bidding entities had at least one PTAN that was still active/enrolled as a Medicare-enrolled supplier more than 4 years later, supporting the fact that most DMEPOS CBP suppliers are able to stay in business for the duration of a DMEPOS CBP supplier contract performance period which cannot exceed 3 years. CMS would like to note that this timeframe was during the COVID-19 pandemic indicating that companies that submit a bid to participate in the DMEPOS CBP appear to typically be financially stable enough to participate in the Medicare DMEPOS CBP for the duration of the contract performance period as most were able to stay in business during/after the pandemic.

Additionally, CMS analyzed the numerical credit score and/or rating on the credit report for each bidding entity's TIN to determine where the majority of bidding entities fell within CMS' 5-tier credit scoring system. Table FF-36 outlines the 5-tier credit scoring system, and table FF-37 provides a description of each business credit report, which were both included in the Round 2021 Financial Scoring Methodology Fact Sheet. Table FF-36 (Credit Report Scoring List) contains a list of credit reports and credit scores or ratings, as well as the associated tiers and scoring. All bidding entities were required to submit a credit report with a numerical credit score and/or rating on the Credit Report Scoring List and depending on the bidding entity's credit score or rating, the bidding entity fell within a specific tier and received a correlating score of either 4, 8, 12, 16, or 20 points, where a score of 4 is the worst and 20 is the best. Historically, a bidding entity could receive a maximum score of 20 points from its credit report with a numerical credit score or rating and the remaining 80 points (equating to 100 total points) from its tax return extract, income statement, balance sheet, and statement of cash flows, which will no longer be applicable in future rounds of the DMEPOS CBP per

this proposal. Specifically, the remaining 80 points were determined by computing each standard accounting ratio for each bidding entity and arraying the bidding entities from the best to worst ratio. Bidding entities in the bottom 10 percent of the array for a specific ratio received a score of 1 (worst) and suppliers in the top 10 percent of the array for a specific ratio received a score of 7.6 or 9.6 (best). The remaining bidding entities' (that is, those falling in between the top and bottom 10 percent) scores were prorated between 1 and 7.6/9.6. Of the 10 standard accounting ratios, 8 have a maximum score of 7.6, while two have a maximum score of 9.6. This information was contained in the Round 2021 Financial Scoring Methodology Fact Sheet.

Table FF-36 includes a detailed description of each business credit report to help suppliers understand the difference between the business credit reports. [GRAPHIC] [TIFF OMITTED] TR02DE25.066

[GRAPHIC] [TIFF OMITTED] TR02DE25.067

The Round 2021 data showed that only 1.7 percent (19 out of 1,133) of suppliers' TINs received a credit score or rating of 8 or lower. Please note that CMS was not able to calculate a score for 20 bidding entity TINs (1,153--1,133), mainly due to the following reasons:

The credit report submitted was not for the entity that submitted the bid.

There was no date on the credit report indicating when it was generated (credit reports were required to be generated no earlier than 90 calendar days prior to the opening of the bid window).

A bidding entity that filed a tax return (Form 1120) as a regular “C” corporation submitted a personal credit report instead of a business credit report.

All of these requirements were outlined in the Round 2021 RFB.

CMS analyzed the 19 suppliers' TINs that received a score of 8 or lower aforementioned and found that 21.1 percent (4 of the 19) of those bidding entities' TINs did not have an active PTAN as of December 28, 2023, supporting our experience that there is a strong correlation between a bidding entity that has a poor credit score and a supplier no longer being enrolled with Medicare. CMS solicited comments on a proposal to continue requiring each bidding entity to submit a credit report with a numerical credit score or rating that is on the CMS Credit Report Scoring List. This list cannot be finalized until closer to when the bid window opens as credit reporting agencies occasionally update the names of their credit reports, as well as the credit score or rating ranges, so CMS also solicited comments on a proposal to include the list that is applicable for each round in the round- specific RFB or a Financial Scoring Methodology Fact Sheet, so bidding entities have plenty of time to obtain the applicable information and submit it prior to the close of the bid window.

CMS also solicited comments on a proposal to continue using the same 5-tier scoring system, so bidding entities will continue to receive a score of 4, 8, 12, 16, or 20 for their credit report with a numerical credit score or rating as it was successful in Round 2021 per the aforementioned data. Because the credit report with a numerical credit score or rating will be the only covered document submitted, CMS solicited comments on a proposal to deem a bidding entity that receives a minimum score of 12 or higher as passing--meets financial sustainability threshold and be financially eligible for a potential contract offer. We believe that a score of 12 or above would be indicative of the bidding entity being financially stable enough to furnish DMEPOS items during the contract performance period. If deemed as “passing,” the bidding entity will continue to be evaluated for a potential contract offer. Because the Credit Report Scoring List as well as the tier and scoring information will be

published prior to the bid window opening, bidding entities will be able to determine if they meet CMS's financial standards prior to submitting its bid(s).

Furthermore, CMS solicited comments on a proposal to no longer use a bidding entity's financial score to assist in determining the capacity to assign to each contract supplier to meet projected beneficiary demand. Specifically, CMS has historically used the bidding entity's financial score, as well as a few other factors, to determine if it can provide more than what it has historically provided to beneficiaries--the details of this process are outlined in the “Determining Payment Amounts and the Number of Contracts Awarded for the DMEPOS CBP” proposal where CMS proposed to use a methodology to establish the target number of contracts to award in each competition, so the financial score is no longer applicable for this process.

Lastly, CMS has historically utilized a bidding entity's tax return extract to determine if the entity is a small supplier and has attempted to have at least 30 percent of contract suppliers be small suppliers in each competition to align with section 1847(b)(6)(D) of the Act. For competitive bidding purposes, a small supplier is a supplier that generates gross revenue of $3.5 million or less in annual receipts including Medicare and non-Medicare revenue. However, because CMS proposed to no longer require the submission of the tax return extract and the gross revenue is typically not shown on a credit report, CMS solicited comments on a proposal to add a field in the bidding system requiring the bidding entity included on the bid have a gross revenue that is under the small supplier threshold. Additionally, before a bidding entity submits its bid(s) in the bidding system, the entity will be required to attest in the bidding system that the information entered into the bidding system is true, correct, and complete--just as bidding entities have done in prior rounds. All bidding entities will also continue to be presented with the “Penalties for Falsifying Information” in the bidding system prior to submitting bid(s).

