(i) The carrier shall compute a base local average monthly payment rate per beneficiary as an amount equal to (I) the total reasonable charges for the item during the 12-month period ending with December 1986, divided by (II) the total number of months for all beneficiaries receiving the item in the area during the 12-month period for which the carrier made payment for the item under this title.

(ii) The carrier shall compute a local average monthly payment rate for the item applicable

(I) to 1989 and 1990, equal to 95 percent of the base local average monthly payment rate computed under clause (i) for the item increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 6-month period ending with December 1987, or

(II) to 1991, 1992, 1993, and 1994 equal to the local average monthly payment rate computed under this clause for the item for the previous year increased by the covered item increase for the year.

(B) COMPUTATION OF NATIONAL LIMITED MONTHLY PAYMENT RATE.-With respect to the furnishing of an item in a year, the Secretary shall compute a national limited monthly payment rate equal to

(i) for 1991, the local monthly payment rate computed under subparagraph (A)(ii)(II) for the item for the year, except that such national limited monthly payment rate may not exceed 100 percent of the weighted average of all local monthly payment rates computed for the item under such subparagraph for the year, and may not be less than 85 percent of the weighted average of all local monthly payment rates computed for the item under such subparagraph for the year;

(ii) for 1992 and 1993, the amount determined under this subparagraph for the preceding year increased by the covered item update for such subsequent year;

(iii) for 1994, the local monthly payment rate computed under subparagraph (A)(ii) for the item for the year, except that such national limited monthly payment rate may not exceed 100 percent of the median of all local monthly payment rates computed for the item under such subparagraph for the year and may not be less than 85 percent of the median of all local monthly payment rates computed for the item under such subparagraph for the year; 180

(iv) for 1995, 1996, and 1997 181, equal to the amount determined under this subparagraph for the preceding year increased by the covered item update for such subsequent year; 182

180 P.L. 105-33, §4552(a)(1), struck out "and".

181 P.L. 105-33, §4552(a)(2)(A), struck out "each subsequent year" and substituted "1995, 1996, and 1997", applicable to items furnished on and after January 1, 1998.

182 P.L. 105-33, §4552(a)(2)(B), struck out the period and substituted a semicolon.

(v) for 1998, 75 percent of the amount determined under this subparagraph for 1997; and

(vi) for 1999 and each subsequent year, 70 percent of the amount determined under this subparagraph for 1997. 183

(C) MONTHLY PAYMENT AMOUNT RECOGNIZED.-For purposes of paragraph (5), the amount that is recognized under this paragraph as the base monthly payment amount for each item furnished

(i) in 1989 and in 1990, is 100 percent of the local average monthly payment rate computed under subparagraph (A)(ii) for the item;

(ii) in 1991, is the sum of (I) 67 percent of the local average monthly payment rate computed under subparagraph (A)(ii)(II) for the item for 1991, and (II) 33 percent of the national limited monthly payment rate computed under subparagraph (B)(i) for the item for 1991;

(iii) in 1992, is the sum of (I) 33 percent of the local average monthly payment rate computed under subparagraph (A)(ii)(II) for the item for 1992, and (II) 67 percent of the national limited monthly payment rate computed under subparagraph (B)(ii) for the item for 1992; and

(iv) in a subsequent year, is the national limited monthly payment rate computed under subparagraph (B) for the item for that year. (D) AUTHORITY TO CREATE CLASSES.

(i) IN GENERAL.-Subject to clause (ii), the Secretary may establish separate classes for any item of oxygen and oxygen equipment and separate national limited monthly payment rates for each of such classes.

(ii) BUDGET NEUTRALITY.-The Secretary may take actions under clause (i) only to the extent such actions do not result in expenditures for any year to be more or less than the expenditures which would have been made if such actions had not been taken. 184 (10) EXCEPTIONS AND ADJUSTMENTS.

(A) AREAS OUTSIDE CONTINENTAL UNITED STATES.-Exceptions to the amounts recognized under the previous provisions of this subsection shall be made to take into account the unique circumstances of covered items furnished in Alaska, Hawaii, or Puerto Rico.

