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<BODY><PRE>[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR424]

[Page 944-948]
 
                         TITLE 42--PUBLIC HEALTH
 
                             HUMAN SERVICES
 
PART 424--CONDITIONS FOR MEDICARE PAYMENT--Table of Contents
 
Subpart D--To Whom Payment Is Ordinarily Made

Sec. 424.50  Scope.

    (a) This subpart specifies to whom Medicare payment is ordinarily 
made for different kinds of services.
    (b) Subpart E of this part sets forth provisions applicable in 
special situations.
    (c) Subpart F of this part specifies the exceptional circumstances 
under which payment may be made to an assignee or reassignee.

Sec. 424.51  Payment to the provider.

    (a) Basic rule. Except as specified in paragraph (b) of this 
section, Medicare pays the provider for services furnished by a 
provider.
    (b) Exception. Medicare pays the beneficiary for outpatient hospital 
services if the hospital has collected an amount in excess of the unmet 
deductible and coinsurance, as specified in Sec. 489.30(b)(4) of this 
chapter.

Sec. 424.52  Payment to a nonparticipating hospital.

    Medicare pays a nonparticipating hospital for the following 
services, if covered, in the specified circumstances:
    (a) Emergency inpatient and outpatient services furnished by a U.S. 
hospital, if the hospital has in effect an election to claim payment in 
accordance with subpart G of this part.
    (b) Certain medical and other health services covered under Medicare 
Part B and furnished by a U.S. hospital, if the hospital meets the 
requirements of Sec. 424.55 for payment as a supplier.
    (c) Emergency or nonemergency inpatient services furnished by a 
foreign hospital if the hospital has in effect an election to claim 
payment in accordance with subpart G of this part.

Sec. 424.53  Payment to the beneficiary.

    Medicare pays the beneficiary for the following services, if 
covered, in the specified circumstances:
    (a) Emergency inpatient and outpatient services furnished by a 
nonparticipating U.S. hospital that has

[[Page 945]]

not elected to claim payment in accordance with subpart G of this part.
    (b) Certain medical and other health services covered under Medicare 
Part B and furnished by a nonparticipating U.S. hospital, if the 
hospital does not receive assigned payment as a supplier under 
Sec. 424.55.
    (c) Emergency or nonemergency services furnished by a foreign 
hospital if the hospital does not have in effect an election to claim 
payment in accordance with subpart H of this part.
    (d) Physician and ambulance services furnished outside the United 
States.
    (e) Services furnished by a supplier if the claim has not been 
assigned to the supplier.

Sec. 424.54  Payment to the beneficiary's legal guardian or 
          representative payee.

    Medicare may pay amounts due a beneficiary to the beneficiary's 
legal guardian or representative payee.

Sec. 424.55  Payment to the supplier.

    (a) Medicare pays the supplier for covered services if the 
beneficiary (or the person authorized to request payment on the 
beneficiary's behalf) assigns the claim to the supplier and the supplier 
accepts assignment.
    (b) In accepting assignment, the supplier agrees to the following:
    (1) To accept, as full charge for the service, the amount approved 
by the carrier as the basis for determining the Medicare Part B payment 
(the reasonable charge or the lesser of the fee schedule amount and the 
actual charge).
    (2) To limit charges to the beneficiary or any other source as 
follows:
    (i) To collect nothing for those services for which Medicare pays 
100 percent of the Medicare approved amount.
    (ii) To collect only the difference between the Medicare approved 
amount and the Medicare Part B payment (for example, the amount of any 
reduction in incurred expenses under Sec. 410.155(c), any applicable 
deductible amount, and any applicable coinsurance amount) for services 
for which Medicare pays less than 100 percent of the approved amount.
    (3) Not to charge the beneficiary when Medicare paid for services 
determined to be ``not reasonable or necessary'' if--
    (i) The beneficiary was without fault in the overpayment; and
    (ii) The determination that the payment was incorrect was made by 
the carrier after the third year following the year in which the carrier 
sent notice to the beneficiary that it approved the payment.

[53 FR 6634, Mar. 2, 1988, as amended at 63 FR 20130, Apr. 23, 1998]

Sec. 424.56  Payment to a beneficiary and to a supplier.

    (a) Conditions for split payment. If the beneficiary assigns the 
claim after paying part of the bill, payment may be made partly to the 
beneficiary and partly to the supplier.
    (b) Payment to the supplier. Payment to the supplier who submits the 
assigned claim is for whichever of the following amounts is less:
    (1) The reasonable charge minus the amount the beneficiary had 
already paid to the supplier; or
    (2) The full Part B benefit due for the services furnished.
    (c) Payment to the beneficiary. Any part of the Part B benefit 
which, on the basis of paragraph (b) of this section, is not payable to 
the supplier, is paid to the beneficiary.
    (d) Examples.