CMS intends to review Medicare fee-for-service claims data for bidding entities that indicate in the DMEPOS Bidding System that they are a small supplier to confirm accuracy. Bidding entities that falsify the small supplier status in the bidding system may be prohibited from participating in the DMEPOS CBP for both the current and the next round of the program in accordance with 42 CFR 414.412(g)(4)(i). Additionally, bidding entities that falsify the small supplier status will be referred to the Office of Inspector General and Department of Justice for further investigation. 3. Provisions of the Regulation a. Required Covered Documents

CMS proposed that each bidding entity submit a business credit report with a numerical credit score or rating, unless the bidding entity does not have a business credit report with a numerical credit score or rating because the entity has not been in operation long enough to generate a numerical score or rating. Bidding entities that are unable to generate a credit report with a numerical credit score or rating would be required to submit a business credit report showing no data or insufficient information to generate a credit score or rating, in addition to a personal credit report with a numerical credit score or rating from the bidding entity's Authorized Official or Delegated Official listed in CMS' PECOS.

The bidding entity must upload a copy of its business' credit report showing the approved crediting agency, a numerical credit score or rating, the bidding entity's name, and the date that the credit report was prepared, which must be within 90 calendar days prior to the opening of the bid window. If the numerical credit score or rating is generated separately from the credit report, the bidding entity's name and the date it was prepared must be shown on the credit report and included with the numerical credit score or rating. b. Financial Scoring Methodology

CMS proposed to continue publishing a Credit Report Scoring List and utilize the same 5-tier credit report scoring system used in prior rounds of the DMEPOS CBP. The report will be published in the round specific RFB and/or a fact sheet prior to the opening of the bid window, and will contain the same credit reports with numerical scores or ratings, unless: a credit reporting agency discontinues, changes the name of a credit report, and/or revises the numerical score/rating ranges.

CMS proposed to continue using the 4, 8, 12, 16, or 20 scoring system when evaluating a bidding entity's credit report with a numerical credit score or rating. CMS proposed to deem a bidding entity that receives a minimum score of 12 or higher as passing--meets financial sustainability threshold. If deemed as passing, the bidding entity will continue to be evaluated for a potential contract offer.

CMS proposed to no longer use a bidding entity's financial score to assist in determining the capacity to assign to each contract supplier to meet projected beneficiary demand.

CMS proposed to add a field in the bidding system requiring the bidding entity to verify that all the bidding entities included on the bid has a gross revenue that is under the small supplier threshold. We solicited comments on this proposal. The following is a summary of the comments we received regarding the submission of covered documents and the financial scoring methodology, as well as our responses.

Comment: A commenter supported no longer requiring a tax return extract, income statement, balance sheet, and statement of cash flows and only requiring the credit report with a numerical credit score and/ or rating. A few commenters stated that they support the reduction in the tax return extract and corresponding financial statements for all suppliers except for small suppliers. A few commenters suggested that CMS should increase, not decrease, financial oversight to ensure that only qualified, capable suppliers participate, but did not provide any recommendations. Other commenters stated that while streamlining the bid submission process is a worthwhile goal, eliminating the tax return, income statement, balance sheet, and statement of cash flows documentation in favor of a single credit report and credit score with a numerical score and/or rating is inadequate. Commenters further stated that a reduction in financial documentation is dangerous as it invites inexperienced suppliers to submit low bid amounts and, if awarded a contract, may fail to serve beneficiaries.

Response: We thank the commenters for their comments. CMS believes that the data from past rounds (outlined previously in this proposal) supports the decision to require a credit report with a numerical credit score and/or rating to determine if a bidding entity is financially stable enough to participate in the program for the duration of the contract performance period. In addition to the financial requirements, all bidding entities must be compliant with the DMEPOS supplier and quality standards, which includes being properly licensed and accredited, to be awarded a DMEPOS CBP contract to provide competitively bid items. Additionally, CMS believes that the bid surety bond requirement, per Section 522(a) of the Medicare Access and CHIP Reauthorization Act of 2015, will continue to deter bidding entities from submitting unrealistic bid amounts.

Comment: A commenter requested clarification about whether the credit evaluation will be based solely on the

most recent year, or if it will include a multi-year look back.

Response: A bidding entity must upload a copy of its business' credit report showing the approved crediting agency, a numerical credit score or rating, the bidding entity's name, and the date that the credit report was prepared no earlier than 90 calendar days prior to the opening of the bid window.

Comment: Commenters requested that CMS issue clearer guidance on the financial documentation requirements based on the structure of the business (that is, sole proprietorship, partnership, limited liability company, C or S-corporation) to limit errors, inadvertent omissions, and inaccurate disqualifications.

Response: CMS will provide detailed information regarding the credit report and numerical credit score and/or rating requirements for entity types in the Request for Bids Instructions, which will be published prior to the opening of the bid window for each round of the DMEPOS CBP.

Comment: Many commenters had concerns that a credit report and credit score and/or rating would not be sufficient in determining if a supplier could increase their capacity to meet beneficiary demand. Commenters stated that financial documentation is critical to assessing a supplier's ability to scale operations and meet demand. Another commenter suggested that this proposal would undermine program integrity and invites abuse as suppliers can manipulate credit scores to secure contracts, only to not be able to meet beneficiary demand. Other commenters both agreed and disagreed to no longer use a bidder's financial score to determine capacity. Other commenters stated that data such as supplier-reported capacity, a DME supplier's historical capacity, and additional financial documentation (tax return extracts and financial statements, including an income statement, balance sheet, and statement of cash flows) must be provided to assess a supplier's potential to successfully increase its capacity. A commenter agreed that using a supplier's reported capacity is not reliable.

