October 1, 2006 CODE OF FEDERAL REGULATIONS 42 Parts 414 to 429 Revised as of October 1, 2006 Public Health Containing a codification of documents of general applicability and future effect As of October 1, 2006 With Ancillaries

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As of October 1, 2006

Title 42, Parts 400 to 429

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 Table of Contents Page Explanation v Title 42: Chapter IV—Centers for Medicare & Medicaid Services, Department of Health and Human Services 3 Finding Aids: Material Approved for Incorporation by Reference 525 Table of CFR Titles and Chapters 527 Alphabetical List of Agencies Appearing in the CFR 545 List of CFR Sections Affected 555

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 Raymond A. Mosley, Director, Office of the Federal Register. October 1, 2006. THIS TITLE

Title 42—Public Health is composed of four volumes. The parts in these volumes are arranged in the following order: Parts 1-399, parts 400-413, parts 414-429, and part 430 to end. The first volume (parts 1-399) contains current regulations issued under chapter I—Public Health Service (HHS). The second and third volumes (parts 400-413 and parts 414-429) include regulations issued under chapter IV—Centers for Medicare & Medicaid Services (HHS) and the fourth volume (part 430 to end) contains the remaining regulations in chapter IV and the regulations issued under chapter V by the Office of Inspector General-Health Care (HHS). The contents of these volumes represent all current regulations codified under this title of the CFR as of October 1, 2006.

The OMB control numbers for the Centers for Medicare & Medicaid Services appear in § 400.310 of chapter IV. For the convenience of the user, subpart C consisting of §§ 400.300-400.310 is reprinted in the Finding Aids section of the third and fourth volumes.

For this volume, Robert J. Sheehan was Chief Editor. The Code of Federal Regulations publication program is under the direction of Frances D. McDonald, assisted by Kenneth R. Payne.

 <LRH>42 CFR Ch. IV (10-1-06 Edition)</LRH> <RRH>Centers for Medicare & Medicaid Services, HHS</RRH> <CFRTITLE> <TITLEHD> <PRTPAGE P="1"/> <HD SOURCE="HED">Title 42—Public Health</HD> <P>(This book contains parts 414 to 429)</P> </TITLEHD> <CFRTOC> <PTHD>Part</PTHD> <CHAPTI> <SUBJECT> <E T="04">chapter iv</E>—Centers for Medicare & Medicaid Services, Department of Health and Human Services</SUBJECT> <PG>414</PG> </CHAPTI> </CFRTOC> </CFRTITLE> <CHAPTER> <TOC> <TOCHD> <PRTPAGE P="3"/> <HD SOURCE="HED">CHAPTER IV—CENTERS FOR MEDICARE </HD> <HD SOURCE="HED">& MEDICAID SERVICES, </HD> <HD SOURCE="HED">DEPARTMENT OF HEALTH AND </HD> <HD SOURCE="HED">HUMAN SERVICES</HD> </TOCHD> <EDNOTE> <HD SOURCE="HED">Editorial Note:</HD> <P>Nomenclature changes to chapter IV appear at 62 FR 46037, Aug. 29, 1997; 66 FR 39452, July 31, 2001; and 67 FR 36540, May 24, 2002.</P> </EDNOTE> <SUBCHAP> <HD SOURCE="HED">SUBCHAPTER A—GENERAL PROVISIONS</HD> </SUBCHAP> <PTHD>Part</PTHD> <PGHD>Page</PGHD> <CHAPTI> <PT>414</PT> <SUBJECT>Payment for Part B medical and other health services</SUBJECT> <PG>5</PG> <PT>415</PT> <SUBJECT>Services furnished by physicians in providers, supervising physicians in teaching settings, and residents in certain settings</SUBJECT> <PG>57</PG> <PT>416</PT> <SUBJECT>Ambulatory surgical services</SUBJECT> <PG>74</PG> <PT>417</PT> <SUBJECT>Health maintenance organizations, competitive medical plans, and health care prepayment plans</SUBJECT> <PG>85</PG> <PT>418</PT> <SUBJECT>Hospice care</SUBJECT> <PG>171</PG> <PT>419</PT> <SUBJECT>Prospective payment system for hospital outpatient department services</SUBJECT> <PG>192</PG> <PT>420</PT> <SUBJECT>Program integrity: Medicare</SUBJECT> <PG>205</PG> <PT>421</PT> <SUBJECT>Intermediaries and carriers</SUBJECT> <PG>216</PG> <PT>422</PT> <SUBJECT>Medicare advantage program</SUBJECT> <PG>228</PG> <PT>423</PT> <SUBJECT>Voluntary medicare prescription drug benefit</SUBJECT> <PG>346</PG> <PT>424</PT> <SUBJECT>Conditions for Medicare payment</SUBJECT> <PG>452</PG> <PT>426</PT> <SUBJECT>Review of national coverage determinations and local coverage determinations</SUBJECT> <PG>495</PG> </CHAPTI> </TOC> <SUBCHAP TYPE="N"> <PRTPAGE P="5"/> <HD SOURCE="HED">SUBCHAPTER A—GENERAL PROVISIONS</HD> <PART> <EAR>Pt. 414</EAR> <HD SOURCE="HED">PART 414—PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES</HD> <CONTENTS> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions</HD> <SECHD>Sec.</SECHD> <SECTNO>414.1</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <SECTNO>414.2</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>414.4</SECTNO> <SUBJECT>Fee schedule areas.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Physicians and Other Practitioners</HD> <SECTNO>414.20</SECTNO> <SUBJECT>Formula for computing fee schedule amounts.</SUBJECT> <SECTNO>414.21</SECTNO> <SUBJECT>Medicare payment basis.</SUBJECT> <SECTNO>414.22</SECTNO> <SUBJECT>Relative value units (RVUs).</SUBJECT> <SECTNO>414.24</SECTNO> <SUBJECT>Review, revision, and addition of RVUs for physician services.</SUBJECT> <SECTNO>414.26</SECTNO> <SUBJECT>Determining the GAF.</SUBJECT> <SECTNO>414.28</SECTNO> <SUBJECT>Conversion factors.</SUBJECT> <SECTNO>414.30</SECTNO> <SUBJECT>Conversion factor update.</SUBJECT> <SECTNO>414.32</SECTNO> <SUBJECT>Determining payments for certain physicians' services furnished in facility settings.</SUBJECT> <SECTNO>414.34</SECTNO> <SUBJECT>Payment for services and supplies incident to a physician's service.</SUBJECT> <SECTNO>414.36</SECTNO> <SUBJECT>Payment for drugs incident to a physician's service.</SUBJECT> <SECTNO>414.39</SECTNO> <SUBJECT>Special rules for payment of care plan oversight.</SUBJECT> <SECTNO>414.40</SECTNO> <SUBJECT>Coding and ancillary policies.</SUBJECT> <SECTNO>414.42</SECTNO> <SUBJECT>Adjustment for first 4 years of practice.</SUBJECT> <SECTNO>414.44</SECTNO> <SUBJECT>Transition rules.</SUBJECT> <SECTNO>414.46</SECTNO> <SUBJECT>Additional rules for payment of anesthesia services.</SUBJECT> <SECTNO>414.48</SECTNO> <SUBJECT>Limits on actual charges of nonparticipating suppliers.</SUBJECT> <SECTNO>414.50</SECTNO> <SUBJECT>Physician billing for purchased diagnostic tests.</SUBJECT> <SECTNO>414.52</SECTNO> <SUBJECT>Payment for physician assistants' services.</SUBJECT> <SECTNO>414.54</SECTNO> <SUBJECT>Payment for certified nurse-midwives' services.</SUBJECT> <SECTNO>414.56</SECTNO> <SUBJECT>Payment for nurse practitioners' and clinical nurse specialists' services.</SUBJECT> <SECTNO>414.58</SECTNO> <SUBJECT>Payment of charges for physician services to patients in providers.</SUBJECT> <SECTNO>414.60</SECTNO> <SUBJECT>Payment for the services of CRNAs.</SUBJECT> <SECTNO>414.62</SECTNO> <SUBJECT>Fee schedule for clinical psychologist services.</SUBJECT> <SECTNO>414.63</SECTNO> <SUBJECT>Payment for outpatient diabetes self-management training.</SUBJECT> <SECTNO>414.64</SECTNO> <SUBJECT>Payment for medical nutrition therapy.</SUBJECT> <SECTNO>414.65</SECTNO> <SUBJECT>Payment for telehealth services.</SUBJECT> <SECTNO>414.66</SECTNO> <SUBJECT>Incentive payments for physician scarcity areas.</SUBJECT> <SECTNO>414.67</SECTNO> <SUBJECT>Incentive payments for Health Professional Shortage Areas.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Fee Schedules for Parenteral and Enteral Nutrition (PEN) Nutrients, Equipment and Supplies</HD> <SECTNO>414.100</SECTNO> <SUBJECT>Purpose.</SUBJECT> <SECTNO>414.102</SECTNO> <SUBJECT>General payment rules.</SUBJECT> <SECTNO>414.104</SECTNO> <SUBJECT>PEN Items and Services.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Payment for Durable Medical Equipment and Prosthetic and Orthotic Devices</HD> <SECTNO>414.200</SECTNO> <SUBJECT>Purpose.</SUBJECT> <SECTNO>414.202</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>414.210</SECTNO> <SUBJECT>General payment rules.</SUBJECT> <SECTNO>414.220</SECTNO> <SUBJECT>Inexpensive or routinely purchased items.</SUBJECT> <SECTNO>414.222</SECTNO> <SUBJECT>Items requiring frequent and substantial servicing.</SUBJECT> <SECTNO>414.224</SECTNO> <SUBJECT>Customized items.</SUBJECT> <SECTNO>414.226</SECTNO> <SUBJECT>Oxygen and oxygen equipment.</SUBJECT> <SECTNO>414.228</SECTNO> <SUBJECT>Prosthetic and orthotic devices.</SUBJECT> <SECTNO>414.229</SECTNO> <SUBJECT>Other durable medical equipment—capped rental items.</SUBJECT> <SECTNO>414.230</SECTNO> <SUBJECT>Determining a period of continuous use.</SUBJECT> <SECTNO>414.232</SECTNO> <SUBJECT>Special payment rules for transcutaneous electrical nerve stimulators (TENS).</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Determination of Reasonable Charges Under the ESRD Program</HD> <SECTNO>414.300</SECTNO> <SUBJECT>Scope of subpart.</SUBJECT> <SECTNO>414.310</SECTNO> <SUBJECT>Determination of reasonable charges for physician services furnished to renal dialysis patients.</SUBJECT> <SECTNO>414.313</SECTNO> <SUBJECT>Initial method of payment.</SUBJECT> <SECTNO>414.314</SECTNO> <SUBJECT>Monthly capitation payment method.</SUBJECT> <SECTNO>414.316</SECTNO> <SUBJECT>Payment for physician services to patients in training for self-dialysis and home dialysis.</SUBJECT> <SECTNO>414.320</SECTNO> <SUBJECT>Determination of reasonable charges for physician renal transplantation services.</SUBJECT> <SECTNO>414.330</SECTNO> <SUBJECT>Payment for home dialysis equipment, supplies, and support services.</SUBJECT> <SECTNO>414.335</SECTNO> <SUBJECT>Payment for EPO furnished to a home dialysis patient for use in the home.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Competitive Bidding for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)</HD> <SECTNO>414.400-414.404</SECTNO> <SUBJECT>[Reserved]</SUBJECT> <SECTNO>414.406</SECTNO> <SUBJECT>Implementation of programs.</SUBJECT> <SECTNO>414.408-414.426</SECTNO> <SUBJECT>[Reserved]</SUBJECT> </SUBPART> <SUBPART> <PRTPAGE P="6"/> <RESERVED>Subpart G [Reserved]</RESERVED> <SECTNO/> <SUBJECT/> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart H—Fee Schedule for Ambulance Services</HD> <SECTNO>414.601</SECTNO> <SUBJECT>Purpose.</SUBJECT> <SECTNO>414.605</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>414.610</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> <SECTNO>414.615</SECTNO> <SUBJECT>Transition to the ambulance fee schedule.</SUBJECT> <SECTNO>414.617</SECTNO> <SUBJECT>Transition from regional to national ambulance fee schedule.</SUBJECT> <SECTNO>414.620</SECTNO> <SUBJECT>Publication of the ambulance fee schedule.</SUBJECT> <SECTNO>414.625</SECTNO> <SUBJECT>Limitation on review.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart I—Payment for Drugs and Biologicals</HD> <SECTNO>414.701</SECTNO> <SUBJECT>Purpose.</SUBJECT> <SECTNO>414.704</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>414.707</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart J—Submission of Manufacturer's Average Sales Price Data</HD> <SECTNO>414.800</SECTNO> <SUBJECT>Purpose.</SUBJECT> <SECTNO>414.802</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>414.804</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> <SECTNO>414.806</SECTNO> <SUBJECT>Penalties associated with the failure to submit timely and accurate ASP data.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart K—Payment for Drugs and Biologicals Under Part B</HD> <SECTNO>414.900</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <SECTNO>414.902</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>414.904</SECTNO> <SUBJECT>Average sales price as the basis for payment.</SUBJECT> <SECTNO>414.906</SECTNO> <SUBJECT>Competitive acquisition program as the basis for payment.</SUBJECT> <SECTNO>414.908</SECTNO> <SUBJECT>Competitive acquisition program.</SUBJECT> <SECTNO>414.910</SECTNO> <SUBJECT>Bidding process.</SUBJECT> <SECTNO>414.912</SECTNO> <SUBJECT>Conflicts of interest.</SUBJECT> <SECTNO>414.914</SECTNO> <SUBJECT>Terms of contract.</SUBJECT> <SECTNO>414.916</SECTNO> <SUBJECT>Dispute resolution for vendors and beneficiaries.</SUBJECT> <SECTNO>414.917</SECTNO> <SUBJECT>Dispute resolution and process for suspension or termination of approved CAP contract.</SUBJECT> <SECTNO>414.918</SECTNO> <SUBJECT>Assignment.</SUBJECT> <SECTNO>414.920</SECTNO> <SUBJECT>Judicial review.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart L—Supplying and Dispensing Fees</HD> <SECTNO>414.1000</SECTNO> <SUBJECT>Purpose.</SUBJECT> <SECTNO>414.1001</SECTNO> <SUBJECT>Basis of Payment.</SUBJECT> </SUBPART> </CONTENTS> <AUTH> <HD SOURCE="HED">Authority:</HD> <P>Secs. 1102, 1871, and 1881(b)(l) of the Social Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).</P> </AUTH> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>55 FR 23441, June 8, 1990, unless otherwise noted.</P> </SOURCE> <EDNOTE> <HD SOURCE="HED">Editorial Note:</HD> <P>Nomenclature changes to part 414 appear at 60 FR 50442, Sept. 29, 1995, and 60 FR 53877, Oct. 18, 1995.</P> </EDNOTE> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions</HD> <SECTION> <SECTNO>§ 414.1</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>This part implements the following provisions of the Act: </P> <EXTRACT> <P>1802—Rules for private contracts by Medicare beneficiaries.</P> <P>1833—Rules for payment for most Part B services.</P> <P>1834(a) and (h)—Amounts and frequency of payments for durable medical equipment and for prosthetic devices and orthotics and prosthetics.</P> <P>1834(l)—Establishment of a fee schedule for ambulance services.</P> <P>1834(m)—Rules for Medicare reimbursement for telehealth services.</P> <P>1842(o)—Rules for payment of certain drugs and biologicals.</P> <P>1847(a) and (b)—Competitive bidding for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).</P> <P>1848—Fee schedule for physician services.</P> <P>1881(b)—Rules for payment for services to ESRD beneficiaries.</P> <P>1887—Payment of charges for physician services to patients in providers.</P> </EXTRACT> <CITA>[67 FR 9132, Feb. 27, 2002, as amended at 69 FR 1116, Jan. 7, 2004; 71 FR 48409, Aug. 18, 2006]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.2</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this part, unless the context indicates otherwise—</P> <P> <E T="03">AA</E> stands for anesthesiologist assistant.</P> <P> <E T="03">AHPB</E> stands for adjusted historical payment basis.</P> <P> <E T="03">CF</E> stands for conversion factor.</P> <P> <E T="03">CRNA</E> stands for certified registered nurse anesthetist.</P> <P> <E T="03">CY</E> stands for calendar year.</P> <P> <E T="03">FY</E> stands for fiscal year.</P> <P> <E T="03">GAF</E> stands for geographic adjustment factor.</P> <P> <E T="03">GPCI</E> stands for geographic practice cost index.</P> <P> <E T="03">HCPCS</E> stands for CMS Common Procedure Coding System.</P> <P> <E T="03">Physician services</E> means the following services to the extent that they are covered by Medicare:</P> <P>(1) Professional services of doctors of medicine and osteopathy (including osteopathic practitioners), doctors of optometry, doctors of podiatry, doctors <PRTPAGE P="7"/>of dental surgery and dental medicine, and chiropractors.</P> <P>(2) Supplies and services covered “incident to” physician services (excluding drugs as specified in § 414.36).</P> <P>(3) Outpatient physical and occupational therapy services if furnished by a person or an entity that is not a Medicare provider of services as defined in § 400.202 of this chapter.</P> <P>(4) Diagnostic x-ray tests and other diagnostic tests (excluding diagnostic laboratory tests paid under the fee schedule established under section 1833(h) of the Act).</P> <P>(5) X-ray, radium, and radioactive isotope therapy, including materials and services of technicians.</P> <P>(6) Antigens, as described in section 1861(s)(2)(G) of the Act.</P> <P>(7) Bone mass measurement.</P> <P> <E T="03">RVU</E> stands for relative value unit.</P> <P>(8) Screening mammography services.</P> <CITA>[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 58 FR 63686, Dec. 2, 1993; 59 FR 63463, Dec. 8, 1994; 60 FR 63177, Dec. 8, 1995; 63 FR 34328, June 24, 1998; 66 FR 55322, Nov. 1, 2001]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.4</SECTNO> <SUBJECT>Fee schedule areas.</SUBJECT> <P>(a) <E T="03">General.</E> CMS establishes physician fee schedule areas that generally conform to the geographic localities in existence before January 1, 1992.</P> <P>(b) <E T="03">Changes.</E> CMS announces proposed changes to fee schedule areas in the <E T="04">Federal Register</E> and provides an opportunity for public comment. After considering public comments, CMS publishes the final changes in the <E T="04">Federal Register</E>.</P> <CITA>[59 FR 63463, Dec. 8, 1994]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Physicians and Other Practitioners</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 414.20</SECTNO> <SUBJECT>Formula for computing fee schedule amounts.</SUBJECT> <P>(a) <E T="03">Participating supplier.</E> The fee schedule amount for a participating supplier for a physician service as defined in § 414.2 is computed as the product of the following amounts:</P> <P>(1) The RVUs for the service.</P> <P>(2) The GAF for the fee schedule area.</P> <P>(3) The CF.</P> <P>(b) <E T="03">Nonparticipating supplier.</E> The fee schedule amount for a nonparticipating supplier for a physician service as defined in § 414.2 is 95 percent of the fee schedule amount as calculated in paragraph (a) of this section.</P> <CITA>[62 FR 59101, Oct. 31, 1997]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.21</SECTNO> <SUBJECT>Medicare payment basis.</SUBJECT> <P>Medicare payment is based on the lesser of the actual charge or the applicable fee schedule amount.</P> <CITA>[62 FR 59101, Oct. 31, 1997]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.22</SECTNO> <SUBJECT>Relative value units (RVUs).</SUBJECT> <P>CMS establishes RVUs for physicians' work, practice expense, and malpractice insurance.</P> <P>(a) <E T="03">Physician work RVUs</E>—(1) <E T="03">General rule.</E> Physician work RVUs are established using a relative value scale in which the value of physician work for a particular service is rated relative to the value of work for other physician services.</P> <P>(2) <E T="03">Special RVUs for anesthesia and radiology services)</E>—(i) <E T="03">Anesthesia services.</E> The rules for determining RVUs for anesthesia services are set forth in § 414.46.</P> <P>(ii) <E T="03">Radiology services.</E> CMS bases the RVUs for all radiology services on the relative value scale developed under section 1834(b)(1)(A) of the Act, with appropriate modifications to ensure that the RVUs established for radiology services that are similar or related to other physician services are consistent with the RVUs established for those similar or related services.