(B) ADJUSTMENT FOR INHERENT REASONABLENESS.The 185 Secretary is authorized to apply the provisions of paragraphs (8) and (9) 186 of section 1842(b) to covered items and suppliers of such items and payments under this subsection. 187

183 P.L. 105-33, §4552(a)(3), added clauses (v) and (vi), applicable to items furnished on and after January 1, 1998.

184 P.L. 105-33, §4552(b), added subparagraph (D), effective August 5, 1997, executed as if §1834(a)(9) rather than §1848(a)(9).

185 P.L. 105-33, §4316(b)(1), struck out "For covered items furnished on or after January 1, 1991, the" and substituted "The", effective August 5, 1997.

186 P.L. 105-33, §4316(b)(2), struck out "(other than subparagraph (D))", effective August 5, 1997.

187 P.L. 105-33, §4316(b)(3), struck out "as such provisions would otherwise apply to physicians' services and physicians and a reasonable charge under section 1842(b) but for the applica

(C) TRANSCUTANEOUS ELECTRICAL NERVE STIMULATOR (TENS). In order to permit an attending physician time to determine whether the purchase of a transcutaneous electrical nerve stimulator is medically appropriate for a particular patient, the Secretary may determine an appropriate payment amount for the initial rental of such item for a period of not more than 2 months. If such item is subsequently purchased, the payment amount with respect to such purchase is the payment amount determined under paragraph (2).

(11) IMPROPER BILLING AND REQUIREMENT OF PHYSICIAN ORDER.

(A) IMPROPER BILLING FOR CERTAIN RENTAL ITEMS.-Notwithstanding any other provision of this title, a supplier of a covered item for which payment is made under this subsection and which is furnished on a rental basis shall tinue to supply the item without charge (other than a charge provided under this subsection for the maintenance and servicing of the item) after rental payments may no longer be made under this subsection. If a supplier knowingly and willfully violates the previous sentence, the Secretary may apply sanctions against the supplier under section 1842(j)(2) in the same manner such sanctions may apply with respect to a physician.

(B) REQUIREMENT OF PHYSICIAN ORDER.-The Secretary is authorized to require, for specified covered items, that payment may be made under this subsection with respect to the item only if a physician has communicated to the supplier, before delivery of the item, a written order for the item.

(12) REGIONAL CARRIERS.-The Secretary may designate, by regulation under section 1842, one carrier for one or more entire regions to process all claims within the region for covered items under this section.

(13) COVERED ITEM.-In this subsection, the term "covered item" means durable medical equipment (as defined in section 1861(n)), including such equipment described in section 1861(m) (5)). 188

(14) COVERED ITEM UPDATE.-In this subsection, the term "covered item update" means, with respect to a year

(A) for 1991 and 1992, the percentage increase in the consumer price index for all urban consumers (U.S. city average) for 12-month period ending with June of the previous year reduced by 1 percentage point; 189

(B) for 1993, 1994, 1995, 1996, and 1997 190, the percentage increase in the consumer price index for all urban con

tion of section 1848(i)(3). In applying such provisions to payments for an item under this subsection, the Secretary shall make adjustments to the payment basis for the item described in paragraph (1)(B) if the Secretary determines (in accordance with such provisions and on the basis of prices and costs applicable at the time the item is furnished) that such payment basis is not inherently reasonable.", effective August 5, 1997.

188 As in original; one closing parenthesis should be stricken.

189 P.L. 105-33, §4551(a)(1)(A), struck out "and".

190 P.L. 105-33, §4551(a)(1)(B)(i), struck out “a subsequent year" and substituted "1993, 1994, 1995, 1996, and 1997", effective August 5, 1997.

sumers (U.S. city average) for the 12-month period ending with June of the previous year; 191

(C) for each of the years 1998 through 2002, 0 percentage points; and

(D) for a subsequent year, the percentage increase in the consumer price index for all urban consumers (U.S. urban average) for the 12-month period ending with June of the previous year. 192 (15) ADVANCE DETERMINATIONS OF COVERAGE FOR CERTAIN ITEMS.

(A) DEVELOPMENT OF LIST OF ITEMS BY SECRETARY.-The Secretary may develop and periodically update a list of items for which payment may be made under this subsection that the Secretary determines, on the basis of prior payment experience, are frequently subject to unnecessary utilization throughout a carrier's entire service area or a portion of such area.