    Example 1. An assigned bill of $300 on which partial payment of $100 
has been made is submitted to the carrier. The carrier determines that 
$300 is the reasonable charge for the service furnished. Total payment 
due is 80 percent of $300 or $240. Of this amount, $200 (the difference 
between the $100 partial payment and the $300 reasonable charge) is paid 
to the supplier. The remaining $40 is paid to the beneficiary.
    Example 2. An assigned bill of $325 on which partial payment of $275 
has been made is submitted to the carrier. The carrier determines that 
$275 is the reasonable charge for the services. Total payment due is 80 
percent of $275 or $220. The $220 is paid to the beneficiary, since any 
payment to the supplier, when added to the $275 partial payment would 
exceed the reasonable charge for the services furnished.

[53 FR 6641, Mar. 2, 1988; 53 FR 12945, Apr. 20, 1988]

[[Page 946]]

Sec. 424.57  Special payment rules for items furnished by <STRONG>DMEPOS</STRONG> 
          <STRONG>suppliers</STRONG> and issuance of <STRONG>DMEPOS</STRONG> supplier billing privileges.

    (a) Definitions. As used in this section, the following definitions 
apply:
    <STRONG>DMEPOS</STRONG> stands for durable medical equipment, prosthetics, orthotics 
and supplies.
    <STRONG>DMEPOS</STRONG> supplier means an entity or individual, including a physician 
or a Part A provider, which sells or rents Part B covered items to 
Medicare beneficiaries and which meets the standards in paragraph (c) of 
this section.
    Medicare covered items means medical equipment and supplies as 
defined in section 1834(j)(5) of the Act.
    (b) General rule. A <STRONG>DMEPOS</STRONG> supplier must meet the following 
conditions in order to be eligible to receive payment for a Medicare-
covered item:
    (1) The supplier has submitted a completed application to CMS to 
furnish Medicare-covered items including required enrollment forms. (The 
supplier must enroll separate physical locations it uses to furnish 
Medicare-covered <STRONG>DMEPOS</STRONG>, with the exception of locations that it uses 
solely as warehouses or repair facilities.)
    (2) The item was furnished on or after the date CMS issued to the 
supplier a <STRONG>DMEPOS</STRONG> supplier number conveying billing privileges. (CMS 
issues only one supplier number for each location.) This requirement 
does not apply to items furnished incident to a physician's service.
    (3) CMS has not revoked or excluded the <STRONG>DMEPOS</STRONG> supplier's privileges 
during the period which the item was furnished has not been revoked or 
excluded.
    (4) A supplier that furnishes a drug used as a Medicare-covered 
supply with durable medical equipment or prosthetic devices must be 
licensed by the State to dispense drugs (A supplier of drugs must bill 
and receive payment for the drug in its own name. A physician, who is 
enrolled as a <STRONG>DMEPOS</STRONG> supplier, may dispense, and bill for, drugs under 
this standard if authorized by the State as part of the physician's 
license.)
    (5) The supplier has furnished to CMS all information or 
documentation required to process the claim.
    (c) Application certification standards. The supplier must meet and 
must certify in its application for billing privileges that it meets and 
will continue to meet the following standards. The supplier:
    (1) Operates its business and furnishes Medicare-covered items in 
compliance with all applicable Federal and State licensure and 
regulatory requirements;
    (2) Has not made, or caused to be made, any false statement or 
misrepresentation of a material fact on its application for billing 
privileges. (The supplier must provide complete and accurate information 
in response to questions on its application for billing privileges. The 
supplier must report to CMS any changes in information supplied on the 
application within 30 days of the change.);
    (3) Must have the application for billing privileges signed by an 
individual whose signature binds a supplier;
    (4) Fills orders, frabicates, or fits items from its own inventory 
or by contracting with other companies for the purchase of items 
necessary to fill the order. If it does, it must provide, upon request, 
copies of contracts or other documentation showing compliance with this 
standard. A supplier may not contract with any entity that is currently 
excluded from the Medicare program, any State health care programs, or 
from any other Federal Government Executive Branch procurement or 
nonprocurement program or activity;
    (5) Advises beneficiaries that they may either rent or purchase 
inexpensive or routinely purchased durable medical equipment, and of the 
purchase option for capped rental durable medical equipment, as defined 
in Sec. 414.220(a) of this subchapter. (The supplier must provide, upon 
request, documentation that it has provided beneficiaries with this 
information, in the form of copies of letters, logs, or signed 
notices.);
    (6) Honors all warranties expressed and implied under applicable 
State law. A supplier must not charge the beneficiary or the Medicare 
program