</P> <P>(b) <E T="03">Practice expense RVUs.</E> (1) Practice expense RVUs are computed for each service or class of service by applying average historical practice cost percentages to the estimated average allowed charge during the 1991 base period.</P> <P>(2) The average practice expense percentage for a service or class of services is computed as follows:</P> <P>(i) Multiply the average practice expense percentage for each specialty by the proportion of a particular service or class of service performed by that specialty.<PRTPAGE P="8"/> </P> <P>(ii) Add the products for all specialties.</P> <P>(3) For services furnished beginning calendar year (CY) 1994, for which 1994 practice expense RVUs exceed 1994 work RVUs and that are performed in office settings less than 75 percent of the time, the 1994, 1995, and 1996 practice expense RVUs are reduced by 25 percent of the amount by which they exceed the number of 1994 work RVUs. Practice expense RVUs are not reduced to less than 128 percent of 1994 work RVUs.</P> <P>(4) For services furnished beginning January 1, 1998, practice expense RVUs for certain services are reduced to 110 percent of the work RVUs for those services. The following two categories of services are excluded from this limitation:</P> <P>(i) The service is provided more than 75 percent of the time in an office setting; or</P> <P>(ii) The service is one described in section 1848(c)(2)(G)(v) of the Act, codified at 42 U.S.C. 1395w-4(c)(2)(G). Section 1848(c)(2)(G)(v) of the Act refers to the 1998 proposed resource-based practice expense RVUs (as specified in the June 18, 1997 physician fee schedule proposed rule (62 FR 33158)) for the specific site, either in-office or out-of-office, increased from its 1997 practice expense RVUs.)</P> <P>(5) For services furnished beginning January 1, 1999, the practice expense RVUs are based on 75 percent of the practice expense RVUs applicable to services furnished in 1998 and 25 percent of the relative practice expense resources involved in furnishing the service. For services furnished in 2000, the practice expense RVUs are based on 50 percent of the practice expense RVUs applicable to services furnished in 1998 and 50 percent of the relative practice expense resources involved in furnishing the service. For services furnished in 2001, the practice expense RVUs are based on 25 percent of the practice expense RVUs applicable to services furnished in 1998 and 75 percent of the relative practice expense resources involved in furnishing the service. For services furnished in 2002 and subsequent years, the practice expense RVUs are based entirely on relative practice expense resources.</P> <P>(i) Usually there are two levels of practice expense RVUs that correspond to each code.</P> <P>(A) <E T="03">Facility practice expense RVUs.</E> The lower facility practice expense RVUs apply to services furnished to patients in the hospital, skilled nursing facility, community mental health center, or in an ambulatory surgical center when the physician performs procedures on the ASC approved procedures list. (The facility practice expense RVUs for a particular code may not be greater than the non-facility RVUs for the code.)</P> <P>(B) <E T="03">Non-facility practice expense RVUs.</E> The higher non-facility practice expense RVUs apply to services performed in a physician's office, a patient's home, an ASC if the physician is performing a procedure not on the ASC approved procedures list, a nursing facility, or a facility or institution other than a hospital or skilled nursing facility, community mental health center, or ASC performing an ASC approved procedure.</P> <P>(C) <E T="03">Outpatient therapy services.</E> Outpatient therapy services billed under the physician fee schedule are paid using the non-facility practice expense RVU component.</P> <P>(ii) Only one practice expense RVU per code can be applied for each of the following services: services that have only technical component practice expense RVUs or only professional component practice expense RVUs; evaluation and management services, such as hospital or nursing facility visits, that are furnished exclusively in one setting; and major surgical services.</P> <P>(6)(i) CMS establishes criteria for supplemental surveys regarding specialty practice expenses submitted to CMS that may be used in determining practice expense RVUs.</P> <P>(ii) Any CMS-designated specialty group may submit a supplemental survey.</P> <P>(iii) CMS will consider for use in determining practice expense RVUs for the physician fee schedule survey data and related materials submitted to CMS by March 1, 2004 to determine CY 2005 practice expense RVUs and by March 1, 2005 to determine CY 2006 practice expense RVUs.<PRTPAGE P="9"/> </P> <P>(c) <E T="03">Malpractice insurance RVUs.</E> (1) Malpractice insurance RVUs are computed for each service or class of services by applying average malpractice insurance historical practice cost percentages to the estimated average allowed charge during the 1991 base period.</P> <P>(2) The average historical malpractice insurance percentage for a service or class of services is computed as follows:</P> <P>(i) Multiply the average malpractice insurance percentage for each specialty by the proportion of a particular service or class of services performed by that specialty.</P> <P>(ii) Add all the products for all the specialties.</P> <P>(3) For services furnished in the year 2000 and subsequent years, the malpractice RVUs are based on the relative malpractice insurance resources.</P> <CITA>[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42493, Sept. 15, 1992; 58 FR 63687, Dec. 2, 1993; 62 FR 59102, Oct. 31, 1997; 63 FR 58910, Nov. 2, 1998; 64 FR 59441, Nov. 2, 1999; 65 FR 25668, May 3, 2000; 65 FR 65440, Nov. 1, 2000; 67 43558, June 28, 2002; 68 FR 63261, Nov. 7, 2003]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.24</SECTNO> <SUBJECT>Review, revision, and addition of RVUs for physician services.</SUBJECT> <P>(a) <E T="03">Interim values for new and revised HCPCS level 1 and level 2 codes.</E> (1) CMS establishes interim RVUs for new services and for codes for which definitions have changed.</P> <P>(2) CMS publishes a notice in the <E T="04">Federal Register</E> to announce interim RVUs and seek public comment on them. The RVUs are effective prospectively for services furnished beginning on the effective date specified in the notice.</P> <P>(3) After considering public comments, CMS revises, if necessary, the interim RVUs and announces those revisions in a final notice published in the <E T="04">Federal Register.</E> Any revisions in the RVUs are effective prospectively for services furnished beginning on the effective date specified in the final notice.</P> <P>(b) <E T="03">Revision of RVUs for established HCPCS level 1 and level 2 codes.</E> (1) CMS publishes a proposed notice in the <E T="04">Federal Register</E> to announce changes in RVUs for established codes and provides an opportunity for public comment no less often than every 5 years.</P> <P>(2) After considering public comments, CMS publishes a final notice in the <E T="04">Federal Register</E> to announce revisions to RVUs.</P> <P>(3) The RVU revisions are effective prospectively for services furnished beginning on the effective date specified in the final notice.</P> <P>(c) <E T="03">Values for local codes (HCPCS Level 3).</E> (1) Carriers establish relative values for local codes for services not included in HCPCS levels 1 or 2.</P> <P>(2) Carriers must obtain prior approval from CMS to establish local codes for services that meet the definition of “physician services” in § 414.2.</P> <CITA>[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.26</SECTNO> <SUBJECT>Determining the GAF.</SUBJECT> <P>CMS establishes a GAF for each service in each fee schedule area.</P> <P>(a) <E T="03">Geographic indices.</E> CMS uses the following indices to establish the GAF:</P> <P>(1) An index that reflects one-fourth of the difference between the relative value of physicians' work effort in each of the different fee schedule areas as determined under § 414.22(a) and the national average of that work effort.</P> <P>(2) An index that reflects the relative costs of the mix of goods and services comprising practice expenses (other than malpractice expenses) in each of the different fee schedule areas as determined under § 414.22(b) compared to the national average of those costs.</P> <P>(3) An index that reflects the relative costs of malpractice expenses in each of the different fee schedule areas as determined under § 414.22(c) compared to the national average of those costs.</P> <P>(b) <E T="03">Class-specific practice cost indices.</E> If the application of a single index to different classes of services would be substantially inequitable because of differences in the mix of goods and services comprising practice expenses for the different classes of services, more than one index may be established under paragraph (a)(2) of this section.</P> <P>(c) <E T="03">Computation of GAF.</E> The GAF for each fee schedule area is the sum of the physicians' work adjustment factor, <PRTPAGE P="10"/>the practice expense adjustment factor, and the malpractice cost adjustment factor, as defined in this section:</P> <P>(1) The geographic physicians' work adjustment factor for a service is the product of the proportion of the total relative value for the service that reflects the RVUs for the work component and the geographic physicians' work index value established under paragraph (a)(1) of this section.</P> <P>(2) The geographic practice expense adjustment factor for a service is the product of the proportion of the total relative value for the service that reflects the RVUs for the practice expense component, multiplied by the geographic practice cost index (GPCI) value established under paragraph (a)(2) of this section.</P> <P>(3) The geographic malpractice adjustment factor for a service is the product of the proportion of the total relative value for the service that reflects the RVUs for the malpractice component, multiplied by the GPCI value established under paragraph (a)(3) of this section.</P> <CITA>[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.28</SECTNO> <SUBJECT>Conversion factors.</SUBJECT> <P>CMS establishes CFs in accordance with section 1848(d) of the Act.</P> <P>(a) <E T="03">Base-year CFs.</E> CMS established the CF for 1992 so that had section 1848 of the Act applied during 1991, it would have resulted in the same aggregate amount of payments for physician services as the estimated aggregate amount of these payments in 1991, adjusted by the update for 1992 computed as specified in § 414.30.</P> <P>(b) <E T="03">Subsequent CFs.</E> For calendar years 1993 through 1995, the CF for each year is equal to the CF for the previous year, adjusted in accordance with § 414.30. Beginning January 1, 1996, the CF for each calendar year may be further adjusted so that adjustments to the fee schedule in accordance with section 1848(c)(2)(B)(ii) of the Act do not cause total expenditures under the fee schedule to differ by more than $20 million from the amount that would have been spent if these adjustments had not been made.</P> <CITA>[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 60 FR 53877, Oct. 18, 1995; 60 FR 63177, Dec. 8, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.30</SECTNO> <SUBJECT>Conversion factor update.</SUBJECT> <P>Unless Congress acts in accordance with section 1848(d)(3) of the Act—</P> <P>(a) <E T="03">General rule.</E> The CF update for a CY equals the Medicare Economic Index increased or decreased by the number of percentage points by which the percentage increase in expenditures for physician services (or for a particular category of physician services, such as surgical services) in the second preceding FY over the third preceding FY exceeds the performance standard rate of increase established for the second preceding FY.</P> <P>(b) <E T="03">Downward adjustment.</E> The downward adjustment may not exceed the following:</P> <P>(1) For CYs 1992 and 1993, 2 percentage points.</P> <P>(2) For CY 1994, 2.5 percentage points.</P> <P>(3) For CYs 1995 and thereafter, 5 percentage points.</P> <CITA>[55 FR 23441, June 8, 1990, as amended at 60 FR 63177, Dec. 8, 1995; 61 FR 42385, Aug. 15, 1996]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.32</SECTNO> <SUBJECT>Determining payments for certain physicians' services furnished in facility settings.</SUBJECT> <P>(a) <E T="03">Definition.</E> As used in this section, <E T="03">facility settings</E> include the following facilities:</P> <P>(1) Hospital outpatient departments, including clinics and emergency rooms.</P> <P>(2) Hospital inpatient departments.</P> <P>(3) Comprehensive outpatient rehabilitation facilities.</P> <P>(4) Comprehensive inpatient rehabilitation facilities.</P> <P>(5) Inpatient psychiatric facilities.</P> <P>(6) Skilled nursing facilities.</P> <P>(b) <E T="03">General rule.</E> If physicians' services of the type routinely furnished in physicians' offices are furnished in facility settings before January 1, 1999, the physician fee schedule amount for those services is determined by reducing the practice expense RVUs for the services by 50 percent. For services furnished on or after January 1, 1999, the practice expense RVUs are determined in accordance with § 414.22(b)(5).<PRTPAGE P="11"/> </P> <P>(c) <E T="03">Services covered by the reduction.</E> CMS establishes a list of services routinely furnished in physicians' offices nationally. Services furnished at least 50 percent of the time in physicians' offices are subject to this reduction.</P> <P>(d) <E T="03">Services excluded from the reduction.</E> The reduction established under this section does not apply to the following:</P> <P>(1) Rural health clinic services.</P> <P>(2) Surgical services not on the ambulatory surgical center covered list of procedures published under § 416.65(c) of this chapter when furnished in an ambulatory surgical center.</P> <P>(3) Anesthesiology services and diagnostic and therapeutic radiology services.</P> <CITA>[58 FR 63687, Dec. 2, 1993, as amended at 60 FR 63177, Dec. 8, 1995; 62 FR 59102, Oct. 31, 1997; 63 FR 58911, Nov. 2, 1998; 64 FR 25457, May 12, 1999]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.34</SECTNO> <SUBJECT>Payment for services and supplies incident to a physician's service.</SUBJECT> <P>(a) <E T="03">Medical supplies.</E> (1) Except as otherwise specified in this paragraph, office medical supplies are considered to be part of a physician's practice expense, and payment for them is included in the practice expense portion of the payment to the physician for the medical or surgical service to which they are incidental.</P> <P>(2) If physician services of the type routinely furnished in provider settings are furnished in a physician's office, separate payment may be made for certain supplies furnished incident to that physician service if the following requirements are met:</P> <P>(i) It is a procedure that can safely be furnished in the office setting in appropriate circumstances.</P> <P>(ii) It requires specialized supplies that are not routinely available in physicians' offices and that are generally disposable.</P> <P>(iii) It is furnished before January 1, 1999.</P> <P>(3) For the purpose of paragraph (a)(2) of this section, provider settings include only the following settings:</P> <P>(i) Hospital inpatient and outpatient departments.</P> <P>(ii) Ambulatory surgical centers.</P> <P>(4) For the purpose of paragraph (a)(2) of this section, “routinely furnished in provider settings” means furnished in inpatient or outpatient hospital settings or ambulatory surgical centers more than 50 percent of the time.</P> <P>(5) CMS establishes a list of services for which a separate supply payment may be made under this section.</P> <P>(6) The fee schedule amount for supplies billed separately is not subject to a GPCI adjustment.</P> <P>(b) <E T="03">Services of nonphysicians that are incident to a physician's service.</E> Services of nonphysicians that are covered as incident to a physician's service are paid as if the physician had personally furnished the service.</P> <CITA>[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, as amended at 63 FR 58911, Nov. 2, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.36</SECTNO> <SUBJECT>Payment for drugs incident to a physician's service.</SUBJECT> <P>Payment for drugs incident to a physician's service is made in accordance with § 405.517 of this chapter.</P> </SECTION> <SECTION> <SECTNO>§ 414.39</SECTNO> <SUBJECT>Special rules for payment of care plan oversight.</SUBJECT> <P>(a) <E T="03">General.</E> Except as specified in paragraphs (b) and (c) of this section, payment for care plan oversight is included in the payment for visits and other services under the physician fee schedule. For purposes of this section a nonphysician practitioner (NPP) is a nurse practitioner, clinical nurse specialist or physician assistant.</P> <P>(b) <E T="03">Exception.</E> Separate payment is made under the following conditions for physician care plan oversight services furnished to beneficiaries who receive HHA and hospice services that are covered by Medicare:</P> <P>(1) The care plan oversight services require recurrent physician supervision of therapy involving 30 or more minutes of the physician's time per month.</P> <P>(2) Payment is made to only one physician per patient for services furnished during a calendar month period. The physician must have furnished a service requiring a face-to-face encounter with the patient at least once during the 6-month period before the month for which care plan oversight payment is first billed. The physician may not <PRTPAGE P="12"/>have a significant ownership interest in, or financial or contractual relationship with, the HHA in accordance with § 424.22(d) of this chapter. The physician may not be the medical director or employee of the hospice and may not furnish services under an arrangement with the hospice.</P> <P>(3) If a physician furnishes care plan oversight services during a postoperative period, payment for care plan oversight services is made if the services are documented in the patient's medical record as unrelated to the surgery.</P> <P>(c) <E T="03">Special rules for payment of care plan oversight provided by nonphysician practitioners for beneficiaries who receive HHA services covered by Medicare.