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Envision to Sell to KKR for $9.9 Billion

We represented Envision Healthcare Corporation (NYSE: EVHC) in its definitive agreement to sell to KKR in an all-cash transaction for $9.9 billion, including debt. KKR will pay $46 per Envision share in cash to buy the company, marking a 32 percent premium to the company's volume-weighted average share price from November 1, when Envision announced it was considering its options. The transaction is expected to close the fourth quarter of 2018. Read more

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Six Things to Know Before Buying a Physician Practice spotlight

Dermatology, ophthalmology, radiology, urology…the list goes on. Yet, in any physician practice management transaction, there are six key considerations that apply and, if not carefully managed, can derail a transaction. Download the 6 Things to Know Before Buying a Physician Practice to keep your physician practice management transactions on track.

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New CMS Rule in Effect that Requires Prior Authorization for Certain DMEPOS Items

Firm Publication


March 8, 2016

On February 29, 2016, the final rule released by the Centers for Medicare & Medicaid Services (CMS) on December 30, 2015 requiring prior authorization for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) became effective (Final Rule).1 The Final Rule is aimed at reducing unnecessary utilization and aberrant billing of certain DMEPOS.

Under the Final Rule, DMEPOS that are most commonly and unnecessarily overused are now subject to an updated authorization process which requires prior approval before Medicare will pay for the items. CMS has created a master list of 135 DMEPOS items that may require such prior authorization.2 This list includes items such as power wheelchairs and a variety of prosthetic limbs and sockets. Additionally, the list focuses on items that CMS has determined to be frequently subject to unnecessary utilization and that are furnished by suppliers who do not comply with one or more of Medicare’s coverage, coding and payment rules. In identifying these items, CMS used HHS Office of Inspector General and U.S. Government Accountability Office reports published since 2007, as well as the Comprehensive Error Rate Testing Program’s annual reports beginning in 2011.3

The master list items have an average purchase price of $1,000 or more or an average rental fee of $100 or more.4 Selected DMEPOS items will remain on the list for 10 years, but may be removed earlier if the purchase amount drops below the payment threshold.5 The Final Rule clarifies that presence on the master list does not automatically require prior authorization.6 Rather, CMS is initially implementing prior authorization on a subset of items, called the Required Prior Authorization List.7 CMS will develop a prior authorization process for these items and annually update the master list.8

CMS indicated in an agency press release dated December 29, 2015 that the prior authorization process will require the same information necessary to support Medicare payment today, just earlier in the process. Prior to supplying an item listed on the Required Prior Authorization List, a DMEPOS supplier must submit patient records to CMS or its contractors demonstrating that the coverage, coding and payment rules have been followed, and CMS or its contractors will provide a provisional affirmation or a non-affirmation decision.9 CMS stated that it will make reasonable efforts to communicate initial prior authorization determinations within 10 business days and resubmission prior authorization determinations within 20 business days; however these are maximum timeframes that may be adjusted downward for items that require less time. An expedited process will be available if a delay would seriously jeopardize the life or health of the beneficiary.10 A prior authorization decision is not a payment decision, and thus, a prior authorization decision is not appealable.11 However, prior authorization requests can be submitted an unlimited number of times.12

The Final Rule is the latest CMS initiative to battle improper payments and fraud related to DMEPOS. CMS previously addressed the potential abuse of DMEPOS through its introduction of a competitive bidding program intended to cut costs related to DMEPOS significantly.13 In addition, CMS recently expanded its three-year prior authorization program for power mobility devices.14

However, concerns exist about unnecessary additional paper work and the potential for delays in patient treatment as a result of the Final Rule. Various trade associations and advocacy groups have voiced concerns that prior authorization can be cumbersome for medical providers and will lead to delays for senior citizens and disabled people who need medical equipment quickly.15 Kathy Holt, associate director of the Center for Medicare Advocacy, stated that she has concerns related to delayed access to care for Medicare beneficiaries.16 Don May, executive vice president of healthcare delivery policy of the Advanced Medical Technology Association, sent a letter to CMS in which he stated that prior authorization programs by their very nature question the medical expertise and judgment of the treating physician.17 May further stated that prior authorization programs remove the decision-making process about appropriate care from patients and their physicians and turn it over to administrators who have no firsthand experience with the patient’s condition.18

While the Final Rule is effective February 29, 2016, the regulation does not include implementation dates for prior authorization notice. Although CMS will provide DMEPOS suppliers with 60 days’ advance notice in the Federal Register before requiring prior authorization for new items, DMEPOS suppliers should regularly monitor the implementation dates to know whether items have been added to the Required Prior Authorization List. DMEPOS suppliers should update their internal processes to reduce the risk of claim denials related to items subject to prior authorization.

Medicare Program; Prior Authorization Process for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies, 80 Fed. Reg. 81673 (Dec. 30, 2015).

80 Fed. Reg. at 81699.

80 Fed. Reg. at 81678.



80 Fed. Reg. at 81680.



80 Fed. Reg. at 81689.

10 80 Fed. Reg. at 81694.

11 80 Fed. Reg. at 81695.

12 Id.

13 Medicare Program; Competitive Acquisition for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) and Other Issues, 72 Fed. Reg. 17992 (April 10, 2007).

14 Medicare Program; Extension of Medicare Prior Authorization for Power Mobility Devices (PMDs) Demonstration, 80 Fed. Reg. 41503 (Jul. 15, 2015).

15 Laura Ungar, New Federal Rule Targets Medical Equipment Often Subject to Fraud, USA Today (Dec. 29, 2015).

16 Id.

17 Id.

18 Id.

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