Response: We thank the commenters for their comments. Bidding entities that manipulate credit scores may be prohibited from participating in the DMEPOS CBP for both the current and the next round of the program in accordance with 42 CFR 414.412(g)(4)(i). Additionally, bidding entities that manipulate credit scores will be referred to the Office of Inspector General and Department of Justice for further investigation. Furthermore, CMS will not rely on supplier- reported capacity because suppliers that bid in Round 2021 did not submit realistic capacity estimates. CMS believes that using the finalized methodology in the “Determining Payment Amounts and the Number of Contracts Awarded for the DMEPOS CBP” proposal will be sufficient in determining the number of contract suppliers that will be needed to collectively meet the projected beneficiary demand in each competition. Additionally, CMS anticipates that most, if not all, suppliers awarded contracts in a competition will have prior experience providing the items in the product category and may also have experience providing the items in the area(s) in which the supplier received a contract. Also, CMS has further confidence that the finalized methodology in the “Determining Payment Amounts and the Number of Contracts Awarded for the DMEPOS CBP” proposal is sufficient because CMS' grandfathering policies will allow rental agreements for DMEPOS items and services entered into before the application of the DMEPOS CBP to be continued once items are phased in under the program in accordance with regulations at 42 CFR 414.408(J), enabling continuity of care for beneficiaries already receiving items included in the DMEPOS CBP. For the product categories that include purchased items, CMS believes that they are easier to furnish and will most likely be able to be provided by mail. Additionally, at least 75 percent of the contract suppliers will be reimbursed at their bid amount (most will receive more than their bid amount), allowing for increased supplier profit and the ability to provide at a higher capacity. However, in the event CMS determines that beneficiaries are having difficulty obtaining competitively bid DMEPOS in a particular competition, CMS can award additional contracts to suppliers who were not initially offered a contract but were included in the winning array.

Comment: Commenters stated that CMS should continue requiring small suppliers to submit a tax return extract, instead of accepting a bidder's attestation, so CMS can confirm that the definition of a small supplier is being met, preventing bad actors from having the ability to receive a DMEPOS CBP contract by abusing the honor system.

Response: As noted in this proposal, CMS intends to review Medicare FFS claims data for bidding entities that indicate in the DMEPOS Bidding System that they are a small supplier to confirm accuracy. Bidding entities that falsify the small supplier status in the bidding system may be prohibited from participating in the DMEPOS CBP for both the current and the next round of the program in accordance with 42 CFR 414.412(g)(4)(i). Additionally, bidding entities that falsify the small supplier status will be referred to the Office of Inspector General and Department of Justice for further investigation.

Comment: A commenter recommended that all locations/billing numbers that are part of a single corporate entity should count as a single supplier.

Response: We agree that all locations/billing numbers that are part of a single corporate entity for a DMEPOS supplier should count as a single supplier for the purposes of the competition. As discussed previously, we proposed a new financial standards requirement requiring a bidding entity to attest in the bidding system that it is submitting one bid that includes all commonly owned or commonly controlled locations, and that it will furnish the lead item and all non-lead items in the same competition.

Comments: A commenter suggested that CMS should apply artificial intelligence (AI) enhanced risk scoring to submitted financial data to detect inconsistencies, anomalies, or patterns linked to fraud cases.

Response: CMS will continue to assess ways in which AI can be incorporated into the DMEPOS CBP.

We are finalizing as proposed to revise our regulations at 42 CFR 414.414(d)(1), with the exception of certain technical changes. In the proposed rule, the proposed regulation text for 42 CFR 414.414(d)(1) incorrectly labeled the subparagraphs as (A) through (D) instead of (i) through (iv). We will be finalizing the regulation text by redesignating paragraphs (1)(A) through (1)(D) as (1)(i) through (iv). As part of this same change, we will also be finalizing a change that revises (1)(iii) to refer to documentation described in paragraphs (d)(1)(i) and (ii) rather than (d)(1)(A) and (B). We also provided technical edits in 42 CFR 414.414(d)(1)(i). Technical edits were also provided in 42 CFR 414.414(d)(1)(ii) as well as clarification that the documentation would need to be submitted by the close of the bid window. Additionally, CMS provided clarification in 42 CFR 414.414(d)(1)(iii) to specify the items that must be contained on the documentation outlined in in 42 CFR 414.414(d)(1)(i) and (ii).

We are finalizing as proposed to revise our regulations at 42 CFR 414.414(d)(2) as this will allow CMS to obtain the most updated credit report

and numerical credit score and/or rating information to assess if a supplier is financially stable enough to participate in the Medicare DMEPOS CBP for the duration of the contract performance period, with the exception of certain clarifying edits.

We are providing clarification to 42 CFR 414.414(d)(2)(i) to state that bidding entities that must obtain both a business and personal credit report with a numerical credit score or rating do not have to utilize the same approved credit agency for both. CMS has also provided technical edits in 42 CFR 414.414(d)(2)(ii) and (iii).

We received no comments on the proposal to continue publishing a Credit Report Scoring List and utilize the same five-tier credit report scoring system, and we are finalizing this proposal without modification.

We are finalizing the proposal to no longer use a bidding entity's financial score to assist in determining the capacity to assign to each contract supplier to meet projected beneficiary demand as the tax return extract and financial statements will no longer be required covered documents in future rounds and CMS is finalizing the “Determining Payment Amounts and the Number of Contracts Awarded for the DMEPOS CBP” proposal which contains a methodology that is sufficient in determining the number of contract suppliers needed to collectively meet the projected beneficiary demand in each competition.

We are finalizing the proposal requiring a bidding entity attest that they are small supplier in the DMEPOS bidding system if the bidding entity meets the small supplier threshold as CMS intends to review Medicare FFS claims data, bidding entities that falsify the small supplier status in the bidding system may be prohibited from participating in the DMEPOS CBP for both the current and the next round of the program in accordance with 42 CFR 414.412(g)(4)(i), and bidding entities that falsify the small supplier status will be referred to the Office of Inspector General and Department of Justice for further investigation.

We received no comments on the requirement for commonly owned and/ or commonly controlled bidding entities being prohibited from competing against themselves when submitting bids in the same competition, and we are finalizing this proposal without modification.

We are finalizing the rest of the proposal without changes, including those that did not receive comments.

If a bidding entity submits at least one covered document by the CDRD and one or more covered documents are missing, per section 1847(a)(1)(F)(i)(I) of the Act the Secretary is required to notify the bidding entity no later than 45 days (in the first round of competition acquisition program as described in subparagraph (B)(i)(I)) or 90 days (in subsequent rounds of such programs) after the CDRD of any missing covered document(s).