</E> (1) An NPP can furnish physician care plan oversight (but may not certify a patient as needing home health services) only if the physician who signs the plan of care provides regular ongoing care under the same plan of care as does the NPP billing for care plan oversight and either—</P> <P>(i) The physician and NPP are part of the same group practice; or</P> <P>(ii) If the NPP is a nurse practitioner or clinical nurse specialist, the physician signing the plan of care also has a collaborative agreement with the NPP; or</P> <P>(iii) If the NPP is a physician assistant, the physician signing the plan of care is also the physician who provides general supervision of physician assistant services for the practice.</P> <P>(2) Payment may be made for care plan oversight services furnished by an NPP when:</P> <P>(i) The NPP providing the care plan oversight has seen and examined the patient;</P> <P>(ii) The NPP providing care plan oversight is not functioning as a consultant whose participation is limited to a single medical condition rather than multi-disciplinary coordination of care; and</P> <P>(iii) The NPP providing care plan oversight integrates his or her care with that of the physician who signed the plan of care.</P> <CITA>[59 FR 63463, Dec. 8, 1994; 60 FR 49, Jan. 3, 1995; 60 FR 36733, July 18, 1995 as amended at 69 FR 66423, Nov. 15, 2004; 70 FR 16722, Apr. 1, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.40</SECTNO> <SUBJECT>Coding and ancillary policies.</SUBJECT> <P>(a) <E T="03">General rule.</E> CMS establishes uniform national definitions of services, codes to represent services, and payment modifiers to the codes.</P> <P>(b) <E T="03">Specific types of policies.</E> CMS establishes uniform national ancillary policies necessary to implement the fee schedule for physician services. These include, but are not limited to, the following policies:</P> <P>(1) Global surgery policy (for example, post- and pre-operative periods and services, and intra-operative services).</P> <P>(2) Professional and technical components (for example, payment for services, such as an EEG, which typically comprise a technical component (the taking of the test) and a professional component (the interpretation)).</P> <P>(3) Payment modifiers (for example, assistant-at-surgery, multiple surgery, bilateral surgery, split surgical global services, team surgery, and unusual services).</P> </SECTION> <SECTION> <SECTNO>§ 414.42</SECTNO> <SUBJECT>Adjustment for first 4 years of practice.</SUBJECT> <P>(a) <E T="03">General rule.</E> For services furnished during CYs 1992 and 1993, except as specified in paragraph (b) of this section, the fee schedule payment amount or prevailing charge must be phased in as specified in paragraph (d) of this section for physicians, physical therapists (PTs), occupational therapists (OTs), and all other health care practitioners who are in their first through fourth years of practice.</P> <P>(b) <E T="03">Exception.</E> The reduction required in paragraph (d) of this section does not apply to primary care services or to services furnished in a rural area as defined in section 1886(d)(2)(D) of the Act that is designated under section 332(a)(1)(A) of the Public Health Service Act as a Health Professional Shortage Area.</P> <P>(c) <E T="03">Definition of years of practice.</E> (1) The “first year of practice“ is the first full CY during the first 6 months of which the physician, PT, OT, or other health care practitioner furnishes professional services for which payment may be made under Medicare Part B, plus any portion of the prior CY if that prior year does not meet the first 6 months test.<PRTPAGE P="13"/> </P> <P>(2) The “second, third, and fourth years of practice“ are the first, second, and third CYs following the first year of practice, respectively.</P> <P>(d) <E T="03">Amounts of adjustment.</E> The fee schedule payment for the service of a new physician, PT, OT, or other health care practitioner is limited to the following percentages for each of the indicated years:</P> <P>(1) First year—80 percent</P> <P>(2) Second year—85 percent</P> <P>(3) Third year—90 percent</P> <P>(4) Fourth year—95 percent</P> <CITA>[57 FR 42493, Sept. 15, 1992, as amended at 58 FR 63687, Dec. 2, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.44</SECTNO> <SUBJECT>Transition rules.</SUBJECT> <P>(a) <E T="03">Adjusted historical payment basis</E>—(1) <E T="03">All services other than radiology and nuclear medicine services.</E> For all physician services other than radiology services, furnished in a fee schedule area, the adjusted historical payment basis (AHPB) is the estimated weighted average prevailing charge applied in the fee schedule area for the service in CY 1991, as determined by CMS without regard to physician specialty and as adjusted to reflect payments for services below the prevailing charge, adjusted by the update established for CY 1992.</P> <P>(2) <E T="03">Radiology services.</E> For radiology services, the AHPB is the amount paid for the service in the fee schedule area in CY 1991 under the fee schedule established under section 1834(b), adjusted by the update established for CY 1992.</P> <P>(3) <E T="03">Nuclear medicine services.</E> For nuclear medicine services, the AHPB is the amount paid for the service in the fee schedule area in CY 1991 under the fee schedule established under section 6105(b) of Public Law 101-239 and section 4102(g) of Public Law 101-508, adjusted by the update established for CY 1992.</P> <P>(4) <E T="03">Transition adjustment.</E> CMS adjusts the AHPB for all services by 5.5 percent to produce budget-neutral payments for 1992.</P> <P>(b) <E T="03">Adjustment of 1992 payments for physician services other than radiology services.</E> For physician services furnished during CY 1992 the following rules apply:</P> <P>(1) If the AHPB determined under paragraph (a) of this section is from 85 percent to 115 percent of the fee schedule amount for the area for services furnished in 1992, payment is at the fee schedule amount.</P> <P>(2) If the AHPB determined under paragraph (a) of this section is less than 85 percent of the fee schedule amount for the area for services furnished in 1992, an amount equal to the AHPB plus 15 percent of the fee schedule amount is substituted for the fee schedule amount.</P> <P>(3) If the AHPB determined under paragraph (a) of this section is greater than 115 percent of the fee schedule amount for the area for services furnished in 1992, an amount equal to the AHPB minus 15 percent of the fee schedule amount is substituted for the fee schedule amount.</P> <P>(c) <E T="03">Adjustment of 1992 payments for radiology services.</E> For radiology services furnished during CY 1992 the following rules apply:</P> <P>(1) If the AHPB determined under paragraph (a) of this section is from 85 percent to 109 percent of the fee schedule amount for the area for services furnished in 1992, payment is at the fee schedule amount.</P> <P>(2) If the AHPB determined under paragraph (a) of this section is less than 85 percent of the fee schedule amount for the area for services furnished in 1992, an amount equal to the AHPB plus 15 percent of the fee schedule amount is substituted for the fee schedule amount.</P> <P>(3) If the AHPB determined under paragraph (a) of this section is greater than 109 percent of the fee schedule amount for the area for services furnished in 1992, an amount equal to the AHPB minus 9 percent of the fee schedule amount is substituted for the fee schedule amount.</P> <P>(d) <E T="03">Computation of payments for CY 1993.</E> For physician services subject to the transition rules in CY 1992 and furnished during CY 1993, the fee schedule is equal to 75 percent of the amount that would have been paid in the fee schedule area under the 1992 transition rules, adjusted by the amount of the 1993 update, plus 25 percent of the 1993 fee schedule amount.</P> <P>(e) <E T="03">Computation of payments for CY 1994.</E> For physician services subject to the transition rules in CY 1993, and furnished during CY 1994, the fee schedule <PRTPAGE P="14"/>is equal to 67 percent of the amount that would have been paid in the fee schedule area under the 1993 transition rules, adjusted by the amount of the 1994 update, plus 33 percent of the 1994 fee schedule amount.</P> <P>(f) <E T="03">Computation of payments for CY 1995.</E> For physician services subject to the transition rules in CY 1994 and furnished during CY 1995, the fee schedule is equal to 50 percent of the amount that would have been paid in the fee schedule area under the 1994 transition rules, adjusted by the amount of the 1995 update, plus 50 percent of the 1995 fee schedule amount.</P> </SECTION> <SECTION> <SECTNO>§ 414.46</SECTNO> <SUBJECT>Additional rules for payment of anesthesia services.</SUBJECT> <P>(a) <E T="03">Definitions.</E> For purposes of this section, the following definitions apply:</P> <P>(1) <E T="03">Base unit</E> means the value for each anesthesia code that reflects all activities other than anesthesia time. These activities include usual preoperative and postoperative visits, the administration of fluids and blood incident to anesthesia care, and monitoring services.</P> <P>(2) <E T="03">Anesthesia practitioner,</E> for the purpose of anesthesia time, means a physician who performs the anesthesia service alone, a CRNA who is not medically directed who performs the anesthesia service alone, or a medically directed CRNA.</P> <P>(3) <E T="03">Anesthesia time</E> means the time during which an anesthesia practitioner is present with the patient. It starts when the anesthesia practitioner begins to prepare the patient for anesthesia services and ends when the anesthesia practitioner is no longer furnishing anesthesia services to the beneficiary, that is, when the beneficiary may be placed safely under postoperative care. Anesthesia time is a continuous time period from the start of anesthesia to the end of an anesthesia service. In counting anesthesia time, the anesthesia practitioner can add blocks of anesthesia time around an interruption in anesthesia time as long as the anesthesia practitioner is furnishing continuous anesthesia care within the time periods around the interruption.</P> <P>(b) <E T="03">Determinations of payment amount—Basic rule.</E> For anesthesia services performed, medically directed, or medically supervised by a physician, CMS pays the lesser of the actual charge or the anesthesia fee schedule amount.</P> <P>(1) The carrier bases the fee schedule amount for an anesthesia service on the product of the sum of allowable base and time units and an anesthesia-specific CF. The carrier calculates the time units from the anesthesia time reported by the anesthesia practitioner for the anesthesia procedure. The physician who fulfills the conditions for medical direction in § 415.110 (Conditions for payment: Anesthesiology services) reports the same anesthesia time as the medically-directed CRNA.</P> <P>(2) CMS furnishes the carrier with the base units for each anesthesia procedure code. The base units are derived from the 1988 American Society of Anesthesiologists' Relative Value Guide except that the number of base units recognized for anesthesia services furnished during cataract or iridectomy surgery is four units.</P> <P>(3) Modifier units are not allowed. Modifier units include additional units charged by a physician or a CRNA for patient health status, risk, age, or unusual circumstances.</P> <P>(c) <E T="03">Physician personally performs the anesthesia procedure.</E> (1) CMS considers an anesthesia service to be personally performed under any of the following circumstances:</P> <P>(i) The physician performs the entire anesthesia service alone.</P> <P>(ii) The physician establishes an attending physician relationship in one or two concurrent cases involving an intern or resident and the service was furnished before January 1, 1994.</P> <P>(iii) The physician establishes an attending physician relationship in one case involving an intern or resident and the service was furnished on or after January 1, 1994 but prior to January 1, 1996. For services on or after January 1, 1996, the physician must be the teaching physician as defined in §§ 415.170 through 415.184 of this chapter.</P> <P>(iv) The physician and the CRNA or AA are involved in a single case and <PRTPAGE P="15"/>the services of each are found to be medically necessary.</P> <P>(v) The physician is continuously involved in a single case involving a student nurse anesthetist.</P> <P>(vi) The physician is continuously involved in a single case involving a CRNA or AA and the service was furnished prior to January 1, 1998.</P> <P>(2) CMS determines the fee schedule amount for an anesthesia service personally performed by a physician on the basis of an anesthesia-specific fee schedule CF and unreduced base units and anesthesia time units. One anesthesia time unit is equivalent to 15 minutes of anesthesia time, and fractions of a 15-minute period are recognized as fractions of an anesthesia time unit.</P> <P>(d) <E T="03">Anesthesia services medically directed by a physician.</E> (1) CMS considers an anesthesia service to be medically directed by a physician if:</P> <P>(i) The physician performs the activities described in § 415.110 of this chapter.</P> <P>(ii) The physician directs qualified individuals involved in two, three, or four concurrent cases.</P> <P>(iii) Medical direction can occur for a single case furnished on or after January 1, 1998 if the physician performs the activities described in § 415.110 of this chapter and medically directs a single CRNA or AA.</P> <P>(2) The rules for medical direction differ for certain time periods depending on the nature of the qualified individual who is directed by the physician. If more than two procedures are directed on or after January 1, 1994, the qualified individuals could be AAs, CRNAs, interns, or residents. The medical direction rules apply to student nurse anesthetists only if the physician directs two concurrent cases, each of which involves a student nurse anesthetist or the physician directs one case involving a student nurse anesthetist and the other involving a CRNA, AA, intern, or resident.</P> <P>(3) Payment for medical direction is based on a specific percentage of the payment allowance recognized for the anesthesia service personally performed by a physician alone. The following percentages apply for the years specified:</P> <P>(i) CY 1994—60 percent of the payment allowance for personally performed procedures.</P> <P>(ii) CY 1995—57.5 percent of the payment allowance for personally performed services.</P> <P>(iii) CY 1996—55 percent of the payment allowance for personally performed services.</P> <P>(iv) CY 1997—52.5 percent of the payment allowance for personally performed services.</P> <P>(v) CY 1998 and thereafter—50 percent of the payment allowance for personally performed services.</P> <P>(e) <E T="03">Physicians involved with two concurrent cases with residents.</E> The physician can bill base units and time units based on the amount of time the physician is actually present with the resident during each of two concurrent cases furnished on or after January 1, 2004.</P> <P>(1) To bill the base units, the physician must be present with the resident during the pre- and post-anesthesia care included in the base units.</P> <P>(2) If the physician is not present with the resident during pre- and post-anesthesia care, then the physician may bill the case as a medically directed case in accordance with paragraph (d) of this section.</P> <P>(f) <E T="03">Physician medically supervises anesthesia services.</E> If the physician medically supervises more than four concurrent anesthesia services, CMS bases the fee schedule amount on an anesthesia-specific CF and three base units. This represents payment for the physician's involvement in the pre-surgical anesthesia services.</P> <P>(g) <E T="03">Payment for medical or surgical services furnished by a physician while furnishing anesthesia services.</E> (1) CMS allows separate payment under the fee schedule for certain reasonable and medically necessary medical or surgical services furnished by a physician while furnishing anesthesia services to the patient. CMS makes payment for these services in accordance with the general physician fee schedule rules in § 414.20. These services are described in program operating instructions.</P> <P>(2) CMS makes no separate payment for other medical or surgical services, such as the pre-anesthetic examination of the patient, pre- or post-operative <PRTPAGE P="16"/>visits, or usual monitoring functions, that are ordinarily included in the anesthesia service.</P> <P>(h) <E T="03">Physician involved in multiple anesthesia services.</E> If the physician is involved in multiple anesthesia services for the same patient during the same operative session, the carrier makes payment according to the base unit associated with the anesthesia service having the highest base unit value and anesthesia time that encompasses the multiple services. The carrier makes payment for add-on anesthesia codes according to program operating instructions.</P> <CITA>[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 58 FR 63687, Dec. 2, 1993; 60 FR 63177, Dec. 8, 1995; 64 FR 59441, Nov. 2, 1999; 67 FR 80041, Dec. 31, 2002; 68 FR 63261, Nov. 7, 2003]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.48</SECTNO> <SUBJECT>Limits on actual charges of nonparticipating suppliers.</SUBJECT> <P>(a) <E T="03">General rule.</E> A supplier, as defined in § 400.202 of this chapter, who is nonparticipating and does not accept assignment may charge a beneficiary an amount up to the limiting charge described in paragraph (b) of this section.</P> <P>(b) <E T="03">Specific limits.</E> For items or services paid under the physician fee schedule, the limiting charge is 115 percent of the fee schedule amount for nonparticipating suppliers. For items or services CMS excludes from payment under the physician fee schedule (in accordance with section 1848 (j)(3) of the Act), the limiting charge is 115 percent of 95 percent of the payment basis applicable to participating suppliers as calculated in § 414.20(b).</P> <CITA>[58 FR 63687, Dec. 2, 1993, as amended at 62 FR 59102, Oct. 31, 1997]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.50</SECTNO> <SUBJECT>Physician billing for purchased diagnostic tests.</SUBJECT> <P>(a) <E T="03">General rule.</E> For services covered under section 1861(s)(3) of the Act and paid for under this part 414 subpart A, if a physician bills for a diagnostic test performed by an outside supplier, the payment to the physician less the applicable deductibles and coinsurance may not exceed the lowest of the following amounts:</P> <P>(1) The supplier's net charge to the physician.</P> <P>(2) The physician's actual charge.</P> <P>(3) The fee schedule amount for the test that would be allowed if the supplier billed directly.</P> <P>(b) <E T="03">Restriction on payment.