CMS issued a proposed rule on May 28, 2014 designed to reduce the rate of medically unnecessary DMEPOS items supplied to beneficiaries. According to CMS, reports issued by GAO and HHS OIG, including Comprehensive Error Rate Testing (CERT) reports, show that DMEPOS claims had a 66% improper payment rate, accounting for approximately 20% of the overall Medicare FFS improper payment rate, although Medicare FFS DMEPOS expenditures represents only 3% of all Medicare FFS expenditures.

In response to these reports, CMS proposes to establish a prior authorization requirement for certain DMEPOS items that meet the three criteria set forth in the proposed rule. CMS proposes to define “unnecessary utilization” as the furnishing of items that do not comply with one or more of Medicare’s coverage, coding, and payment rules, as applicable. To identify those items that would require a prior authorization, CMS has proposed a “Master List” of DMEPOS items that meet the following criteria: 1) the item has been identified in a GAO or HHS OIG report that is national in scope and published in 2007 or later as having a high rate of fraud or unnecessary utilization; 2) the item is listed in the 2011 or later Comprehensive Error Rate Testing (CERT) program’s Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix; and 3) the item meets a payment threshold amount of an average purchase fee of $1,000 or greater or an average rental fee schedule of $100 or greater. Items included on the Master List would remain on the list for ten years, subject to certain criteria for early removal. The Master List would be self-updated annually, to include any items in future OIG or GAO reports that meet the criteria. CMS proposes to make prior authorization for some of the items a national requirement, if claims data analysis shows that unnecessary utilization of the item is widespread and occurs across multiple geographical areas. On the other hand, if claims data shows the unnecessary utilization is localized to a specific geographic region, the prior authorization requirement may be limited to that geographic region.

The proposed rule includes the initial Master List of items that would require prior authorization. However, the list includes Power Mobility Devices that are already subject to a prior authorization requirement, and that would not change. The proposed initial Master List also includes such as items as respiratory assist and CPAP devices, semi-electric hospital bed with mattress, certain pressure mattresses for the beds, negative therapy wound pressure equipment, lightweight wheel chairs, and certain orthotics equipment.

According to CMS, the proposed prior authorization requirement would not create new clinical documentation requirements. It would simply require the same clinical information earlier in the process. Prior to furnishing the item and prior to submitting a claim for the item, the prior authorization requestor would submit evidence that the item complies with all coverage, coding and payment rules. After receipt of all required documentation, CMS or its contractors would conduct a medical review and notify the requestor whether the request for prior authorization was affirmed or non-affirmed. CMS proposes that it or its contractors would make reasonable efforts to communicate this decision within ten (10) days of receipt of all applicable information. A requestor could submit a request for expedited prior authorization by also submitting documentation to show that the standard time frame for a decision would jeopardize the life or health of the beneficiary. In that case, CMS proposes that it or its contractors would make reasonable efforts to communicate the decision within two (2) days of receipt of all applicable information.

The affirmation of a request for prior authorization is provisional. Claims receiving a provisional affirmation may still be denied based on technical requirements that cannot be evaluated until after the claim has been submitted, such as submission of a duplicate claim. A prior authorization request that is not affirmed is not an initial determination on a claim for payment for items furnished and would not be appealable. A request for prior authorization may be submitted multiple times. CMS and its contractors would use reasonable efforts to communicate the decision on a re-submitted request within twenty (20) days of receiving all applicable information.

CMS proposes to automatically deny payment for a claim for an item on the Required Prior Authorization list that is submitted without a prior authorization decision. A requestor who submits a claim for a non-affirmed prior authorization request, or for which no prior authorization request was submitted, is afforded appeal rights on the denial of the claim.

After promulgation of a final rule governing the prior authorization requirement, CMS or its contractor will presume the supplier knows Medicare would automatically deny the claim for which the supplier failed to request a prior authorization but would presume the beneficiary does not know and cannot reasonably be expected to know that Medicare will deny or did deny payment. In that case, the supplier bears the financial responsibility for the denied claim and is obligated to refund any money paid by the beneficiary. When the beneficiary insists on getting the item without affirmation of the prior authorization decision, while the decision is pending, or where the prior authorization request was non-affirmed, the supplier must issue an Advanced Beneficiary Notice of Noncoverage (ABN) to the beneficiary, and the beneficiary must agree to pay for the item and sign the ABN, in order to shift the financial responsibility for the item to the beneficiary.