(B) DEVELOPMENT OF LISTS OF SUPPLIERS BY SECRETARY.-The Secretary may develop and periodically update a list of suppliers of items for which payment may be made under this subsection with respect to whom

(i) the Secretary has found that a substantial number of claims for payment under this part for items furnished by the supplier have been denied on the basis of the application of section 1862(a)(1); or

(ii) the Secretary has identified a pattern of overutilization resulting from the business practice of the supplier.

(C) DETERMINATIONS OF COVERAGE IN ADVANCE.-A carrier shall determine in advance of delivery of an item whether payment for the item may not be made because the item is not covered or because of the application of section 1862(a)(1) if—

(i) the item is included on the list developed by the Secretary under subparagraph (A);

(ii) the item is furnished by a supplier included on the list developed by the Secretary under subparagraph (B); or

(iii) the item is a customized item (other than inexpensive items specified by the Secretary) and the patient to whom the item is to be furnished or the supplier requests that such advance determination be made.

(16) DISCLOSURE OF INFORMATION AND SURETY BOND.-The Secretary shall not provide for the issuance (or renewal) of a provider number for a supplier of durable medical equipment, for purposes of payment under this part for durable medical equipment furnished by the supplier, unless the supplier provides the Secretary on a continuing basis

(A) with

(i) full and complete information as to the identity of each person with an ownership or control interest (as defined in section 1124(a)(3)) in the supplier or in

191 P.L. 105-33, §4551(a)(1)(B)(ii), struck out the period and inserted a semicolon. 192 P.L. 105-33, §4551(a)(1)C), added subparagraphs (C) and (D), effective August 5, 1997.

any subcontractor (as defined by the Secretary in regulations) in which the supplier directly or indirectly has a 5 percent or more ownership interest; and

(ii) to the extent determined to be feasible under regulations of the Secretary, the name of any disclosing entity (as defined in section 1124(a)(2)) with respect to which a person with such an ownership or control interest in the supplier is a person with such an ownership or control interest in the disclosing entity; and

(B) with a surety bond in a form specified by the Secretary and in an amount that is not less than $50,000. The Secretary may waive the requirement of a bond under subparagraph (B) in the case of a supplier that provides a comparable surety bond under State law. 193 The Secretary, at the Secretary's discretion, may impose the requirements of the first sentence with respect to some or all providers of items or services under part A or some or all suppliers or other persons (other than physicians or other practitioners, as defined in section 1842(b)(18)(C)) who furnish items or services under this part. 194

(17) PROHIBITION AGAINST UNSOLICITED TELEPHONE CONTACTS BY SUPPLIERS.

(A) IN GENERAL.-A supplier of a covered item under this subsection may not contact an individual enrolled under this part by telephone regarding the furnishing of a covered item to the individual unless I of the following applies:

(i) The individual has given written permission to the supplier to make contact by telephone regarding the furnishing of a covered item.

(ii) The supplier has furnished a covered item to the individual and the supplier is contacting the individual only regarding the furnishing of such covered item.

(iii) If the contact is regarding the furnishing of a covered item other than a covered item already furnished to the individual, the supplier has furnished at least 1 covered item to the individual during the 15month period preceding the date on which the supplier makes such contact.

(B) PROHIBITING PAYMENT FOR ITEMS FURNISHED SUBSEQUENT TO UNSOLICITED CONTACTS.-If a supplier knowingly contacts an individual in violation of subparagraph (A), no payment may be made under this part for any item subsequently furnished to the individual by the supplier.

(C) EXCLUSION FROM PROGRAM FOR SUPPLIERS ENGAGING IN PATTERN OF UNSOLICITED CONTACTS.-If a supplier knowingly contacts individuals in violation of subparagraph (A) to such an extent that the supplier's conduct es

193 P.L. 105-33, §4312(a), added paragraph (16), applicable to suppliers of durable medical equipment with respect to such equipment furnished on or after January 1, 1998.

194 P.L. 105-33, §4312(c), added "The Secretary, at the Secretary's discretion, may impose the requirements of the first sentence with respect to some or all providers of items or services under part A or some or all suppliers or other persons (other than physicians or other practitioners, as defined in section 1842(b)(18)(C)) who furnish items or services under this part.", effective August 5, 1997, applicable with respect to items and services furnished on or after January 1, 1998.