</E> The physician must identify the supplier and indicate the supplier's net charge for the test. If the physician fails to provide this information, CMS makes no payment to the physician and the physician may not bill the beneficiary.</P> <P>(1) Physicians who accept Medicare assignment may bill beneficiaries for only the applicable deductibles and coinsurance.</P> <P>(2) Physicians who do not accept Medicare assignment may not bill the beneficiary more than the payment amount described in paragraph (a) of this section.</P> <CITA>[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, as amended at 63 FR 34328, June 24, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.52</SECTNO> <SUBJECT>Payment for physician assistants' services.</SUBJECT> <P>Allowed amounts for the services of a physician assistant furnished beginning January 1, 1992 and ending December 31, 1997, may not exceed the limits specified in paragraphs (a) through (c) of this section. Allowed amounts for the services of a physician assistant furnished beginning January 1, 1998, may not exceed the limits specified in paragraph (d) of this section.</P> <P>(a) For assistant-at-surgery services, 65 percent of the amount that would be allowed under the physician fee schedule if the assistant-at-surgery service was furnished by a physician.</P> <P>(b) For services (other than assistant-at-surgery services) furnished in a hospital, 75 percent of the physician fee schedule amount for the service.</P> <P>(c) For all other services, 85 percent of the physician fee schedule amount for the service.</P> <P>(d) For services (other than assistant-at-surgery services) furnished beginning January 1, 1998, 85 percent of the physician fee schedule amount for the service. For assistant-at-surgery services, 85 percent of the physician fee schedule amount that would be allowed under the physician fee schedule if the <PRTPAGE P="17"/>assistant-at-surgery service were furnished by a physician.</P> <CITA>[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, as amended at 63 FR 58911, Nov. 2, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.54</SECTNO> <SUBJECT>Payment for certified nurse-midwives' services.</SUBJECT> <P>For services furnished after December 31, 1991, allowed amounts under the fee schedule established under section 1833(a)(1)(K) of the Act for the payment of certified nurse-midwife services may not exceed 65 percent of the physician fee schedule amount for the service.</P> </SECTION> <SECTION> <SECTNO>§ 414.56</SECTNO> <SUBJECT>Payment for nurse practitioners' and clinical nurse specialists' services.</SUBJECT> <P>(a) <E T="03">Rural areas.</E> For services furnished beginning January 1, 1992 and ending December 31, 1997, allowed amounts for the services of a nurse practitioner or a clinical nurse specialist in a rural area (as described in section 1861(s)(2)(K)(iii) of the Act) may not exceed the following limits:</P> <P>(1) For services furnished in a hospital (including assistant-at-surgery services), 75 percent of the physician fee schedule amount for the service.</P> <P>(2) For all other services, 85 percent of the physician fee schedule amount for the service.</P> <P>(b) <E T="03">Non-rural areas.</E> For services furnished beginning January 1, 1992 and ending December 31, 1997, allowed amounts for the services of a nurse practitioner or a clinical nurse specialist in a nursing facility may not exceed 85 percent of the physician fee schedule amount for the service.</P> <P>(c) <E T="03">Beginning January 1, 1998.</E> For services (other than assistant-at-surgery services) furnished beginning January 1, 1998, allowed amounts for the services of a nurse practitioner or clinical nurse specialist may not exceed 85 percent of the physician fee schedule amount for the service. For assistant-at-surgery services, allowed amounts for the services of a nurse practitioner or clinical nurse specialist may not exceed 85 percent of the physician fee schedule amount that would be allowed under the physician fee schedule if the assistant-at-surgery service were furnished by a physician.</P> <CITA>[63 FR 58911, Nov. 2, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.58</SECTNO> <SUBJECT>Payment of charges for physician services to patients in providers.</SUBJECT> <P>(a) <E T="03">Payment under the physician fee schedule.</E> In addition to the special conditions for payment in §§ 415.100 through 415.130, and § 415.190 of this chapter, CMS establishes payment for physician services to patients in providers under the physician fee schedule in accordance with §§ 414.1 through 414.48.</P> <P>(b) <E T="03">Teaching hospitals.</E> Services furnished by physicians in teaching hospitals may be made on a reasonable cost basis set forth in § 415.162 of this chapter if the hospital exercises the election described in § 415.160 of this chapter.</P> <CITA>[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 60 FR 63189, Dec. 8, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.60</SECTNO> <SUBJECT>Payment for the services of CRNAs.</SUBJECT> <P>(a) <E T="03">Basis for payment.</E> The allowance for the anesthesia service furnished by a CRNA, medically directed or not medically directed, is based on allowable base and time units as defined in § 414.46(a). Beginning with CY 1994—</P> <P>(1) The allowance for an anesthesia service furnished by a medically directed CRNA is based on a fixed percentage of the allowance recognized for the anesthesia service personally performed by the physician alone, as specified in § 414.46(d)(3); and</P> <P>(2) The CF for an anesthesia service furnished by a CRNA not directed by a physician may not exceed the CF for a service personally performed by a physician.</P> <P>(b) <E T="03">To whom payment may be made.</E> Payment for an anesthesia service furnished by a CRNA may be made to the CRNA or to any individual or entity (such as a hospital, critical access hospital, physician, group practice, or ambulatory surgical center) with which the CRNA has an employment or contract relationship that provides for payment to be made to the individual or entity.</P> <P>(c) <E T="03">Condition for payment.</E> Payment for the services of a CRNA may be made only on an assignment related basis, and any assignment accepted by a CRNA is binding on any other person <PRTPAGE P="18"/>presenting a claim or request for payment for the service.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 62 FR 46037, Aug. 29, 1997; 64 FR 59441, Nov. 2, 1999]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.62</SECTNO> <SUBJECT>Fee schedule for clinical psychologist services.</SUBJECT> <P>The fee schedule for clinical psychologist services is set at 100 percent of the amount determined for corresponding services under the physician fee schedule.</P> <CITA>[62 FR 59102, Oct. 31, 1997]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.63</SECTNO> <SUBJECT>Payment for outpatient diabetes self-management training.</SUBJECT> <P>(a) Payment under the physician fee schedule. Except as provided in paragraph (d) of this section, payment for outpatient diabetes self-management training is made under the physician fee schedule in accordance with §§ 414.1 through 414.48.</P> <P>(b) To whom payment may be made. Payment may be made to an entity approved by CMS to furnish outpatient diabetes self-management training in accordance with part 410, subpart H of this chapter.</P> <P>(c) Limitation on payment. Payment may be made for training sessions actually attended by the beneficiary and documented on attendance sheets.</P> <P>(d) Payments made to those not paid under the physician fee schedule. Payments may be made to other entities not routinely paid under the physician fee schedule, such as hospital outpatient departments, ESRD facilities, and DME suppliers. The payment equals the amounts paid under the physician fee schedule.</P> <P>(e) Other conditions for fee-for-service payment. The beneficiary must meet the following conditions:</P> <P>(1) Has not previously received initial training for which Medicare payment was made under this benefit.</P> <P>(2) Is not receiving services as an inpatient in a hospital, SNF, hospice, or nursing home.</P> <P>(3) Is not receiving services as an outpatient in an RHC or FQHC.</P> <CITA>[65 FR 83153, Dec. 29, 2000]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.64</SECTNO> <SUBJECT>Payment for medical nutrition therapy.</SUBJECT> <P>(a) <E T="03">Payment under the physician fee schedule.</E> Medicare payment for medical nutrition therapy is made under the physician fee schedule in accordance with subpart B of this part. Payment to non-physician professionals, as specified in paragraph (b) of this section, is the lesser of the actual charges or 80 percent of 85 percent of the physician fee schedule amount.</P> <P>(b) <E T="03">To whom payment may be made.</E> Payment may be made to a registered dietician or nutrition professional qualified to furnish medical nutrition therapy in accordance with part 410, subpart G of this chapter.</P> <P>(c) <E T="03">Effective date of payment.</E> Medicare pays suppliers of medical nutrition therapy on or after the effective date of enrollment of the supplier at the carrier.</P> <P>(d) <E T="03">Limitation on payment.</E> Payment is made only for documented nutritional therapy sessions actually attended by the beneficiary.</P> <P>(e) <E T="03">Other conditions for fee-for-service payment.</E> Payment is made only if the beneficiary:</P> <P>(1) Is not an inpatient of a hospital, SNF, nursing home, or hospice.</P> <P>(2) Is not receiving services in an RHC, FQHC or ESRD dialysis facility.</P> <CITA>[66 FR 55332, Nov. 1, 2001]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.65</SECTNO> <SUBJECT>Payment for telehealth services.</SUBJECT> <P>(a) <E T="03">Professional service.</E> Medicare payment for the professional service via an interactive telecommunications system is made according to the following limitations:</P> <P>(1) The Medicare payment amount for office or other outpatient visits, consultation, individual psychotherapy, psychiatric diagnostic interview examination, pharmacologic management, end stage renal disease related services included in the monthly capitation payment (except for one visit per month to examine the access site), and individual medical nutrition therapy furnished via an interactive telecommunications system is equal to the current fee schedule amount applicable for the service of the physician or practitioner.<PRTPAGE P="19"/> </P> <P>(2) Only the physician or practitioner at the distant site may bill and receive payment for the professional service via an interactive telecommunications system.</P> <P>(3) Payments made to the physician or practitioner at the distant site, including deductible and coinsurance, for the professional service may not be shared with the referring practitioner or telepresenter.</P> <P>(b) <E T="03">Originating site facility fee.</E> For telehealth services furnished on or after October 1, 2001:</P> <P>(1) For services furnished on or after October 1, 2001 through December 31, 2002, the payment amount to the originating site is the lesser of the actual charge or the originating site facility fee of $20. For services furnished on or after January 1 of each subsequent year, the facility fee for the originating site will be updated by the Medicare Economic Index (MEI) as defined in section 1842(i)(3) of the Act.</P> <P>(2) Only the originating site may bill for the originating site facility fee and only on an assignment-related basis. The distant site physician or practitioner may not bill for or receive payment for facility fees associated with the professional service furnished via an interactive telecommunications system.</P> <P>(c) <E T="03">Deductible and coinsurance apply.</E> The payment for the professional service and originating site facility fee is subject to the coinsurance and deductible requirements of sections 1833(a)(1) and (b) of the Act.</P> <P>(d) <E T="03">Assignment required for physicians, practitioners, and originating sites.</E> Payment to physicians, practitioners, and originating sites is made only on an assignment-related basis.</P> <P>(e) <E T="03">Sanctions.</E> A distant site practitioner or originating site facility may be subject to the applicable sanctions provided for in chapter IV, part 402 and chapter V, parts 1001, 1002, and 1003 of this title if he or she does any of the following:</P> <P>(1) Knowingly and willfully bills or collects for services in violation of the limitation of this section.</P> <P>(2) Fails to timely correct excess charges by reducing the actual charge billed for the service in an amount that does not exceed the limiting charge for the service or fails to timely refund excess collections.</P> <P>(3) Fails to submit a claim on a standard form for services provided for which payment is made on a fee schedule basis.</P> <P>(4) Imposes a charge for completing and submitting the standard claims form.</P> <CITA>[66 FR 55332, Nov. 1, 2001, as amended at 67 FR 80041, Dec. 31, 2003; 69 FR 66424, Nov. 15, 2004; 70 FR 70332, Nov. 21, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.66</SECTNO> <SUBJECT>Incentive payments for physician scarcity areas.</SUBJECT> <P>(a) <E T="03">Definition.</E> As used in this section, the following definitions apply.</P> <P> <E T="03">Physician scarcity area</E> is defined as an area with a shortage of primary care physicians or specialty physicians to the Medicare population in that area.</P> <P> <E T="03">Primary care physician</E> is defined as a general practitioner, family practice practitioner, general internist, obstetrician or gynecologist.</P> <P>(b) Physicians' services furnished to a beneficiary in a Physician Scarcity Area (PSA) for primary or specialist care are eligible for a 5 percent incentive payment.</P> <P>(c) Primary care physicians furnishing services in primary care PSAs are entitled to an additional 5 percent incentive payment above the amount paid under the physician fee schedule for their professional services furnished on or after January 1, 2005 and before January 1, 2008.</P> <P>(d) Physicians, as defined in section 1861(r)(1) of the Act, furnishing services in specialist care PSAs are entitled to an additional 5 percent payment above the amount paid under the physician fee schedule for their professional services furnished on or after January 1, 2005 and before January 1, 2008.</P> <CITA>[69 FR 66424, Nov. 15, 2004]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.67</SECTNO> <SUBJECT>Incentive payments for Health Professional Shortage Areas.</SUBJECT> <P>(a) Physicians' services furnished to a beneficiary in a geographic-based Health Professional Shortage Area (HPSA) are eligible for a 10 percent incentive payment above the amount paid for their professional services under the physician fee schedule.<PRTPAGE P="20"/> </P> <P>(b) Physicians furnishing services in a geographic-based primary medical care HPSA are entitled to a 10 percent incentive payment above the amount paid for their professional services under the physician fee schedule.</P> <P>(c) Psychiatrists furnishing services in a mental health HPSA are entitled to a 10 percent incentive payment above the amount paid for their professional services under the physician fee schedule. (The only physicians eligible to receive the 10 percent incentive payment in mental health HPSAs that do not overlap with primary care HPSAs are psychiatrists.)</P> <CITA>[69 FR 66424, Nov. 15, 2004]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Fee Schedules for Parenteral and Enteral Nutrition (PEN) Nutrients, Equipment and Supplies</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>66 FR 45176, Aug. 28, 2001, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 414.100</SECTNO> <SUBJECT>Purpose.</SUBJECT> <P>This subpart implements fee schedules for PEN items and services as authorized by section 1842(s) of the Act.</P> </SECTION> <SECTION> <SECTNO>§ 414.102</SECTNO> <SUBJECT>General payment rules.</SUBJECT> <P>(a) General rule. For items and services furnished on or after January 1, 2002, Medicare pays for the items and services as described in paragraph (b) of this section on the basis of 80 percent of the lesser of—</P> <P>(1) The actual charge for the item or service; or</P> <P>(2) The fee schedule amount for the item or service, as determined in accordance with §§ 414.104.</P> <P>(b) Payment classification. (1) CMS or the carrier determines fee schedules for Parenteral and enteral nutrition (PEN) nutrients, equipment, and supplies, as specified in § 414.104.</P> <P>(2) CMS designates the specific items and services in each category through program instructions.</P> <P>(c) Updating the fee schedule amounts. For each year subsequent to 2002, the fee schedule amounts of the preceding year are updated by the percentage increase in the CPI-U for the 12-month period ending with June of the preceding year.</P> </SECTION> <SECTION> <SECTNO>§ 414.104</SECTNO> <SUBJECT>PEN Items and Services.</SUBJECT> <P>(a) Payment Rules. Payment for PEN items and services is made in a lump sum for nutrients and supplies that are purchased and on a monthly basis for equipment that is rented.</P> <P>(b) Fee schedule amount. The fee schedule amount for payment for an item or service furnished in 2002 is the lesser of—</P> <P>(i) The reasonable charge from 1995; or</P> <P>(ii) The reasonable charge that would have been used in determining payment for 2002.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Payment for Durable Medical Equipment and Prosthetic and Orthotic Devices</HD> <SECTION> <SECTNO>§ 414.200</SECTNO> <SUBJECT>Purpose.</SUBJECT> <P>This subpart implements sections 1834 (a) and (h) of the Act by specifying how payments are made for the purchase or rental of new and used durable medical equipment and prosthetic and orthotic devices for Medicare beneficiaries.</P> <CITA>[57 FR 57689, Dec. 7, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.202</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>For purposes of this subpart, the following definitions apply:</P> <P> <E T="03">Covered item update</E> means the percentage increase in the consumer price index for all urban consumers (U.S. city average) (CPI-U) for the 12-month period ending with June of the previous year.</P> <P> <E T="03">Durable medical equipment</E> means equipment, furnished by a supplier or a home health agency that—</P> <P>(1) Can withstand repeated use;</P> <P>(2) Is primarily and customarily used to serve a medical purpose;</P> <P>(3) Generally is not useful to an individual in the absence of an illness or injury; and</P> <P>(4) Is appropriate for use in the home. (See § 410.38 of this chapter for a description of when an institution qualifies as a home.)