Section 1847(a)(1)(F)(i)(II) of the Act specifies that the Secretary may not reject the bid submission on the basis that any covered document is missing or has not been submitted on a timely basis, if all such missing documents identified in the notice provided to the bidding entity are submitted to the Secretary no later than 10 business days after the date of such notice. Per the limitations of this process in section 1847(a)(1)(F)(iii)(I) through (IV) of the Act, section 1847(a)(1)(F)(i)(I) and (II) of the Act--(1) applies only to the timely submission of covered documents; (2) does not apply to any determination as to the accuracy or completeness of covered documents submitted or whether the documents meet applicable requirements; (3) shall not prevent the Secretary from rejecting a bid based on any basis not described in clause (i)(II) of section 1847(a)(1)(F) of the Act; and (4) shall not be construed as permitting a bidding entity to change bidding amounts or to make other changes in a bid submission.

Per section 1847(a)(1)(F)(ii)(I) and (II) of the Act, the CDRD is the later of the date that is 30 days before the final date specified by the Secretary for submission of bids under the program or the date that is 30 days after the first date specified by the Secretary for submission of bids under the program.

The 2009 interim final rule codified the CDRD process, which is outlined in 42 CFR 414.414(d)(2) (74 FR 2876 through 2877). 2. Current Issues

Since the inception of the DMEPOS CBP, within either 45 (for Round 1 bids) or 90 days (for subsequent round bids) after the CDRD, CMS has notified bidding entities that submitted at least one covered document by the CDRD, if a covered document was missing by the CDRD and by the close of the bid window. The first step has been identifying the universe of bidding entities that submitted a covered document by the CDRD. The next step has been to determine if each bidding entity with a complete bid has any missing documents covered by the CDRD and the closing of the bid window. If a covered document is identified as missing by the CDRD, CMS then determines if the covered document was received or not by the close of the bid window. Once the analysis is completed, CMS has communicated its findings to the applicable bidding entity within 45 or 90 days after the CDRD, as applicable. CMS specifies in each bidding entity's notification, to the extent applicable, if: (1) a covered document(s) was missing by the CDRD and was still missing by the close of the bid window, (2) a covered document(s) was missing by the CDRD date but was received by the close of the bid window, (3) covered documents were missing by the CDRD but at least one of the missing covered documents was received by the close of the bid window while the other covered document(s) was still missing by the close of the bid window, or (4) no covered document(s) was missing by the CDRD.

CMS proposed to streamline the evaluation and notification processes by only informing bidding entities if a covered document was missing by the close of the bid window. Each bidding entity would receive a notification stating if: (1) a covered document(s) was missing by the close of the bid window; or (2) no covered document(s) was missing by the close of the bid window. CMS believes that this proposal aligns with the intent of statute as bidding entities would continue to be notified of any missing covered documents (as long as they submit at least one covered document by the CDRD) and would continue to be able to submit any missing covered documents within 10 business days of receiving the notification.

This proposal would also reduce CMS workload in determining if/when a covered document is missing for bidding entities that submitted at least one covered document by the CDRD. Specifically, CMS proposed to identify the universe of bidding entities that submitted at least one covered document by the CDRD and then determines if they have a missing covered document(s) by the close of the bid window. CMS would notify bidding entities if they have missing covered documents or if all covered documents were submitted, so CMS will only have to send two different types of notifications compared to the four different notifications previously mentioned. Additionally, due to the

simplification of the notifications, bidding entities would have an easier time understanding which covered documents they may need to submit in response to their notification. We solicited comments on this proposal. 3. Provisions of the Regulation

CMS proposed to streamline the evaluation and notification processes for missing covered document(s). Under this proposal, CMS will no longer evaluate if a bidding entity was missing a covered document(s) by the CDRD and by the close of the bid window, and will only determine if a bidding entity had a missing covered document by the close of the bid window. Once the evaluation is completed, CMS proposed to continue notifying bidding entities, within 90 days of the CDRD, of the specific covered document(s) that was missing or provide confirmation that all applicable covered documents had been received by the close of the bid window. Bidding entities will continue to have 10 business days from receiving their notification to submit the missing covered document(s). We solicited comments on this proposal.

Comments: Commenters supported the proposal.

Response: We are finalizing our proposal as proposed with the exception of technical changes made to the regulation text. In the proposed rule, the proposed regulation text cited 42 CFR 414.414(d)(2) incorrectly. We are finalizing the regulation text by redesignating paragraphs (d)(2) to (d)(3) and will finalize the rest of the proposal without changes, which is reflected in 42 CFR 414.414(d)(3)(ii)(B).

Section 1847(a)(1)(G) of the Act, as added by section 522(a) of the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) (MACRA), requires a bid surety bond for bidders. We believe that a bid surety bond would help address the fact that the bids submitted under the DMEPOS CBP are not binding, which can encourage the practice of bidders submitting “low-ball” bids. Requiring a bid surety bond was also believed to reduce the number of bad actors submitting bids in the DMEPOS CBP, while imposing a penalty for a bidder that does not accept a contract that they won.

If a bidder is offered a contract for a competition and its bid is at or below the median composite bid rate for all bidders included in the calculation of the SPA, and it does not accept the contract offer, the bidder's bid surety bond would be forfeited for that CBA. Bidders that accepted the contract offer, or those bids that are above the median composite bid rate, would have the bid surety bond liability returned.

The 2016 ESRD & DMEPOS final rule (81 FR 77966 and 77967) finalized the regulations at 42 CFR 414.412(g) for setting the requirements for bid surety bonds. Additionally, CMS proposed to correct a technical error in 42 CFR 414.412(g) that happened as a result of a previous paragraph redesignation in the 2018 ESRD & DMEPOS final rule (83 FR 57072). 2. Current Issues

This proposal codifies how CMS handles situations where at least one of the bid surety bond requirements outlined in 42 CFR 414.412(g)(2)(i) and (ii) is not properly met after a bidder submits its bid surety bond(s) during the bid window. Specifically, if CMS determines that a bid surety bond requirement is not met, the bidder would be notified by CMS and would be provided with an opportunity to correct the deficiency on the bid surety bond via a bid surety bond rider. A bid surety bond rider is a change or amendment to the original bid surety bond. It is the only legal way of modifying or updating information on a bid surety bond which is still in effect, and it can only be issued by the authorized surety agency that issued the original bid surety bond. Allowing bidders to submit a bid surety bond rider would provide bidders that have a bid surety bond deficiency(s) an opportunity to correct the deficiency(s) instead of the bid(s) for the applicable CBA(s) being disqualified in the early stages of the bid evaluation process. Bids that are disqualified for a bid surety bond deficiency are not included in other bid evaluation processes that are necessary to determine if a bid is eligible for a contract offer.