[[Page 947]]

for the repair or replacement of Medicare covered items or for services 
covered under warranty. This standard applies to all purchased and 
rented items, including capped rental items, as described in 
Sec. 414.229 of this subchapter. The supplier must provide, upon 
request, documentation that it has provided beneficiaries with 
information about Medicare covered items covered under warranty, in the 
form of copies of letters, logs, or signed notices;
    (7) Maintains a physical facility on an appropriate site. The 
physical facility must contain space for storing business records 
including the supplier's delivery, maintenance, and beneficiary 
communication records. For purposes of this standard, a post office box 
or commercial mailbox is not considered a physical facility. In the case 
of a multi-site supplier, records may be maintained at a centralized 
location;
    (8) Permits CMS, or its agents to conduct on-site inspections to 
ascertain supplier compliance with the requirements of this section. The 
supplier location must be accessible during reasonable business hours to 
beneficiaries and to CMS, and must maintain a visible sign and posted 
hours of operation;
    (9) Maintains a primary business telephone listed under the name of 
the business locally or toll-free for beneficiaries. The supplier must 
furnish information to beneficiaries at the time of delivery of items on 
how the beneficiary can contact the supplier by telephone. The exclusive 
use of a beeper number, answering service, pager, facsimile machine, car 
phone, or an answering machine may not be used as the primary business 
telephone for purposes of this regulation;
    (10) Has a comprehensive liability insurance policy in the amount of 
at least $300,000 that covers both the supplier's place of business and 
all customers and employees of the supplier. In the case of a supplier 
that manufactures its own items, this insurance must also cover product 
liability and completed operations. Failure to maintain required 
insurance at all times will result in revocation of the supplier's 
billing privileges retroactive to the date the insurance lapsed;
    (11) Must agree not to contact a beneficiary by telephone when 
supplying a Medicare-covered item unless one of the following applies:
    (i) The individual has given written permission to the supplier to 
contact them by telephone concerning the furnishing of a Medicare-
covered item that is to be rented or purchased.
    (ii) The supplier has furnished a Medicare-covered item to the 
individual and the supplier is contacting the individual to coordinate 
the delivery of the item.
    (iii) If the contact concerns the furnishing of a Medicare-covered 
item other than a covered item already furnished to the individual, the 
supplier has furnished at least one covered item to the individual 
during the 15-month period preceding the date on which the supplier 
makes such contact.
    (12) Must be responsible for the delivery of Medicare covered items 
to beneficiaries and maintain proof of delivery. (The supplier must 
document that it or another qualified party has at an appropriate time, 
provided beneficiaries with necessary information and instructions on 
how to use Medicare-covered items safely and effectively);
    (13) Must answer questions and respond to complaints a beneficiary 
has about the Medicare-covered item that was sold or rented. A supplier 
must refer beneficiaries with Medicare questions to the appropriate 
carrier. A supplier must maintain documentation of contacts with 
beneficiaries regarding complaints or questions;
    (14) Must maintain and replace at no charge or repair directly, or 
through a service contract with another company, Medicare-covered items 
it has rented to beneficiaries. The item must function as required and 
intended after being repaired or replaced;
    (15) Must accept returns from beneficiaries of substandard (less 
than full quality for the particular item or unsuitable items, 
inappropriate for the beneficiary at the time it was fitted and rented 
or sold);
    (16) Must disclose these supplier standards to each beneficiary to 
whom it supplies a Medicare-covered item;
    (17) Must comply with the disclosure provisions in Sec. 420.206 of 
this subchapter;

[[Page 948]]

    (18) Must not convey or reassign a supplier number;
    (19) Must have a complaint resolution protocol to address 
beneficiary complaints that relate to supplier standards in paragraph 
(c) of this section and keep written complaints, related correspondence 
and any notes of actions taken in response to written and oral 
complaints. Failure to maintain such information may be considered 
evidence that supplier standards have not been met. (This information 
must be kept at its physical facility and made available to CMS, upon 
request.);
    (20) Must maintain the following information on all written and oral 
beneficiary complaints, including telephone complaints, it receives:
    (i) The name, address, telephone number, and health insurance claim 
number of the beneficiary.
    (ii) A summary of the complaint; the date it was received; the name 
of the person receiving the complaint, and a summary of actions taken to 
resolve the complaint.
    (iii) If an investigation was not conducted, the name of the person 
making the decision and the reason for the decision.
    (21) Provides to CMS, upon request, any information required by the 
Medicare statute and implementing regulations.
    (d) Failure to meet standards. CMS will revoke a supplier's billing 
privileges if it is found not to meet the standards in paragraphs (b) 
and (c) of this section. (The revocation is effective 15 days after the 
entity is sent notice of the revocation, as specified in Sec. 405.874 of 
this subchapter.)
    (e) Renewal of billing privileges. A supplier must renew its 
application for billing privileges every 3 years after the billing 
privileges are first granted. (Each supplier must complete a new 
application for billing privileges 3 years after its last renewal of 
privileges.)

[65 FR 60377, Oct. 11, 2000]



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