</P> <P> <E T="03">Prosthetic and orthotic devices</E> means—</P> <P>(1) Devices that replace all or part of an internal body organ, including ostomy bags and supplies directly related to ostomy care, and replacement of such devices and supplies;<PRTPAGE P="21"/> </P> <P>(2) One pair of conventional eyeglasses or contact lenses furnished subsequent to each cataract surgery with insertion of an intraocular lens; and</P> <P>(3) Leg, arm, back, and neck braces, and artificial legs, arms, and eyes, including replacements if required because of a change in the beneficiary's physical condition.</P> <FP>The following are neither prosthetic nor orthotic devices—</FP> <P>(1) Parenteral and enteral nutrients, supplies, and equipment;</P> <P>(2) Intraocular lenses;</P> <P>(3) Medical supplies such as catheters, catheter supplies, ostomy bags, and supplies related to ostomy care that are furnished by an HHA as part of home health services under § 409.40(e) of this chapter;</P> <P>(4) Dental prostheses.</P> <P> <E T="03">Region</E> means those carrier service areas administered by CMS regional offices.</P> <CITA>[57 FR 57689, Dec. 7, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.210</SECTNO> <SUBJECT>General payment rules.</SUBJECT> <P>(a) <E T="03">General rule.</E> For items furnished on or after January 1, 1989, except as provided in paragraphs (c) and (d) of this section, Medicare pays for durable medical equipment, prosthetics and orthotics, including a separate payment for maintenance and servicing of the items as described in paragraph (e) of this section, on the basis of 80 percent of the lesser of—</P> <P>(1) The actual charge for the item;</P> <P>(2) The fee schedule amount for the item, as determined in accordance with the provisions of §§ 414.220 through 414.232.</P> <P>(b) <E T="03">Payment classification.</E> (1) The carrier determines fee schedules for the following classes of equipment and devices:</P> <P>(i) Inexpensive or routinely purchased items, as specified in § 414.220.</P> <P>(ii) Items requiring frequent and substantial servicing, as specified in § 414.222.</P> <P>(iii) Certain customized items, as specified in § 414.224.</P> <P>(iv) Oxygen and oxygen equipment, as specified in § 414.226.</P> <P>(v) Prosthetic and orthotic devices, as specified in § 414.228.</P> <P>(vi) Other durable medical equipment (capped rental items), as specified in § 414.229.</P> <P>(vii) Transcutaneous electrical nerve stimulators (TENS), as specified in § 414.232.</P> <P>(2) CMS designates the items in each class of equipment or device through its program instructions.</P> <P>(c) <E T="03">Exception for certain HHAs.</E> Public HHAs and HHAs that furnish services or items free-of-charge or at nominal prices to a significant number of low-income patients, as defined in § 413.13(a) of this chapter, are paid on the basis of 80 percent of the fee schedule amount determined in accordance with the provision of §§ 414.220 through 414.230.</P> <P>(d) <E T="03">Prohibition on special limits.</E> For items furnished on or after January 1, 1989 and before January 1, 1991, neither CMS nor a carrier may establish a special reasonable charge for items covered under this subpart on the basis of inherent reasonableness as described in § 405.502(g) of this chapter.</P> <P>(e) <E T="03">Maintenance and servicing</E>—(1) <E T="03">General rule.</E> Except as provided in paragraph (e)(2) of this section, the carrier pays the reasonable and necessary charges for maintenance and servicing of purchased equipment. Reasonable and necessary charges are those made for parts and labor not otherwise covered under a manufacturer's or supplier's warranty. Payment is made, as needed, in a lump sum based on the carrier's consideration of the item. Payment is not made for maintenance and servicing of a rented item other than the maintenance and servicing fee for other durable medical equipment, as described in § 414.229(e).</P> <P>(2) <E T="03">Exception.</E> For items purchased on or after June 1, 1989, no payment is made under the provisions of paragraph (e)(1) of this section for the maintenance and servicing of:</P> <P>(i) Items requiring frequent and substantial servicing, as defined in § 414.222(a);</P> <P>(ii) Capped rental items, as defined in § 414.229(a), that are not purchased in accordance with § 414.229(d); and</P> <P>(iii) Oxygen equipment, as defined in § 414.226.</P> <P>(f) <E T="03">Replacement of equipment.</E> Except as provided in § 414.229(g), if a purchased item of DME or a prosthetic or <PRTPAGE P="22"/>orthotic device paid for under this subpart has been in continuous use by the patient for the equipment's reasonable useful lifetime or if the carrier determines that the item is lost or irreparably damaged, the patient may elect to obtain a new piece of equipment.</P> <P>(1) The reasonable useful lifetime of DME or prosthetic and orthotic devices is determined through program instructions. In the absence of program instructions, carriers may determine the reasonable useful lifetime of equipment but in no case can it be less than 5 years. Computation is based on when the equipment is delivered to the beneficiary, not the age of the equipment.</P> <P>(2) If the beneficiary elects to obtain replacement equipment, payment is made on a purchase basis.</P> <CITA>[57 FR 57689, Dec. 7, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.220</SECTNO> <SUBJECT>Inexpensive or routinely purchased items.</SUBJECT> <P>(a) <E T="03">Definitions.</E> (1) <E T="03">Inexpensive equipment</E> means equipment the average purchase price of which did not exceed $150 during the period July 1986 through June 1987.</P> <P>(2) <E T="03">Routinely purchased equipment</E> means equipment that was acquired by purchase on a national basis at least 75 percent of the time during the period July 1986 through June 1987.</P> <P>(3) <E T="03">Accessories.</E> Effective January 1, 1994, accessories used in conjunction with a nebulizer, aspirator, or ventilator excluded from § 414.222 meet the definitions of “inexpensive equipment” and “routinely purchased equipment” in paragraphs (a)(1) and (a)(2) of this section, respectively.</P> <P>(b) <E T="03">Payment rules.</E> (1) Subject to the limitation in paragraph (b)(3) of this section, payment for inexpensive and routinely purchased items is made on a rental basis or in a lump sum amount for purchase of the item based on the applicable fee schedule amount.</P> <P>(2) Effective January 1, 1994, payment for ostomy supplies, tracheostomy supplies, urologicals, and surgical dressings not furnished as incident to a physician's professional service or furnished by an HHA is made using the methodology for the inexpensive and routinely purchased class.</P> <P>(3) The total amount of payments made for an item may not exceed the fee schedule amount recognized for the purchase of that item.</P> <P>(c) <E T="03">Fee schedule amount for 1989 and 1990.</E> The fee schedule amount for payment of purchase or rental of inexpensive or routinely purchased items furnished in 1989 and 1990 is the local payment amount determined as follows:</P> <P>(1) The carrier determines the average reasonable charge for inexpensive or routinely purchased items that were furnished during the period July 1, 1986 through June 30, 1987 based on the mean of the carrier's allowed charges for the item. A separate determination of an average reasonable charge is made for rental equipment, new purchased equipment, and used purchased equipment.</P> <P>(2) The carrier adjusts the amount determined under paragraph (c)(1) of this section by the change in the level of the CPI-U for the 6-month period ending December 1987.</P> <P>(d) <E T="03">Updating the local payment amounts for years after 1990.</E> For each year subsequent to 1990, the local payment amounts of the preceding year are increased or decreased by the covered item update. For 1991 and 1992, the covered item update is reduced by 1 percentage point.</P> <P>(e) <E T="03">Calculating the fee schedule amounts for years after 1990.</E> For years after 1990, the fee schedule amounts are equal to the national limited payment amount.</P> <P>(f) <E T="03">Calculating the national limited payment amount.</E> The national limited payment amount is computed as follows:</P> <P>(1) The 1991 national limited payment amount is equal to:</P> <P>(i) 100 percent of the local payment amount if the local payment amount is neither greater than the weighted average nor less than 85 percent of the weighted average of all local payment amounts;</P> <P>(ii) The sum of 67 percent of the local payment amount plus 33 percent of the weighted average of all local payment amounts if the local payment amount exceeds the weighted average of all local payment amounts; or</P> <P>(iii) The sum of 67 percent of the local payment amount plus 33 percent of 85 percent of the weighted average of all local payment amounts if the local payment amount is less than 85 percent <PRTPAGE P="23"/>of the weighted average of all local payment amounts.</P> <P>(2) The 1992 national limited payment amount is equal to:</P> <P>(i) 100 percent of the local payment amount if the local payment amount is neither greater than the weighted average nor less than 85 percent of the weighted average of all local payment amounts;</P> <P>(ii) The sum of 33 percent of the local payment amount plus 67 percent of the weighted average of all local payment amounts if the local payment amount exceeds the weighted average; or</P> <P>(iii) The sum of 33 percent of the local payment amount plus 67 percent of 85 percent of the weighted average of all local payment amounts if the local payment amount is less than 85 percent of the weighted average.</P> <P>(3) For 1993, the national limited payment amount is equal to one of the following:</P> <P>(i) 100 percent of the local payment amount if the local payment amount is neither greater than the weighted average nor less than 85 percent of the weighted average of all local payment amounts.</P> <P>(ii) 100 percent of the weighted average of all local payment amounts if the local payment amount exceeds the weighted average of all local payment amounts.</P> <P>(iii) 85 percent of the weighted average of all local payment amounts if the local payment amount is less than 85 percent of the weighted average of all local payment amounts.</P> <P>(4) For 1994 and subsequent years, the national limited payment amount is equal to one of the following:</P> <P>(i) If the local payment amount is not in excess of the median, nor less than 85 percent of the median, of all local payment amounts—100 percent of the local payment amount.</P> <P>(ii) If the local payment amount exceeds the median—100 percent of the median of all local payment amounts.</P> <P>(iii) If the local payment amount is less than 85 percent of the median—85 percent of the median of all local payment amounts.</P> <P>(g) <E T="03">Payment for surgical dressings.</E> For surgical dressings furnished after December 31, 1993, the national limited payment amount is computed based on local payment amounts using average reasonable charges for the 12-month period ending December 31, 1992, increased by the covered item updates for 1993 and 1994.</P> <CITA>[57 FR 57689, Dec. 7, 1992, as amended at 60 FR 35497, July 10, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.222</SECTNO> <SUBJECT>Items requiring frequent and substantial servicing.</SUBJECT> <P>(a) <E T="03">Definition.</E> Items requiring frequent and substantial servicing in order to avoid risk to the beneficiary's health are the following:</P> <P>(1) Ventilators (except those that are either continuous airway pressure devices or respiratory assist devices with bi-level pressure capability with or without a backup rate, previously referred to as “intermittent assist devices with continuous airway pressure devices”).</P> <P>(2) Continuous and intermittent positive pressure breathing machines.</P> <P>(3) Continuous passive motion machines.</P> <P>(4) Other items specified in CMS program instructions.</P> <P>(5) Other items identified by the carrier.</P> <P>(b) <E T="03">Payment rule.</E> Rental payments for items requiring frequent and substantial servicing are made on a monthly basis, and continue until medical necessity ends.</P> <P>(c) <E T="03">Fee schedule amount for 1989 and 1990.</E> The fee schedule amount for items requiring frequent and substantial servicing is the local payment amount determined as follows:</P> <P>(1) The carrier determines the average reasonable charge for rental of items requiring frequent and substantial servicing that were furnished during the period July 1, 1986 through June 30, 1987 based on the mean of the carrier's allowed charges for the item.</P> <P>(2) The carrier adjusts the amounts determined under paragraph (c)(1) of this section by the change in the level of the CPI-U for the 6-month period ending December 1987.</P> <P>(d) <E T="03">Updating the fee schedule amounts for years after 1990.</E> For years after 1990, the fee schedules are determined using the methodology contained in paragraphs (d), (e), and (f) of § 414.220.</P> <P>(e) <E T="03">Transition to other payment classes.</E> For purposes of calculating the 15-<PRTPAGE P="24"/>month rental period, beginning January 1, 1994, if an item has been paid for under the frequent and substantial servicing class and is subsequently paid for under another payment class, the rental period begins with the first month of continuous rental, even if that period began before January 1, 1994. For example, if the rental period began on July 1, 1993, the carrier must use this date as beginning the first month of rental. Likewise, for purposes of calculating the 10-month purchase option, the rental period begins with the first month of continuous rental without regard to when that period started. For example, if the rental period began in August 1993, the 10-month purchase option must be offered to the beneficiary in May 1994, the tenth month of continuous rental.</P> <CITA>[57 FR 57690, Dec. 7, 1992, as amended at 60 FR 35497, July 10, 1995; 71 FR 4525, Jan. 27, 2006]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.224</SECTNO> <SUBJECT>Customized items.</SUBJECT> <P>(a) <E T="03">Criteria for a customized item.</E> To be considered a customized item for payment purposes under paragraph (b) of this section, a covered item (including a wheelchair) must be uniquely constructed or substantially modified for a specific beneficiary according to the description and orders of a physician and be so different from another item used for the same purpose that the two items cannot be grouped together for pricing purposes.</P> <P>(b) <E T="03">Payment rule.</E> Payment is made on a lump sum basis for the purchase of a customized item based on the carrier's individual consideration and judgment of a reasonable payment amount for each customized item. The carrier's individual consideration takes into account written documentation on the costs of the item including at least the cost of labor and materials used in customizing an item.</P> <CITA>[56 FR 65998, Dec. 20, 1991, as amended at 58 FR 34919, June 30, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.226</SECTNO> <SUBJECT>Oxygen and oxygen equipment.</SUBJECT> <P>(a) <E T="03">Payment rules.</E> (1) Payment for rental of oxygen equipment and purchase of oxygen contents is made based on a monthly fee schedule amount.</P> <P>(2) Monthly fee schedule payments continue until medical necessity ends.</P> <P>(b) <E T="03">Monthly fee schedule amount.</E> (1) Monthly fee schedule amounts are separately calculated for the following items:</P> <P>(i) Stationary oxygen equipment and oxygen contents (stationary and portable oxygen contents).</P> <P>(ii) Portable oxygen equipment only.</P> <P>(iii) Stationary and portable oxygen contents only.</P> <P>(iv) Portable oxygen contents only.</P> <P>(2) For 1989 and 1990, the monthly fee schedule amounts are the local payment amounts determined as follows:</P> <P>(i) The carrier determines the base local average monthly payment rate equal to the total reasonable charges for the item for the 12-month period ending December 1986 divided by the total number of months for all beneficiaries receiving the item for the same period. In determining the local average monthly payment rate, the following limitations apply:</P> <P>(A) Purchase charges for oxygen systems are not included as items classified under paragraph (b)(1)(i) of this section.</P> <P>(B) Purchase charges for portable equipment are not included as items classified under paragraph (b)(1)(ii) of this section.</P> <P>(ii) The carrier determines the local monthly payment amount equal to 0.95 times the base local average monthly payment amount adjusted by the change in the CPI-U for the six-month period ending December 1987.</P> <P>(3) For years after 1990, the fee schedule amounts are determined using the methodology contained in § 414.220 (d), (e), and (f).</P> <P>(c) <E T="03">Application of monthly fee schedule amounts.</E> (1) The fee schedule amount for items described in paragraph (b)(1)(i) of this section is paid when the beneficiary rents a stationary oxygen system.</P> <P>(2) Subject to the limitation set forth in paragraph (d)(2) of this section, the fee schedule amount for items described in paragraph (b)(1)(ii) of this section is paid when the beneficiary rents a portable oxygen system.</P> <P>(3) The fee schedule amount for items described in paragraph (b)(1)(iii) of this section is paid when the beneficiary <PRTPAGE P="25"/>owns a stationary gaseous or liquid oxygen system.</P> <P>(4) The fee schedule amount for items described in paragraph (b)(1)(iv) of this section is paid when the beneficiary owns or rents a portable gaseous or portable liquid oxygen system and uses either a stationary oxygen concentrator or no stationary oxygen system.</P> <P>(d) <E T="03">Volume adjustments:</E> (1) The fee schedule amount for an item described in paragraph (b)(1)(i) of this section is adjusted as follows:</P> <P>(i) If the attending physician prescribes an oxygen flow rate exceeding four liters per minute, the fee schedule amount is increased by 50 percent, subject to the limit in paragraph (d)(2) of this section.</P> <P>(ii) If the attending physician prescribes an oxygen flow rate of less than one liter per minute, the fee schedule amount is decreased by 50 percent.</P> <P>(2) If portable oxygen equipment is used and the prescribed oxygen flow rate exceeds four liters per minute, the total fee schedule amount recognized for payment is limited to the higher of—</P> <P>(i) The sum of the monthly fee schedule amount for the items described in paragraphs (b)(1)(i) and (ii) of this section; or</P> <P>(ii) The adjusted fee schedule amount described in paragraph (d)(1)(i) of this section.