CMS applied the bid surety bond rider process during bid evaluation for Round 2021 of the DMEPOS CBP and now proposed to codify this process in regulation. Additionally, CMS proposed correcting a technical error in 42 CFR 414.412(g) that happened as a result of a paragraph redesignation in 83 FR 57072. 3. Provisions of the Regulation

CMS proposed to correct a technical error created 2018 ESRD & DMEPOS final rule (83 FR 57072) where CMS redesignated paragraphs (e) through (h) as paragraphs (d) through (g), respectively. The redesignated paragraph (g)(3)(ii) still contained a reference to the paragraph (h)(3)(i), which, with the redesignation, was deleted in its entirety. The proposed correction would revise existing paragraph (g)(3)(ii) by removing the reference to “(h)(3)(i)” and replacing it with “(g)(3)(i)”. All other parts of paragraph (g)(3)(ii) remain unchanged with this proposal. We solicited comments on this proposal.

In 2015, Congress passed section 522(a) of MACRA, which required a bid surety bond for bidders. The 2016 ESRD & DMEPOS final rule (81 FR 77966 and 77967) finalized the regulations at 42 CFR 414.412(g) for setting the requirements for bid surety bonds. Round 2021 of the DMEPOS CBP was the first round that required bid surety bonds. As a result, CMS reviewed all bids to ensure a bid surety bond was uploaded to the DMEPOS CBP's secure portal by the deadline for bid submission for each CBA in which a bid was submitted, and that it met all bid surety bond requirements outlined in 42 CFR 414.412(g)(2)(i) and (ii). During the Round 2021 bid evaluation, CMS was able to identify bid surety bonds that had deficiencies with the bid surety bond requirements and allowed certain deficiencies to be corrected via a bid surety bond rider.

Round 2021 had 1,338 bidders and 43 were identified as having at least one bid surety bond with a minimum of one deficiency that was able to be corrected via a bid surety bond rider. These 43 bidders were provided with the opportunity to submit a bid surety bond rider from its surety within a 10-business day timeframe rectifying all deficiencies. Of the 43 bidders, 40 responded within the allotted timeframe; however, only 36 out of the 40 bidders submitted a bid surety bond rider that properly corrected the deficiencies. After successful implementation of the process for Round 2021, CMS proposed to include this process in all future rounds of the program.

Each bid surety bond requirement, described in 42 CFR 414.412(g)(2)(i) and (ii), is listed later in this section followed by an example(s) of the type of deficiency that could be corrected by a bid surety bond rider, which is a change or amendment to the original bid surety bond, that can only be issued by the authorized surety, at its discretion, that issued the original bid surety bond:

The name of the bidder as the principal/obligor: If a bidder submits a bid surety bond that contains a name of a different entity other than the Legal Business Name entered in the Business Organization section of Form A in the DMEPOS Bidding System, for example using its “doing business as” name or the name is missing the “LLC” at the

end, then the error can be corrected by a bid surety bond rider.

The name and the National Association of Insurance Commissioners (NAIC) number of the authorized surety: If a bidder submits a bid surety bond with a missing or illegible name or NAIC number, or the NAIC number does not match the name on the Treasury Department's list of authorized sureties, these issues can be corrected with a bid surety bond rider.

CMS as the named obligee: If a bidder submits a bid surety bond without naming CMS as obligee or names another agency or department as obligee, this error can be corrected by a bid surety bond rider.

The conditions of the bid surety bond as specified in Sec. 414.412(g)(3), which is forfeiture of the bid surety bond language; If a bidder submits a bid surety bond that is missing part or all of the pertinent language on forfeiture of the bid surety bond, then the omission of bid surety bond forfeiture language can be corrected by a bid surety bond rider.

The CBA covered by the bid surety bond: If a bidder submits a bid surety bond with an incorrect or missing CBA name, then the CBA name can be corrected by a bid surety bond rider.

The bid surety bond number: If a bidder submits a bid surety bond with a missing or illegible bid surety bond number, then the bid surety bond number can be corrected by a bid surety bond rider.

The date of issuance: If a bidder submits a bid surety bond with a missing or illegible date of issuance, then the date of issuance can be corrected by a bid surety bond rider.

The bid surety bond value of $50,000.00. If a bidder submits a bid surety bond for a value other $50,000.00, then the bid surety bond value can be corrected by a bid surety bond rider.

The following are examples of the type of deficiencies that a bidder may have on its bid surety bonds that cannot be corrected by a bid surety bond rider:

Late Bid Submissions: CMS will not review any bid surety bonds that are submitted after the deadline for bid submission. The Social Security Act clearly states that bidders must provide “proof of having obtained” a bid surety bond by the “deadline for bid submission.” Submission of a bid surety bond rider will not rectify a bid(s) from a bidder that is disqualified for having a bid surety bond failure, if the failure was for not submitting a bid surety bond prior to the deadline for bid submission. This would also include a bidder that submitted a document other than a bid surety bond (for example, a Medicare enrollment bond, or a Certificate of Liability Insurance). No notice would be provided to a bidder in this situation.

Missing Bid Surety Bonds: If a bidder submitted bids in two different CBAs, but the bidder uploaded the same bid surety bond for both CBAs, then the bidder will not be notified that there is a deficiency for the bid for the CBA in which the bid surety bond that was never uploaded, as a bid surety bond rider cannot correct the issue of a missing bid surety bond, and the bidder did not provide proof of having a bid surety bond for the one CBA by the deadline for bid submission. For example, this could occur by error, where the bidder accidentally uploaded the same bid surety bond for both CBAs, despite having two bid surety bonds; or this could occur by a mistaken understanding of the bidder that one bid surety bond should be sufficient for both CBAs.

Bidders would be notified by CMS of the deficiency (that is, the incorrect, incomplete, or missing requirement) and would be permitted to obtain the bid surety bond rider within a certain timeframe to submit to CMS in order for its bid(s) to remain eligible for further review during bid evaluation. CMS proposed sending the notification to bidders and having bidders provide the bid surety bond riders via the DMEPOS CBP's secure portal. CMS will not notify bidders of deficiencies that are not correctable with a bid surety bond rider during this review process.

