CMS Finalizes Rule on Prior Authorization for DMEPOS Items

CMS recently issued a final rule establishing a prior authorization process for items that qualify as durable medical equipment, prosthetics, orthotics and supplies.

According to a press release from CMS, the rule was created to prevent “unnecessary utilization” of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) items and to improve consistency with Medicare coverage, coding and payment rules.

The prior authorization process under the final rule will not require new clinical documentation requirements; instead, it will require suppliers to provide information before the item is furnished to the beneficiary and before the claim is submitted for payment. The purpose of the change is to keep beneficiaries from being held responsible for payment of items that are not eligible for Medicare payment. An expedited process will be used in cases where delay can jeopardize the health of beneficiaries.

‘Master List’, prior authorization

The final rule creates a “Master List” of items meeting specific criteria that are potentially subject to prior authorization; a subset of items on the Master List designated the “Required Prior Authorization List;” and a prior authorization program for the items on the latter list.

The Master List includes 135 DMEPOS items CMS has identified as being frequently subject to unnecessary utilization. The list includes items on the DMEPOS Fee Schedule with an average purchase fee of $1,000 or greater or an average rental fee schedule of $100 or greater (adjusted annually for inflation) and that have been the subject of either HHS Office of the Inspector General (OIG) or U.S. Government Accountability Office (GAO) reports that are national in scope and published in since 2007, or DMEPOS Service Specific Reports of the Comprehensive Error Rate Testing Annual Medicare Fee-for-Service Improper Payment Report DME Report.

CMS initially will implement prior authorization for the Required Prior Authorization List. This list will be published in the Federal Register 60 days’ notice prior to implementation of prior authorization for those items and will require all relevant documentation to be submitted for review prior to furnishing the DMEPOS item to the beneficiary and submitting the claim for processing. CMS or its contractors will review each prior authorization request and provide either a provisional affirmation or non-affirmation decision. If a claim receives provisional affirmation and meets all other requirements, it will be paid. If a claim receives a non-affirmation decision, it will be denied. Unlimited resubmission of prior authorization requests is allowed.

According to the release, CMS or its review contractor will make a reasonable effort to determine initial prior authorization within 10 business days and resubmission prior authorization within 20 business days. An expedited review process will be available for situations in which the standard timeframe for prior authorization could seriously jeopardize the health of the beneficiary. The request for expedited review must provide rationale supporting the request.

Impact on O&P

According to the Medicare Payment Advisory Commission (MedPAC), Medicare reportedly spent $6.3 billion on DME items in 2014, a decrease from more than $7.4 billion in 2013. This number, however, does not appear to include prosthetic and orthotic supplies.

A Regulatory Impact Analysis (RIA) of the rule conducted by the Office of the Federal Register predicts the rule could save CMS $10 million in its first year, $200 million in 5 years and $580 million in 10 years. An RIA is required for major rules with “economically significant effects,” defined as an impact of $100 million or more in 1 year.

The RIA estimates the overall economic cost of the rule to be $1.3 million in the first year, $57 million in 5 years and $212 million in 10 years. The increased cost is expected to be driven by an increase of the number of items subjected to prior authorization, according to the analysis.


The National Association for the Advancement of Orthotics and Prosthetics (NAAOP) offered comments about the rule on its website, describing the rule as a “mixed bag” of positive and negative effects on the field of O&P. NAAOP noted a few positive aspects of the rule include its planned gradual implementation and the possible protection of claims that have received prior authorization. At the same time, the NAAOP statement claimed there are “many drawbacks to prior authorization as well.”

A statement from the American Orthotic and Prosthetic Association (AOPA) noted the potential impact the rule could have on O&P patients. “AOPA’s primary concern with prior authorization of prostheses is, and always has been, that it will critically delay timely access to the provision of prosthetic devices that are crucial to the rehabilitation needs of Medicare beneficiaries,” statement reads. In addition, the statement noted, “Another concern that AOPA expressed in its comments on the proposed rule that was not sufficiently addressed in the final rule is that prior authorization does not equate to a guarantee of claim payment nor does it eliminate the exposure of the claim to additional audits.” – by Amanda Alexander

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