</P> <P>(3) In establishing the volume adjustment for those beneficiaries whose physicians prescribe varying flow rates, the following rules apply:</P> <P>(i) If the prescribed flow rate is different for stationary oxygen equipment than for portable oxygen equipment, the flow rate for the stationary equipment is used.</P> <P>(ii) If the prescribed flow rate is different for the patient at rest than for the patient at exercise, the flow rate for the patient at rest is used.</P> <P>(iii) If the prescribed flow rate is different for nighttime use and daytime use, the average of the two flow rates is used.</P> <CITA>[57 FR 57690, Dec. 7, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.228</SECTNO> <SUBJECT>Prosthetic and orthotic devices.</SUBJECT> <P>(a) <E T="03">Payment rule.</E> Payment is made on a lump-sum basis for prosthetic and orthotic devices subject to this subpart.</P> <P>(b) <E T="03">Fee schedule amounts.</E> The fee schedule amount for prosthetic and orthotic devices is determined as follows:</P> <P>(1) The carrier determines a base local purchase price equal to the average reasonable charge for items purchased during the period July 1, 1986 through June 30, 1987 based on the mean of the carrier's allowed charges for the item.</P> <P>(2) The carrier determines a local purchase price equal to the following:</P> <P>(i) For 1989 and 1990, the base local purchase price is adjusted by the change in the level of the CPI-U for the 6-month period ending December 1987.</P> <P>(ii) For 1991 through 1993, the local purchase price for the preceding year is adjusted by the applicable percentage increase for the year. The applicable percentage increase is equal to 0 percent for 1991. For 1992 and 1993, the applicable percentage increase is equal to the percentage increase in the CPI-U for the 12-month period ending with June of the previous year.</P> <P>(iii) For 1994 and 1995, the applicable percentage increase is 0 percent.</P> <P>(iv) For all subsequent years the applicable percentage increase is equal to the percentage increase in the CPI-U for the 12-month period ending with June of the previous year.</P> <P>(3) CMS determines the regional purchase price equal to the following:</P> <P>(i) For 1992, the average (weighted by the relative volume of all claims among carriers) of the local purchase prices for the carriers in the region.</P> <P>(ii) For 1993 and subsequent years, the regional purchase price for the preceding year adjusted by the applicable percentage increase for the year.</P> <P>(4) CMS determines a purchase price equal to the following:</P> <P>(i) For 1989, 1990 and 1991, 100 percent of the local purchase price.</P> <P>(ii) For 1992, 75 percent of the local purchase price plus 25 percent of the regional purchase price.</P> <P>(iii) For 1993, 50 percent of the local purchase price plus 50 percent of the regional purchase price.</P> <P>(iv) For 1994 and subsequent years, 100 percent of the regional purchase price.<PRTPAGE P="26"/> </P> <P>(5) For 1992 and subsequent years, CMS determines a national average purchase price equal to the unweighted average of the purchase prices determined under paragraph (b)(4) of this section for all carriers.</P> <P>(6) CMS determines the fee schedule amount equal to 100 percent of the purchase price determined under paragraph (b)(4) of this section, subject to the following limitations:</P> <P>(i) For 1992, the amount cannot be greater than 125 percent nor less than 85 percent of the national average purchase price determined under paragraph (b)(5) of this section.</P> <P>(ii) For 1993 and subsequent years, the amount cannot be greater than 120 percent of the national average nor less than 90 percent of the national average purchase price determined under paragraph (b)(5) of this section.</P> <CITA>[57 FR 57691, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.229</SECTNO> <SUBJECT>Other durable medical equipment—capped rental items.</SUBJECT> <P>(a) <E T="03">General payment rule.</E> Subject to the limitation set forth in paragraph (b) of this section, payment is made on a rental or purchase option basis for other durable medical equipment that is not subject to the payment provisions set forth in §§ 414.220 through 414.228.</P> <P>(b) <E T="03">Fee schedule amounts for rental.</E> (1) For 1989 and 1990, the monthly fee schedule amount for rental of other covered durable medical equipment equals 10 percent of the purchase price recognized as determined under paragraph (c) of this section subject to the following limitation: For 1989 and 1990, the fee schedule amount cannot be greater than 115 percent nor less than 85 percent of the prevailing charge, as determined under § 405.504 of this chapter, established for rental of the item in January 1987, as adjusted by the change in the level of the CPI-U for the 6-month period ending December 1987.</P> <P>(2) For 1991 and subsequent years, the monthly fee schedule amount for rental of other covered durable medical equipment equals 10 percent of the purchase price recognized as determined under paragraph (c) of this section for each of the first 3 months and 7.5 percent of the purchase price for each of the remaining months.</P> <P>(c) <E T="03">Determination of purchase price.</E> The purchase price of other covered durable medical equipment is determined as follows:</P> <P>(1) For <E T="03">1989 and 1990.</E> (i) The carrier determines a base local purchase price amount equal to the average of the purchase prices submitted on an assignment-related basis of new items supplied during the 6-month period ending December 1986.</P> <P>(ii) The purchase price is equal to the base local purchase price adjusted by the change in the level of the CPI-U for the 6-month period ending December 1987.</P> <P>(2) For <E T="03">1991.</E> (i) The local payment amount is the purchase price for the preceding year adjusted by the covered item update for 1991 and decreased by the percentage by which the average of the reasonable charges for claims paid for all other items described in § 414.229, is lower than the average of the purchase prices submitted for such items during the final 9 months of 1988.</P> <P>(ii) The purchase price for 1991 is the national limited payment amount as determined using the methodology contained in § 414.220(f).</P> <P>(3) <E T="03">For years after 1991.</E> The purchase price is determined using the methodology contained in paragraphs (d) through (f) of § 414.220.</P> <P>(d) <E T="03">Purchase option.</E> Suppliers must offer a purchase option to beneficiaries during the 10th continuous rental month and, for power-driven wheelchairs, the purchase option must also be made available at the time the equipment is initially furnished.</P> <P>(1) Suppliers must offer beneficiaries the option of purchasing power-driven wheelchairs at the time the supplier first furnishes the item. Payment must be on a lump-sum fee schedule purchase basis if the beneficiary chooses the purchase option. The purchase fee is the amount established in § 414.229(c).</P> <P>(2) Suppliers must offer beneficiaries the option of converting capped rental items (including power-driven wheelchairs not purchased when initially furnished) to purchased equipment during their 10th continuous rental month. Beneficiaries have one month <PRTPAGE P="27"/>from the date the supplier makes the offer to accept the purchase option.</P> <P>(i) If the beneficiary does not accept the purchase option, payment continues on a rental basis not to exceed a period of continuous use of longer than 15 months. After 15 months of rental payments have been paid, the supplier must continue to provide the item without charge, other than a charge for maintenance and servicing fees, until medical necessity ends or Medicare coverage ceases. A period of continuous use is determined under the provisions in § 414.230.</P> <P>(ii) If the beneficiary accepts the purchase option, payment continues on a rental basis not to exceed a period of continuous use of longer than 13 months. On the first day after 13 continuous rental months during which payment is made, the supplier must transfer title to the equipment to the beneficiary.</P> <P>(e) <E T="03">Payment for maintenance and servicing.</E> (1) The carrier establishes a reasonable fee for maintenance and servicing for each rented item of other durable medical equipment. The fee may not exceed 10 percent of the purchase price recognized as determined under paragraph (c) of this section.</P> <P>(2) Payment of the fee for maintenance and servicing of other durable medical equipment that is rented is made only for equipment that continues to be used after 15 months of rental payments have been made and is limited to the following:</P> <P>(i) For the first 6-month period, no payments are to be made.</P> <P>(ii) For each succeeding 6-month period, payment may be made during the first month of that period.</P> <P>(3) Payment for maintenance and servicing DME purchased in accordance with paragraphs (d)(1) and (d)(2)(ii) of this section, is made on the basis of reasonable and necessary charges.</P> <P>(f) <E T="03">Transition to the fee schedules.</E> For purposes of computing the 10-month or 15-month period of continuous use for other durable medical equipment, as described in § 414.230, the carrier counts the first month that the beneficiary continuously rented the equipment without regard to whether that month occurred before January 1, 1989 or after. If a beneficiary's 15-month rental period ends prior to January 1, 1989, no further purchase or rental payments are to be made except for maintenance and servicing of equipment as described in paragraph (e) of this section.</P> <P>(g) <E T="03">Replacement of equipment.</E> If the item of equipment has been in continuous use by the patient on either a rental or purchase basis for the equipment's useful lifetime, or if the carrier determines that the item is lost or irreparably damaged, the patient may elect to obtain a new piece of equipment.</P> <P>(1) The reasonable useful lifetime of DME or prosthetic and orthotic devices is determined through program instructions. In the absence of program instructions, carriers may determine the reasonable useful lifetime of equipment but in no case can it be less than 5 years. Computation is based on when the equipment is delivered to the beneficiary, not the age of the equipment.</P> <P>(2) If the beneficiary elects to obtain replacement equipment, payment is made on a rental or purchase basis in accordance with paragraph (a) of this section or on a lump-sum purchase basis if a purchase agreement had been entered into in accordance with paragraph (d) of this section.</P> <CITA>[57 FR 57691, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.230</SECTNO> <SUBJECT>Determining a period of continuous use.</SUBJECT> <P>(a) <E T="03">Scope.</E> This section sets forth the rules that apply in determining a period of continuous use for rental of durable medical equipment.</P> <P>(b) <E T="03">Continuous use.</E> A period of continuous use begins with the first month of medical need and lasts until a beneficiary's medical need for a particular item of durable medical equipment ends.</P> <P>(c) <E T="03">Temporary interruption.</E> (1) A period of continuous use allows for temporary interruptions in the use of equipment.</P> <P>(2) An interruption of not longer than 60 consecutive days plus the days remaining in the rental month in which use ceases is temporary, regardless of the reason for the interruption.<PRTPAGE P="28"/> </P> <P>(3) Unless there is a break in medical necessity that lasts lnnger than 60 consecutive days plus the days remaining in the rental month in which use ceases, medical necessity is presumed to continue.</P> <P>(d) <E T="03">Criteria for a new rental period.</E> If an interruption in the use of equipment continues for more than 60 consecutive days plus the days remaining in the rental month in which use ceases, a new rental period begins if the supplier submits all of the following information—</P> <P>(1) A new prescription.</P> <P>(2) New medical necessity documentation.</P> <P>(3) A statement describing the reason for the interruption and demonstrating that medical necessity in the prior episode ended.</P> <P>(e) <E T="03">Beneficiary moves.</E> A permanent or temporary move made by a beneficiary does not constitute an interruption in the period of continuous use.</P> <P>(f) <E T="03">New equipment.</E> If a beneficiary changes equipment or requires additional equipment based on a physician's prescription, and the new or additional equipment is found to be necessary, a new period of continuous use begins for the new or additional equipment. A new period of continuous use does not begin for base equipment that is modified by an addition.</P> <P>(g) <E T="03">New supplier.</E> If a beneficiary changes suppliers, a new period of continuous use does not begin.</P> <CITA>[56 FR 50823, Oct. 9, 1991, as amended at 57 FR 57111, Dec. 3, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.232</SECTNO> <SUBJECT>Special payment rules for transcutaneous electrical nerve stimulators (TENS).</SUBJECT> <P>(a) <E T="03">General payment rule.</E> Except as provided in paragraph (b) of this section, payment for TENS is made on a purchase basis with the purchase price determined using the methodology for purchase of inexpensive or routinely purchased items as described in § 414.220. The payment amount for TENS computed under § 414.220(c)(2) is reduced according to the following formula:</P> <P>(1) Effective April 1, 1990—the original payment amount is reduced by 15 percent.</P> <P>(2) Effective January 1, 1991—the reduced payment amount in paragraph (a)(1) is reduced by 15 percent.</P> <P>(3) Effective January 1, 1994—the reduced payment amount in paragraph (a)(1) is reduced by 45 percent.</P> <P>(b) <E T="03">Exception.</E> In order to permit an attending physician time to determine whether the purchase of the TENS is medically appropriate for a particular patient, two months of rental payments may be made in addition to the purchase price. The rental payments are equal to 10 percent of the purchase price.</P> <CITA>[57 FR 57692, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Determination of Reasonable Charges Under the ESRD Program</HD> <SECTION> <SECTNO>§ 414.300</SECTNO> <SUBJECT>Scope of subpart.</SUBJECT> <P>This subpart sets forth criteria and procedures for payment of the following services furnished to ESRD patients:</P> <P>(a) Physician services related to renal dialysis.</P> <P>(b) Physician services related to renal transplantation.</P> <P>(c) Home dialysis equipment, supplies, and support services.</P> <P>(d) Epoetin (EPO) furnished by a supplier of home dialysis equipment and supplies to a home dialysis patient for use in the home.</P> <CITA>[55 FR 23441, June 8, 1990, as amended at 56 FR 43710, Sept. 4, 1991; 59 FR 1285, Jan. 10, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.310</SECTNO> <SUBJECT>Determination of reasonable charges for physician services furnished to renal dialysis patients.</SUBJECT> <P>(a) <E T="03">Principle.</E> Physician services furnished to renal dialysis patients are subject to payment if the services are otherwise covered by the Medicare program and if they are considered reasonable and medically necessary in accordance with section 1862(a)(1)(A) of the Act.</P> <P>(b) <E T="03">Scope and applicability</E>—(1) <E T="03">Scope.</E> This section pertains to physician services furnished to the following patients:</P> <P>(i) Outpatient maintenance dialysis patients who dialyze—<PRTPAGE P="29"/> </P> <P>(A) In an independent or hospital-based ESRD facility, or</P> <P>(B) At home.</P> <P>(ii) Hospital inpatients for which the physician elects to continue payment under the monthly capitation payment (MCP) method described in § 414.314.</P> <P>(2) <E T="03">Applicability.</E> These provisions apply to routine professional services of physicians. They do not apply to administrative services performed by physicians, which are paid for as part of a prospective payment for dialysis services made to the facility under § 413.170 of this chapter.</P> <P>(c) <E T="03">Definitions.</E> For purposes of this section, the following definitions apply:</P> <P> <E T="03">Administrative services</E> are physician services that are differentiated from routine professional services and other physician services because they are supervision, as described in the definition of “supervision of staff” of this section, or are not related directly to the care of an individual patient, but are supportive of the facility as a whole and of benefit to patients in general. Examples of administrative services include supervision of staff, staff training, participation in staff conferences and in the management of the facility, and advising staff on the procurement of supplies.</P> <P> <E T="03">Dialysis session</E> is the period of time that begins when the patient arrives at the facility and ends when the patient departs from the facility. In the case of home dialysis, the period begins when the patient prepares for dialysis and generally ends when the patient is disconnected from the machine. In this context, a dialysis facility includes only those parts of the building used as a facility. It does not include any areas used as a physician's office.</P> <P> <E T="03">Medical direction,</E> in contrast to supervision of staff, is a routine professional service that entails substantial direct involvement and the physical presence of the physician in the delivery of services directly to the patient.</P> <P> <E T="03">Routine professional services</E> include all physicians' services furnished during a dialysis session and all services listed in paragraph (d) of this section that meet the following requirements:</P> <P>(1) They are personally furnished by a physician to an individual patient.</P> <P>(2) They contribute directly to the diagnosis or treatment of an individual patient.</P> <P>(3) They ordinarily must be performed by a physician.</P> <P> <E T="03">Supervision of staff,</E> in contrast to medical direction, is an administrative service that does not necessarily require the physician to be present at the dialysis session. It is a general activity primarily concerned with monitoring performance of and giving guidance to other health care personnel (such as nurses and dialysis technicians) who deliver services to patients.</P> <P>(d) <E T="03">Types of routine professional services.