CMS proposed to provide bidders with a single, 10-business day timeframe to obtain and submit a bid surety bond rider correcting the deficiencies on the bid surety bond. A 10-business day timeframe was utilized for Round 2021, which provided bidders ample time to obtain a bid surety bond rider from the authorized surety that issued the original bid surety bond and submit the bid surety bond rider via the DMEPOS CBP's secure portal. Additionally, we anticipate the 10-business day timeframe will run concurrent with other bid evaluation processes, and extending this timeframe would result in some bid evaluation processes being delayed until the bid surety bond rider review process is complete, impacting CMS's ability to continue evaluating all bids submitted and ultimately awarding contracts in a timely manner. Lastly, CMS believes that bidders have the resources (for example, fact sheets, bid surety bond template) available, and that it is the responsibly of the bidder to submit a bid surety bond that meets all bid surety bond requirements outlined in 42 CFR 414.412(g)(2)(i) and (ii). For these reasons, CMS believes a single, 10-business day opportunity to rectify the deficiency is sufficient. We solicited comments on this proposal.

The following is a summary of the comments we received regarding the bid surety bond review process and our responses.

Comment: Commenters supported the proposal of allowing bidders with a single, 10-business day timeframe to submit a bid surety bond rider correcting certain deficiencies on their bid surety bond(s). Other commenters stated that the 10-business day timeframe is too short and recommended a 30-business day timeframe.

Response: CMS utilized a 10-business day timeframe in Round 2021 and did not receive complaints from bidders about having difficulty obtaining a bid surety bond rider from its surety agency within this timeframe.

Comment: Commenters suggested CMS clarify when a supplier can decline a contract offer(s) without forfeiting its bid surety bond with the application of setting the single payment amounts at the 75th percentile.

Response: Per 42 CFR 414.412(g)(3)(i), when a bidding entity is offered a contract for a competition and its composite bid (the bid submitted by the supplier for the lead item in the product category) for the competition is at or below the median composite bid rate for all bidding entities included in the calculation of the single payment amounts within the competition and the bidding entity does not accept the contract offer, its bid surety bond submitted for that CBA will be forfeited and CMS will collect on the bond.

Comment: A commenter suggested that CMS consider reimbursement of bid surety bond premiums or credits toward future rounds of the DMEPOS Competitive Bidding Program in the event the current program is not implemented. Another commentor indicated that requiring upfront financial cost with no protection or refund mechanism if CMS does not implement the program represents an unfair burden on small businesses and mid-sized suppliers that already operate on tight margins.

Response: CMS believes that bidding suppliers should discuss any refund mechanism with the authorized surety that issued the bond(s).

We are finalizing all provisions outlined in 42 CFR 414.412(g)(5) as proposed. CMS is also finalizing revisions in 42 CFR 414.412(g)(1) to clarify that, for each round of the DMEPOS CBP, a bidding entity must

obtain a bid surety bond for each CBA included on a bid(s) from an authorized surety on the Department of the Treasury's Listing of Certified Companies and provide proof of having obtained the bond by submitting a copy to CMS by the deadline for bid submission. Additionally, CMS is finalizing the proposal to correct a technical error created 2018 ESRD & DMEPOS final rule (83 FR 57072) where CMS redesignated paragraphs (e) through (h) as paragraphs (d) through (g), respectively. The redesignated paragraph (g)(3)(ii) still contained a reference to the paragraph (h)(3)(i), which, with the redesignation, was deleted in its entirety. The finalization of this correction will revise existing paragraph (g)(3)(ii) by removing the reference to “(h)(3)(i)” and replacing it with “(g)(3)(i)”. All other parts of paragraph (g)(3)(ii) will remain unchanged. We will be finalizing the rest of the proposal without changes.

There is a special government-to-government relationship between the federal government and federally recognized tribes based on U.S. treaties, laws, Supreme Court decisions, Executive Orders, and the U.S. Constitution. This government-to-government relationship forms the basis for federal health services to American Indians/Alaska Natives (AI/AN) in the U.S. In 1976, the Indian Health Care Improvement Act (IHCIA) (Pub. L. 94-437, September 30, 1976) amended the Act to permit payment by Medicare and Medicaid for services provided to AI/ANs in Indian Health Service (IHS) and Tribal health care facilities that meet the applicable requirements. Under this authority, Medicare services may be furnished by IHS operated facilities and programs, and Tribally operated facilities and programs, under Title I or Title V of the Indian Self Determination Education Assistance Act, as amended (ISDEAA) (Pub. L. 93-638, January 4, 1975) to AI/ANs. As of October 10, 2025, the IHS healthcare delivery system currently consists of 44 hospitals, with 20 of those hospitals operated by the IHS and 24 of them operated by Tribes under the ISDEAA, as well as 391 health centers, 51 operated by IHS and 340 operated by Tribes under the ISDEAA.

The Act prohibits Medicare payment to non-contract suppliers under the DMEPOS CBP. Specifically, section 1847(b)(6) of the Act states that, “payment shall not be made for items and services described in section 1847(a)(2) furnished by a contractor and for which competition is conducted under this section unless: (i) the contractor has submitted a bid for such items and services under this section; and (ii) the Secretary has awarded a contract to the contractor for such items and services under this section.”

However, section 1862(a)(17) of the Act carves out an exception to this rule. Section 1862(a)(17) of the Act states, “Notwithstanding any other provision of this title, no payment may be made under part A or part B for any expenses incurred for items or services where the expenses are for an item or service furnished in a competitive acquisition area (as established by the Secretary under section 1847(a) of the Act) by an entity other than an entity with which the Secretary has entered into a contract under section 1847(b) of the Act for the furnishing of such an item or service in that area, unless the Secretary finds that the expenses were incurred in a case of urgent need, or in other circumstances specified by the Secretary.” 2. Current Issues

Tribes that operate health facilities or suppliers under the ISDEAA have approached CMS requesting an exception from the DMEPOS CBP to allow Medicare payment for competitively bid items provided to AI/AN Medicare beneficiaries, who reside in a CBA, but who receive services from an IHS or Tribally operated facility or supplier, which can be located 60 or 90 minutes outside the CBA. Many of these AI/AN Medicare beneficiaries receive primary care services at a Tribally operated facility, and, as a result of this visit, might be provided DMEPOS by the facility or a Tribally operated supplier. Without an exception, the IHS or Tribally operated facility or supplier would not be paid by Medicare when providing competitively bid DMEPOS to eligible AI/AN Medicare beneficiaries during an active round of the DMEPOS CBP.