</E> Routine professional services include at least all of the following services when medically appropriate:</P> <P>(1) Visits to the patient during dialysis, and review of laboratory test results, nurses' notes and any other medical documentation, as a basis for—</P> <P>(i) Adjustment of the patient's medication or diet, or the dialysis procedure;</P> <P>(ii) Prescription of medical supplies; and</P> <P>(iii) Evaluation of the patient's psychosocial status and the appropriateness of the treatment modality.</P> <P>(2) Medical direction of staff in delivering services to a patient during a dialysis session.</P> <P>(3) Pre-dialysis and post-dialysis examinations, or examinations that could have been furnished on a pre-dialysis or post-dialysis basis.</P> <P>(4) Insertion of catheters for patients who are on peritoneal dialysis and do not have indwelling catheters.</P> <P>(e) <E T="03">Payment for routine professional services.</E> Beginning August 7, 1990, routine professional services furnished by physicians may be paid under either the “initial method” of payment described in § 414.313, (if all of the physicians at the facility elect the initial method) or under the “physician MCP method” described in § 414.314. Physician services furnished after July 31, 1983 and before August 6, 1990, are payable only under the MCP method described in § 414.314.</P> </SECTION> <SECTION> <SECTNO>§ 414.313</SECTNO> <SUBJECT>Initial method of payment.</SUBJECT> <P>(a) <E T="03">Basic rule.</E> Under this method, the intermediary pays the facility for routine professional services furnished by <PRTPAGE P="30"/>physicians. Payment is in the form of an add-on to the facility's composite rate payment, which is described in part 413, subpart H of this subchapter.</P> <P>(b) <E T="03">Services for which payment is not included in the add-on payment.</E> (1) Physician administrative services are considered to be facility services and are paid for as part of the facility's composite rate.</P> <P>(2) The carrier pays the physician or the beneficiary (as appropriate) under the reasonable charge criteria set forth in subpart E of part 405 of this chapter for the following services:</P> <P>(i) Physician services that must be furnished at a time other than during the dialysis session (excluding pre-dialysis and post-dialysis examinations and examinations that could have been furnished on a pre-dialysis or post-dialysis basis), such as monthly and semi-annual examinations to review health status and treatment.</P> <P>(ii) Physician surgical services other than insertion of catheters for patients who are on peritoneal dialysis and do not have indwelling catheters.</P> <P>(iii) Physician services furnished to hospital inpatients who were not admitted solely to receive maintenance dialysis.</P> <P>(iv) Administration of hepatitis B vaccine.</P> <P>(c) <E T="03">Physician election of the initial method.</E> (1) Each physician in a facility must submit to the appropriate carrier and intermediary that serve the facility a statement of election of the initial method of payment for all the ESRD facility patients that he or she attends.</P> <P>(2) The initial method of payment applies to dialysis services furnished beginning with the second calendar month after the month in which all physicians in the facility elect the initial method and continues until the effective date of a termination of the election described in paragraph (d) of this section.</P> <P>(d) <E T="03">Termination of the initial method.</E> (1) Physicians may terminate the initial method of payment by written notice to the carrier(s) that serves each physician and to the intermediary that serves the facility.</P> <P>(2) If the notice terminating the initial method is received by the carrier(s) and intermediary—</P> <P>(i) On or before November 1, the effective date of the termination is January 1 of the year following the calendar year in which the termination notice is received by the carrier(s) and intermediary; or</P> <P>(ii) After November 1, the effective date of the termination is January 1 of the second year after the calendar year in which the notice is received by the carrier(s) and intermediary.</P> <P>(e) <E T="03">Determination of payment amount.</E> The factors used in determining the add-on amount are related to program experience. They are re-evaluated periodically and may be adjusted, as determined necessary by CMS, to maintain the payment at a level commensurate with the prevailing charges of other physicians for comparable services.</P> <P>(f) <E T="03">Publication of payment amount.</E> Revisions to the add-on amounts are published in the <E T="04">Federal Register</E> in accordance with the Department's established rulemaking procedures.</P> <CITA>[55 FR 23441, June 8, 1990, as amended at 62 FR 43674, Aug. 15, 1997]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.314</SECTNO> <SUBJECT>Monthly capitation payment method.</SUBJECT> <P>(a) <E T="03">Basic rules.</E> (1) Under the monthly capitation payment (MCP) method, the carrier pays an MCP amount for each patient, to cover all professional services furnished by the physician, except those listed in paragraph (b) of this section.</P> <P>(2) The carrier pays the MCP amount, subject to the deductible and coinsurance provisions, either to the physician if the physician accepts assignment or to the beneficiary if the physician does not accept assignment.</P> <P>(3) The MCP method recognizes the need of maintenance dialysis patients for physician services furnished periodically over relatively long periods of time, and the capitation amounts are consistent with physicians' charging patterns in their localities.</P> <P>(4) Payment of the capitation amount for any particular month is contingent upon the physician furnishing to the patient all physician services required by the patient during <PRTPAGE P="31"/>the month, except those listed in paragraph (b) of this section.</P> <P>(5) Payment for physician administrative services (§ 414.310) is made to the dialysis facility as part of the facility's composite rate (part 413, subpart H of this subchapter) and not to the physician under the MCP.</P> <P>(b) <E T="03">Services not included in the MCP.</E> (1) Services that are not included in the MCP and which may be paid in accordance with the reasonable charge rules set forth in subpart E of part 405 of this chapter are limited to the following:</P> <P>(i) Administration of hepatitis B vaccine.</P> <P>(ii) Covered physician services furnished by another physician when the patient is not available to receive, or the attending physician is not available to furnish, the outpatient services as usual (see paragraph (b)(3) of this section).</P> <P>(iii) Covered physician services furnished to hospital inpatients, including services related to inpatient dialysis, by a physician who elects not to continue to receive the MCP during the period of inpatient stay.</P> <P>(iv) Surgical services, including declotting of shunts, other than the insertion of catheters for patients on maintenance peritoneal dialysis who do not have indwelling catheters.</P> <P>(v) Needed physician services that are—</P> <P>(A) Furnished by the physician furnishing renal care or by another physician;</P> <P>(B) Not related to the treatment of the patient's renal condition; and</P> <P>(C) Not furnished during a dialysis session or an office visit required because of the patient's renal condition.</P> <P>(2) For the services described in paragraph (b)(1)(v) of this section, the following rules apply:</P> <P>(i) The physician must provide documentation to show that the services are not related to the treatment of the patient's renal condition and that additional visits are required.</P> <P>(ii) The carrier's medical staff, acting on the basis of the documentation and appropriate medical consultation obtained by the carrier, determines whether additional payment for the additional services is warranted.</P> <P>(3) The MCP is reduced in proportion to the number of days the patient is—</P> <P>(i) Hospitalized and the physician elects to bill separately for services furnished during hospitalization; or</P> <P>(ii) Not attended by the physician or his or her substitute for any reason, including when the physician is not available to furnish patient care or when the patient is not available to receive care.</P> <P>(c) <E T="03">Determination of payment amount.</E> The amount of payment for the MCP is determined under the Medicare physician fee schedule described in this part 414.</P> <CITA>[55 FR 23441, June 8, 1990, as amended at 59 FR 63463, Dec. 8, 1994; 62 FR 43674, Aug. 15, 1997]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.316</SECTNO> <SUBJECT>Payment for physician services to patients in training for self-dialysis and home dialysis.</SUBJECT> <P>(a) For each patient, the carrier pays a flat amount that covers all physician services required to create the capacity for self-dialysis and home dialysis.</P> <P>(b) CMS determines the amount on the basis of program experience and reviews it periodically.</P> <P>(c) The payment is made at the end of the training course, is subject to the deductible and coinsurance provisions, and is in addition to any amounts payable under the initial or MCP methods set forth in §§ 414.313 and 414.314, respectively.</P> <P>(d) If the training is not completed, the payment amount is proportionate to the time spent in training.</P> </SECTION> <SECTION> <SECTNO>§ 414.320</SECTNO> <SUBJECT>Determination of reasonable charges for physician renal transplantation services.</SUBJECT> <P>(a) <E T="03">Comprehensive payment for services furnished during a 60-day period.</E> (1) The comprehensive payment is subject to the deductible and coinsurance provisions and is for all surgeon services furnished during a period of 60 days in connection with a renal transplantation, including the usual preoperative and postoperative care, and for immunosuppressant therapy if supervised by the transplant surgeon.</P> <P>(2) Additional sums, in amounts established on the basis of program experience, may be included in the comprehensive payment for other surgery <PRTPAGE P="32"/>performed concurrently with the transplant operation.</P> <P>(3) The amount of the comprehensive payment may not exceed the lower of the following:</P> <P>(i) The actual charges made for the services.</P> <P>(ii) Overall national payment levels established under the ESRD program and adjusted to give effect to variations in physician's charges throughout the nation. (These adjusted amounts are the maximum allowances in a carrier's service area for renal transplantation surgery and related services by surgeons.)</P> <P>(4) Maximum allowances computed under these instructions are revised at the beginning of each calendar year to the extent permitted by the lesser of the following:</P> <P>(i) Changes in the economic index as described in § 405.504(a)(3)(i) of this chapter.</P> <P>(ii) Percentage changes in the weighted average of the carrier's prevailing charges (before adjustment by the economic index) for—</P> <P>(A) A unilateral nephrectomy; or</P> <P>(B) Another medical or surgical service designated by CMS for this purpose.</P> <P>(b) <E T="03">Other payments.</E> Payments for covered medical services furnished to the transplant recipient by other specialists, as well as for services by the transplant surgeon after the 60-day period covered by the comprehensive payment, are made under the reasonable charge criteria set forth in § 405.502 (a) through (d) of this chapter. The payments for physicians' services in connection with renal transplantations are changed on the basis of program experience and the expected advances in the medical art for this operation.</P> </SECTION> <SECTION> <SECTNO>§ 414.330</SECTNO> <SUBJECT>Payment for home dialysis equipment, supplies, and support services.</SUBJECT> <P>(a) <E T="03">Equipment and supplies</E>—(1) <E T="03">Basic rule.</E> Except as provided in paragraph (a)(2) of this section, Medicare pays for home dialysis equipment and supplies only under the prospective payment rates established at § 413.170.</P> <P>(2) <E T="03">Exception.</E> If the conditions in subparagraphs (a)(2) (i) through (iv) of this section are met, Medicare pays for home analysis equipment and supplies on a reasonable charge basis in accordance with subpart E (Criteria for Determination of Reasonable Charges; Reimbursement for Services of Hospital Interns, Residents, and Supervising Physicians) of part 405, but the amount of payment may not exceed the limit for equipment and supplies in paragraph (c)(2) of this section.</P> <P>(i) The patient elects to obtain home dialysis equipment and supplies from a supplier that is not a Medicare approved dialysis facility.</P> <P>(ii) The patient certifies to CMS that he or she has only one supplier for all home dialysis equipment and supplies. This certification is made on CMS Form 382 (the “ESRD Beneficiary Selection” form).</P> <P>(iii) In writing, the supplier—</P> <P>(A) Agrees to receive Medicare payment for home dialysis supplies and equipment only on an assignment-related basis; and</P> <P>(B) Certifies to CMS that it has a written agreement with one Medicare approved dialysis facility or, if the beneficiary is also entitled to military or veteran's benefits, one military or Veterans Administration hospital, for each patient. (See subpart U of part 405 of this chapter for the requirements for a Medicare approved dialysis facility.) Under the agreement, the facility or military or VA hospital agrees to the following:</P> <P>(<E T="03">1</E>) To furnish all home dialysis support services for each patient in accordance with subpart U (Conditions for Coverage of Suppliers of ESRD Services) of this chapter. (§ 410.52 sets forth the scope and conditions of Medicare Part B coverage of home dialysis services, supplies, and equipment.)</P> <P>(<E T="03">2</E>) To furnish institutional dialysis services and supplies. (§ 410.50 sets forth the scope and conditions for Medicare Part B coverage of institutional dialysis services and supplies.)</P> <P>(<E T="03">3</E>) To furnish dialysis-related emergency services.</P> <P>(<E T="03">4</E>) To arrange for a Medicare approved laboratory to perform dialysis-related laboratory tests that are covered under the composite rate established at § 413.170 and to arrange for the laboratory to seek payment from the facility. The facility then includes these laboratory services in its claim <PRTPAGE P="33"/>for payment for home dialysis support services.</P> <P>(<E T="03">5</E>) To arrange for a Medicare approved laboratory to perform dialysis-related laboratory tests that are not covered under the composite rate established at § 413.170 and for which the laboratory files a Medicare claim directly.</P> <P>(<E T="03">6</E>) To furnish all other necessary dialysis services and supplies (that is, those which are not home dialysis equipment and supplies).</P> <P>(<E T="03">7</E>) To satisfy all documentation, recordkeeping and reporting requirements in subpart U (Conditions for Coverage of Suppliers of ESRD Services) of this chapter. This includes maintaining a complete medical record of ESRD related items and services furnished by other parties. The facility must report, on the forms required by CMS or the ESRD network, all data for each patient in accordance with subpart U.</P> <P>(iv) The facility with which the agreement is made must be located within a reasonable distance from the patient's home (that is, located so that the facility can actually furnish the needed services in a practical and timely manner, taking into account variables like the terrain, whether the patient's home is located in an urban or rural area, the availability of transportation, and the usual distances traveled by patients in the area to obtain health care services).</P> <P>(b) <E T="03">Support services</E>—(1) <E T="03">Basic rule.</E> Except as provided in paragraph (b)(2) of this section, Medicare pays for support services only under the prospective payment rates established in § 413.170 of this chapter.</P> <P>(2) <E T="03">Exceptions.</E> If the patient elects to obtain home dialysis equipment and supplies from a supplier that is not an approved ESRD facility, Medicare pays for support services, other than support services furnished by military or VA hospitals referred to in paragraph (a)(2)(iii)(B) of this section, under paragraphs (b)(2) (i) and (ii) of this section but in no case may the amount of payment exceed the limit for support services in paragraph (c)(1) of this section:</P> <P>(i) For support services furnished by a hospital-based ESRD facility, Medicare pays on a reasonable cost basis in accordance with part 413 of this chapter.</P> <P>(ii) For support services furnished by an independent ESRD facility, Medicare pays on the basis of reasonable charges that are related to costs and allowances that are reasonable when the services are furnished in an effective and economical manner.</P> <P>(c) <E T="03">Payment limits</E>—(1) <E T="03">Support services.</E> The amount of payment for home dialysis support services is limited to the national average Medicare-allowed charge per patient per month for home dialysis support services, as determined by CMS, plus the median cost per treatment for all dialysis facilities for laboratory tests included under the composite rate, as determined by CMS, multiplied by the national average number of treatments per month.</P> <P>(2) <E T="03">Equipment and supplies.</E> Payment for home dialysis equipment and supplies is limited to an amount equal to the result obtained by subtracting the support services payment limit in paragraph (c)(1) of this section from the amount (or, in the case of continuous cycling peritoneal dialysis, 130 percent) of the national median payment as determined by CMS that would have been made under the prospective payment rates established in § 413.170 of this chapter for hospital-based facilities.</P> <P>(3) <E T="03">Notification of changes to the payment limits.</E> Updated data are incorporated into the payment limits when the prospective payment rates established at § 413.170 of this chapter are updated, and changes are announced by notice in the <E T="04">Federal Register</E> without a public comment period. Revisions of the methodology for determining the limits are published in the <E T="04">Federal Register</E> in accordance with the Department's established rulemaking procedures.</P> <CITA>[57 FR 54187, Nov. 17, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.335</SECTNO> <SUBJECT>Payment for EPO furnished to a home dialysis patient for use in the home.</SUBJECT> <P>(a) Payment for EPO used at home by a home dialysis patient is made only to either a Medicare approved ESRD facility or a supplier of home dialysis equipment and supplies.<PRTPAGE P="34"/> </P> <P>(b) Payment is made in accordance with the rules set forth in § 413.170 of this chapter.