In addition, under the Indian Health Care Improvement Act (IHCIA), AI/ANs who are eligible for services from the IHS, in general do not pay coinsurance for DMEPOS they receive from an IHS supplier or facility. However, under an active round of the DMEPOS CBP, AI/AN Medicare beneficiaries residing in a CBA must receive DMEPOS from a competitive bidding contract supplier in their CBA and pay a 20 percent coinsurance, even in cases where they receive care at a Tribally operated facility outside their CBA. This creates added expenses for AI/AN Medicare beneficiaries. 3. Provisions of the Regulation

CMS proposed to use the authority at section 1862(a)(17) of the Act to add an exception to Sec. 414.408(e)(2) that would allow Medicare payment to IHS or Tribally operated facilities and suppliers that furnish competitively bid items and services to AI/AN Medicare beneficiaries who reside in a CBA so that the AI/AN Medicare beneficiaries can retain the benefits described previously when receiving DMEPOS items and services from a Tribal supplier. We solicited comments on this proposal.

Comment: CMS received comments that were in support of this proposal.

Response: We are finalizing all provisions outlined in 42 CFR 414.408(e)(2)(v) as proposed. We will be finalizing the rest of the proposal without changes.

L. Addition of a Termination Clause for the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) Supplier Contracts

As previously discussed, an important benefit of the DMEPOS CBP is that it ensures access to covered DMEPOS items and services. Current regulations at 42 CFR 414.422 establishing the terms of each DMEPOS CBP contract state that contract suppliers must agree to furnish items under its contract to any beneficiary who maintains a permanent residence in, or who visits, the CBA and who requests those items from that contract supplier. CMS implemented these regulations pursuant to section 1847(b)(3)(A) of the Act, which states that the Secretary may specify the terms and conditions of a DMEPOS CBP contract. In the 2006 proposed rule (71 FR 25682), CMS proposed adding a unilateral contract termination for convenience clause to the DMEPOS CBP supplier contracts. After receiving multiple public comments challenging the termination for convenience clause, per the 2007 final rule (72 FR 18054 and 18055), CMS decided not to finalize the proposal. 2. Current Issues

Since the inception of the DMEPOS CBP, CMS has never verified an instance where all contract suppliers for a competition were not able to meet beneficiary demand for the competition, even during a PHE. For example, after the Secretary of HHS declared PHEs after major hurricanes, contract suppliers were able to replace damaged DMEPOS and furnish competitively bid DMEPOS items to beneficiaries without

any access concerns. CMS believes this can be attributed to the fact that not all contract suppliers for a CBA are physically located within the impacted CBA. Also, Medicare requires Medicare-enrolled DMEPOS suppliers to “have a contingency plan that enables it 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 a result of an emergency or disaster” (see section 1.F of the CMS DMEPOS Quality Standards). CMS has experienced that contract suppliers are prepared to promptly resume operations and remain in compliance with the terms of the DMEPOS CBP supplier contract, without a need for any contract action by CMS. Additionally, there is an already established network of agencies and organizations at the federal, state, and local levels that are integral in responding to the immediate needs, including DMEPOS needs, during a PHE. For instance, CMS works closely with HHS's Administration for Strategic Preparedness and Response (ASPR) that leads the nation's medical and public health preparedness for, response to, and recovery from disasters and other PHEs.

Nevertheless, we are concerned that, in the event of a PHE, contract suppliers may be unable to fulfill their obligations under DMEPOS CBP supplier contracts to furnish certain required items and services to beneficiaries in CBAs or defined area(s) within CBAs specified in the contracts and affected by the PHE (the PHE-impacted area). In the event that CMS determines that, due to a PHE, contract suppliers are unable to furnish items and services to beneficiaries in a PHE-impacted area specified in their DMEPOS CBP contracts, we believe it is prudent for CMS to have the authority to unilaterally terminate or modify each applicable contract to exclude the requirement to furnish such items and services in the PHE-impacted area from the scope of the DMEPOS CBP. If the items and services in the PHE-impacted area to be removed from the DMEPOS CBP encompasses all competitions referenced in a DMEPOS CBP contract, CMS would unilaterally terminate the contract supplier's entire contract. If the items and services in the PHE-impacted area to be removed from the DMEPOS CBP encompass only a portion of the items and services and areas referenced in a DMEPOS CBP supplier contract, CMS would unilaterally modify the contract to exclude the requirement to furnish the applicable items and services in the PHE-impacted area. Upon modification, the contract supplier would no longer be obligated under the terms of the contract to furnish the specified items and services in the PHE-impacted area, and CMS would no longer provide payment under the contract for furnishing those items and services in that area. Depending on the PHE, such area may be a specific CBA or a defined area within a CBA. A DMEPOS CBP supplier contract modified to exclude the requirement to furnish certain items and services in the PHE-impacted area would continue to remain in effect for all other items and services and all other geographic areas that are within the scope of the contract. Upon the termination and/or modification of each DMEPOS CBP supplier contract impacted by the PHE, any Medicare enrolled DMEPOS supplier would be able to furnish the applicable items and services to Medicare beneficiaries in the PHE- impacted area.

CMS would reserve the right to unilaterally terminate or modify every DMEPOS CBP supplier contract impacted by a PHE in accordance noted previously if the following conditions are met: (1) the Secretary of HHS declares a PHE; (2) CMS determines the PHE has created an access concern for beneficiaries receiving items and services under the DMEPOS CBP in certain CBAs or defined area(s) within CBAs; (3) CMS determines that awarding additional CBP contracts, per 42 CFR 414.414(i), would not address the access concerns; and (4) CMS determines terminating or modifying each impacted DMEPOS CBP supplier contract to exclude those specific areas from the DMEPOS CBP would alleviate access concerns.

To determine whether or not a PHE has created an access concern, CMS would review information obtained directly from the contract supplier(s) impacted by a PHE, along with data obtained through CMS's monitoring system (complaints, claims data, beneficiary health outcomes, assignment rates, etc.) and from other agencies and organizations at the federal, state, and local levels. CMS would continue to remain in communication with affected contract suppliers throughout a PHE. CMS would share all relevant information from contract suppliers with applicable emergency response partners to aid in the response efforts. We would also be analyzing the information to determine the scope and length of the challenges being experienced to assess whether it is necessary to terminate an entire DMEPOS CBP supplier contract, terminate a competition(s), or terminate a defined area(s) within a CBA. For example, if the Secretary of HHS declares a PHE due to a pandemic and the President of the United States enacts the Defense Production Act to assist with furnishing essential medical supplies, CMS would communicate with contract suppliers to determine if they are able to continue furnishing the competitively bid DMEPOS item to beneficiaries in the CBA under existing conditions. The information and data obtained from contract suppliers would be combined with relevant information gathered from other agencies and organizations at the federal, state, and local levels that are integral in responding to the PHE. We solicited comments on this proposal.

In a form and manner to be determined by CMS, CMS would announce the exclusion of the PHE-impacted area from the scope of the DMEPOS CBP to all applicable contract suppliers and would further notify each applicable contract supplier if the DMEPOS CBP supplier's contract, based on this announcement, will be terminated or unilaterally modified.

Any termination or modification made in accordance with this proposal would remain in effect for the remainder of the DMEPOS CBP supplier contract term, even if the PHE ends before the contract's expiration date.

CMS would apply a high degree of prudence when making an informed decision to terminate and/or modify a DMEPOS CBP supplier contract to exclude areas impacted by a PHE. CMS would not consider a situation that does not meet the qualifying criteria previously mentioned. Even if a PHE meets the qualifying criteria, CMS would not terminate and/or modify a DMEPOS CBP supplier contract if the body of evidence and information determines that there is sufficient capacity from remaining contract suppliers, or if CMS is able to award additional contracts to meet the existing market demands for the competition(s) or defined area(s) within a CBA. For example, if most contract suppliers for a competition say that they are unable to furnish an item to beneficiaries, but there are at least two contract suppliers that provide evidence that they can meet the demand for the competition, CMS may decide that there is sufficient capacity remaining from a contract supplier. We solicited comments on this proposal. 3. Provisions of the Regulation

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 proposed in Sec. 414.422 to 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. Depending on the geographic extent of the PHE, a PHE-impacted area may refer to entire CBA(s) or only certain areas within a CBA.

If the items and services in the PHE-impacted area identified encompass all competitions referenced a DMEPOS CBP supplier contract, CMS proposed in Sec. 414.422 to unilaterally terminate the DMEPOS CBP supplier contract.

If the items and services in the PHE-impacted area identified encompass only a portion of the items and services and geographic areas referenced in a DMEPOS CBP supplier contract, CMS proposed in Sec. 414.422 to unilaterally modify the DMEPOS CBP supplier contract to remove the contract supplier's obligation to furnish specified items and services in the PHE-impacted area, as well as CMS's obligation to pay for those items and services under the DMEPOS CBP supplier contract.

After termination and/or modification of all applicable DMEPOS CBP supplier contracts, CMS proposed in Sec. 414.422 to revert back to the general fee-for-service program requirements set forth in 42 CFR part 414 Subpart D for the applicable competition(s) or defined area(s) within a CBA. As a reminder, fee-for-service (Medicare enrolled) DMEPOS suppliers are not required to furnish DMEPOS to beneficiaries in the CBA, nor are they required to accept assignment, unless they are already participating suppliers with Medicare. We solicited comments on this proposal.

CMS proposed in Sec. 414.422 to have the option to remove items and services furnished in a PHE-impacted areas from the DMEPOS CBP when all of the following qualifying criteria are met: (1) the Secretary declares a PHE; (2) CMS determines that verifiable evidence exists of a DMEPOS access problem for beneficiaries for a certain competition or defined area(s) within the competition's CBA; (3) CMS determines that awarding additional DMEPOS CBP supplier contracts, per Sec. 414.414(i), would not address the access concerns; and (4) CMS determines terminating or modifying each impacted DMEPOS CBP supplier contract to exclude certain competition(s) or defined area(s) within the competition's CBA from the DMEPOS CBP would alleviate access concerns. We solicited comments on this proposal.

Comment: Commenters supported this proposal. A commenter stated that while the proposal allows CMS to terminate contracts during a public health emergency, that does not solve the risk of over- consolidation and indicated that replacement providers will not be staffed or stocked to absorb a sudden surge, leaving patients vulnerable.

Response: CMS wants to clarify that this proposal has no impact on DMEPOS supplier consolidation and that any enrolled DMEPOS supplier will be permitted to provide services to Medicare beneficiaries who live in a competitive bidding area if DMEPOS CBP contracts are terminated during a Public Health Emergency. We are finalizing the addition of 42 CFR 414.422(h) as proposed.

The Medicare fee schedule amounts for enteral nutrition furnished in non-CBAs are adjusted using information from the DMEPOS CBP in accordance with Sec. 414.105. The Medicare fee schedule amounts for DME and medical supplies and OTS orthotics furnished in non-CBAs are adjusted using information from the DMEPOS CBP in accordance with Sec. 414.210(g). The Medicare payment amounts for lymphedema compression treatment items are adjusted using information from the DMEPOS CBP in accordance with Sec. 414.1690. For the purposes of streamlining the language under this subpart, we proposed to add definitions for “Adjusted fee schedule amount” and “Unadjusted fee schedule amount” under Sec. 414.402. We proposed that Adjusted fee schedule amount means the payment amount established for the item under Subpart C of this part, with the application of Sec. 414.105; Subpart D of this part, with the application of Sec. 414.210(g); or Subpart Q of this part, with the application of Sec. 414.1690. We proposed that Unadjusted payment amount means the payment amount established for the item under Subpart C of this part, without the application of Sec. 414.105; Subpart D of this part, without the application of Sec. 414.210(g); or Subpart Q of this part, without the application of Sec. 414.1690.

Similarly, for the purpose of streamlining regulation text, rather than continuing to write out “competitive bidding area and product category combination,” we proposed to add a definition for “Competition” under Sec. 414.402 to read Competition means a competitive bidding area and product category combination for which a bidding entity submits a bid and for which a supplier enters into a DMEPOS supplier contract to furnish items and services within the product category to beneficiaries residing within the competitive bidding area.

We solicited comments on this proposal. We did not receive public comments on these issues, and therefore, we are finalizing as proposed.