</P> <CITA>[56 FR 43710, Sept. 4, 1991]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Competitive Bidding for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)</HD> <SECTION> <SECTNO>§ 414.400-§ 414.404</SECTNO> <RESERVED>[Reserved]</RESERVED> </SECTION> <SECTION> <SECTNO>§ 414.406</SECTNO> <SUBJECT>Implementation of programs.</SUBJECT> <P>(a) <E T="03">Implementation contractor.</E> CMS designates one or more implementation contractors for the purpose of implementing this subpart.</P> <P>(b)-(d) [Reserved]</P> <P>(e) <E T="03">Claims processing.</E> The Durable Medical Equipment Medicare Administrative Contractor designated to process DMEPOS claims for a particular geographic region also processes claims for items furnished under a competitive bidding program in the same geographic region.</P> <CITA>[71 FR 48409, Aug. 18, 2006]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.408-§ 414.426</SECTNO> <RESERVED>[Reserved]</RESERVED> </SECTION> </SUBPART> <SUBPART> <RESERVED>Subpart G [Reserved]</RESERVED> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart H—Fee Schedule for Ambulance Services</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>67 FR 9132, Feb. 27, 2002, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 414.601</SECTNO> <SUBJECT>Purpose.</SUBJECT> <P>This subpart implements section 1834(l) of the Act by establishing a fee schedule for the payment of ambulance services. Section 1834(l) of the Act requires that, except for services furnished by certain critical access hospitals (see § 413.70(b)(5) of this chapter), payment for all ambulance services, otherwise previously payable on a reasonable charge basis or retrospective reasonable cost basis, be made under a fee schedule.</P> </SECTION> <SECTION> <SECTNO>§ 414.605</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart, the following definitions apply to both land and water (hereafter collectively referred to as “ground”) ambulance services and to air ambulance services unless otherwise specified:</P> <P> <E T="03">Advanced life support (ALS) assessment</E> is an assessment performed by an ALS crew as part of an emergency response that was necessary because the patient's reported condition at the time of dispatch was such that only an ALS crew was qualified to perform the assessment. An ALS assessment does not necessarily result in a determination that the patient requires an ALS level of service.</P> <P> <E T="03">Advanced life support (ALS) intervention</E> means a procedure that is, in accordance with State and local laws, required to be furnished by ALS personnel.</P> <P> <E T="03">Advanced life support, level 1 (ALS1)</E> means transportation by ground ambulance vehicle, medically necessary supplies and services and either an ALS assessment by ALS personnel or the provision of at least one ALS intervention.</P> <P> <E T="03">Advanced life support, level 2 (ALS2)</E> means either transportation by ground ambulance vehicle, medically necessary supplies and services, and the administration of at least three medications by intravenous push/bolus or by continuous infusion, excluding crystalloid, hypotonic, isotonic, and hypertonic solutions (Dextrose, Normal Saline, Ringer's Lactate); or transportation, medically necessary supplies and services, and the provision of at least one of the following ALS procedures:</P> <P>(1) Manual defibrillation/cardioversion.</P> <P>(2) Endotracheal intubation.</P> <P>(3) Central venous line.</P> <P>(4) Cardiac pacing.</P> <P>(5) Chest decompression.</P> <P>(6) Surgical airway.</P> <P>(7) Intraosseous line.</P> <P> <E T="03">Advanced life support (ALS) personnel</E> means an individual trained to the level of the emergency medical technician-intermediate (EMT-Intermediate) or paramedic. The EMT-Intermediate is defined as an individual who is qualified, in accordance with State and local laws, as an EMT-Basic and who is also qualified in accordance with State and local laws to perform essential advanced techniques and to administer a <PRTPAGE P="35"/>limited number of medications. The EMT-Paramedic is defined as possessing the qualifications of the EMT-Intermediate and also, in accordance with State and local laws, as having enhanced skills that include being able to administer additional interventions and medications.</P> <P> <E T="03">Basic life support (BLS)</E> means transportation by ground ambulance vehicle and medically necessary supplies and services, plus the provision of BLS ambulance services. The ambulance must be staffed by an individual who is qualified in accordance with State and local laws as an emergency medical technician-basic (EMT-Basic). These laws may vary from State to State. For example, only in some States is an EMT-Basic permitted to operate limited equipment on board the vehicle, assist more qualified personnel in performing assessments and interventions, and establish a peripheral intravenous (IV) line.</P> <P> <E T="03">Conversion factor (CF)</E> is the dollar amount established by CMS that is multiplied by relative value units to produce ground ambulance service base rates.</P> <P> <E T="03">Emergency response</E> means responding immediately at the BLS or ALS1 level of service to a 911 call or the equivalent in areas without a 911 call system. An immediate response is one in which the ambulance entity begins as quickly as possible to take the steps necessary to respond to the call.</P> <P> <E T="03">Fixed wing air ambulance (FW)</E> means transportation by a fixed wing aircraft that is certified as a fixed wing air ambulance and such services and supplies as may be medically necessary.</P> <P> <E T="03">Geographic adjustment factor (GAF)</E> means the practice expense (PE) portion of the geographic practice cost index (GPCI) from the physician fee schedule as applied to a percentage of the base rate. For ground ambulance services, the PE portion of the GPCI is applied to 70 percent of the base rate for each level of service. For air ambulance services, the PE portion of the GPCI is applied to 50 percent of the applicable base rate.</P> <P> <E T="03">Goldsmith modification</E> means the recognition of rural areas within certain Standard Metropolitan Statistical Areas wherein a census tract is deemed to be rural when located within a large metropolitan county of at least 1,225 square miles, but is so isolated from the metropolitan core of that county by distance or physical features as to be more rural than urban in character.</P> <P> <E T="03">Loaded mileage</E> means the number of miles the Medicare beneficiary is transported in the ambulance vehicle.</P> <P> <E T="03">Paramedic ALS intercept (PI)</E> means EMT-Paramedic services furnished by an entity that does not furnish the ground ambulance transport, provided the services meet the requirements specified in § 410.40(c) of this chapter.</P> <P> <E T="03">Point of pick-up</E> means the location of the beneficiary at the time he or she is placed on board the ambulance.</P> <P> <E T="03">Relative value units (RVUs)</E> means a value assigned to a ground ambulance service.</P> <P> <E T="03">Rotary wing air ambulance (RW)</E> means transportation by a helicopter that is certified as an ambulance and such services and supplies as may be medically necessary.</P> <P> <E T="03">Rural adjustment factor (RAF)</E> means an adjustment applied to the base payment rate when the point of pick-up is located in a rural area.</P> <P> <E T="03">Rural area</E> means an area located outside a Metropolitan Statistical Area (MSA), or, in New England, a New England County Metropolitan Area (NECMA), or an area within an MSA or NECMA that is identified as rural by the Goldsmith modification.</P> <P> <E T="03">Specialty care transport (SCT)</E> means interfacility transportation of a critically injured or ill beneficiary by a ground ambulance vehicle, including medically necessary supplies and services, at a level of service beyond the scope of the EMT-Paramedic. SCT is necessary when a beneficiary's condition requires ongoing care that must be furnished by one or more health professionals in an appropriate specialty area, for example, nursing, emergency medicine, respiratory care, cardiovascular care, or a paramedic with additional training.</P> <CITA>[67 FR 9132, Feb. 27, 2002, as amended at 68 FR 67693, Dec. 5, 2003]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.610</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> <P>(a) <E T="03">Method of payment.</E> Medicare payment for ambulance services is based on the lesser of the actual charge or <PRTPAGE P="36"/>the applicable fee schedule amount. The fee schedule payment for ambulance services equals a base rate for the level of service plus payment for mileage and applicable adjustment factors. Except for services furnished by certain critical access hospitals or entities owned and operated by them, as described in § 413.70(b) of this chapter, all ambulance services are paid under the fee schedule specified in this subpart (regardless of the vehicle furnishing the service).</P> <P>(b) <E T="03">Mandatory assignment.</E> Effective with implementation of the ambulance fee schedule described in § 414.601 (that is, for services furnished on or after April 1, 2002), all payments made for ambulance services are made only on an assignment-related basis. Ambulance suppliers must accept the Medicare allowed charge as payment in full and may not bill or collect from the beneficiary any amount other than the unmet Part B deductible and Part B coinsurance amounts. Violations of this requirement may subject the provider or supplier to sanctions, as provided by law (part 402 of this chapter).</P> <P>(c) <E T="03">Formula for computation of payment amounts.</E> The fee schedule payment amount for ambulance services is computed according to the following provisions:</P> <P>(1) <E T="03">Ground ambulance service levels.</E> The CF is multiplied by the applicable RVUs for each level of service to produce a service-level base rate. For services furnished during the period July 1, 2004 through December 31, 2006, ambulance services originating in urban areas (both base rate and mileage) are paid based on a rate that is one percent higher than otherwise is applicable under this section, and ambulance services originating in rural areas (both base rate and mileage) are paid based on a rate that is two percent higher than otherwise is applicable under this section. The service-level base rate is then adjusted by the GAF. Compare this amount to the actual charge. The lesser of the actual charge or the GAF adjusted base rate amount is added to the lesser of the actual mileage charges or the payment rate per mile, multiplied by the number of miles that the beneficiary was transported. When applicable, the appropriate RAF is applied to the ground mileage rate to determine the appropriate payment rates. The RVU scale for the ambulance fee schedule is as follows:</P> <GPOTABLE CDEF="s25,9" COLS="2" OPTS="L2"> <BOXHD> <CHED H="1">Service level</CHED> <CHED H="1">Relative<LI>value units</LI> <LI>(RVUs)</LI> </CHED> </BOXHD> <ROW> <ENT I="01">BLS</ENT> <ENT>1.00</ENT> </ROW> <ROW> <ENT I="01">BLS-Emergency</ENT> <ENT>1.60</ENT> </ROW> <ROW> <ENT I="01">ALS1</ENT> <ENT>1.20</ENT> </ROW> <ROW> <ENT I="01">ALS1-Emergency</ENT> <ENT>1.90</ENT> </ROW> <ROW> <ENT I="01">ALS2</ENT> <ENT>2.75</ENT> </ROW> <ROW> <ENT I="01">SCT</ENT> <ENT>3.25</ENT> </ROW> <ROW> <ENT I="01">PI</ENT> <ENT>1.75</ENT> </ROW> </GPOTABLE> <P>(2) <E T="03">Air ambulance service levels.</E> The base payment rate for the applicable type of air ambulance service is adjusted by the GAF and, when applicable, by the appropriate RAF to determine the amount of payment. Air ambulance services have no CF or RVUs. This amount is compared to the actual charge. The lesser of the charge or the adjusted GAF rate amount is added to the payment rate per mile, multiplied by the number of miles that the beneficiary was transported. When applicable, the appropriate RAF is also applied to the air mileage rate.</P> <P>(3) <E T="03">Loaded mileage.</E> Payment is based on loaded miles. Payment for air mileage is based on loaded miles flown as expressed in statute miles. There are three mileage payment rates: a rate for FW services, a rate for RW services, and a rate for all levels of ground transportation.</P> <P>(4) <E T="03">Geographic adjustment factor (GAF).</E> For ground ambulance services, the PE portion of the GPCI from the physician fee schedule is applied to 70 percent of the base rate for ground ambulance services. For air ambulance services, the PE portion of the physician fee schedule GPCI is applied to 50 percent of the base rate for air ambulance services.</P> <P>(5) <E T="03">Rural adjustment factor (RAF).</E> (i) For ground ambulance services where the point of pickup is in a rural area, the mileage rate is increased by 50 percent for each of the first 17 miles and by 25 percent for miles 18 through 50. The standard mileage rate applies to every mile over 50 miles. For air ambulance services where the point of pickup is in a rural area, the total payment is increased by 50 percent; that is, the <PRTPAGE P="37"/>rural adjustment factor applies to the sum of the base rate and the mileage rate.</P> <P>(ii) For services furnished during the period July 1, 2004 through December 31, 2009, the payment amount for the ground ambulance base rate is increased by 22.6 percent where the point of pickup is in a rural area determined to be in the lowest 25 percent of rural population arrayed by population density. The amount of this increase is based on CMS's estimate of the ratio of the average cost per trip for the rural areas in the lowest quartile of population compared to the average cost per trip for the rural areas in the highest quartile of population. In making this estimate, CMS may use data provided by the GAO.</P> <P>(6) <E T="03">Multiple patients.</E> The allowable amount per beneficiary for a single ambulance transport when more than one patient is transported simultaneously is based on the total number of patients (both Medicare and non-Medicare) on board. If two patients are transported simultaneously, then the payment allowance for the beneficiary (or for each of them if both patients are beneficiaries) is equal to 75 percent of the service payment allowance applicable for the level of care furnished to the beneficiary, plus 50 percent of the applicable mileage payment allowance. If three or more patients are transported simultaneously, the payment allowance for the beneficiary (or each of them) is equal to 60 percent of the service payment allowance applicable for the level of care furnished to the beneficiary, plus the applicable mileage payment allowance divided by the number of patients on board.</P> <P>(7) <E T="03">Payment rate for mileage greater than 50 miles.</E> For services furnished during the period July 1, 2004 through December 31, 2008, each loaded ambulance mile greater than 50 (that is, miles 51 and greater) for ambulance transports originating in either urban areas or in rural areas are paid based on a rate that is 25 percent higher than otherwise is applicable under this section.</P> <P>(d) <E T="03">Payment.</E> Payment, in accordance with this subpart, represents payment in full (subject to applicable Medicare Part B deductible and coinsurance requirements as described in subpart G of part 409 of this chapter or in subpart I of part 410 of this chapter) for all services, supplies, and other costs for an ambulance service furnished to a Medicare beneficiary. No direct payment will be made under this subpart if billing for the ambulance service is required to be consolidated with billing for another benefit for which payment may be made under this chapter.</P> <P>(e) <E T="03">Point of pick-up.</E> The zip code of the point of pick-up must be reported on each claim for ambulance services so that the correct GAF and RAF may be applied, as appropriate.</P> <P>(f) <E T="03">Updates.</E> The CF, the air ambulance base rates, and the mileage rates are updated annually by an inflation factor established by law. The inflation factor is based on the consumer price index for all urban consumers (CPI-U) (U.S. city average) for the 12-month period ending with June of the previous year.</P> <P>(g) <E T="03">Adjustments.</E> The Secretary will annually review rates and will adjust the CF and air ambulance rates if actual experience under the fee schedule is significantly different from the assumptions used to determine the initial CF and air ambulance rates. The CF and air ambulance rates will not be adjusted solely because of changes in the total number of ambulance transports.</P> <CITA>[67 FR 9132, Feb. 27, 2002, as amended at 68 FR 67693, Dec. 5, 2003; 69 FR 40292, July 1, 2004]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.615</SECTNO> <SUBJECT>Transition to the ambulance fee schedule.</SUBJECT> <P>The fee schedule for ambulance services will be phased in over 5 years beginning April 1, 2002. Subject to the first sentence in § 414.610(a), payment for services furnished during the transition period is made based on a combination of the fee schedule payment for ambulance services and the amount the program would have paid absent the fee schedule for ambulance services, as follows:</P> <P>(a) <E T="03">2002 Payment.</E> For services furnished in 2002, the payment for the service component, the mileage component and, if applicable, the supply component is based on 80 percent of the <PRTPAGE P="38"/>reasonable charge for independent suppliers or on 80 percent of reasonable cost for providers, plus 20 percent of the ambulance fee schedule amount for the service and mileage components. The reasonable charge or reasonable cost portion of payment in CY 2002 is equal to the supplier's reasonable charge allowance or provider's reasonable cost allowance for CY 2001, multiplied by the statutory inflation factor for ambulance services.</P> <P>(b) <E T="03">2003 Payment.</E> For services furnished in CY 2003, payment is based on 60 percent of the reasonable charge or reasonable cost, as applicable, plus 40 percent of the ambulance fee schedule amount. The reasonable charge and reasonable cost portion in CY 2003 is equal to the supplier's reasonable charge or provider's reasonable cost for CY 2002, multiplied by the statutory inflation factor for ambulance services.</P> <P>(c) <E T="03">2004 Payment.</E> For services furnished in CY 2004, payment is based on 40 percent of the reasonable charge or reasonable cost, as applicable, plus 60 percent of the ambulance fee schedule amount. The reasonable charge and reasonable cost portion in CY 2004 is equal to the supplier's reasonable charge or provider's reasonable cost for CY 2003, multiplied by the statutory inflation factor for ambulance services.</P> <P>(d) <E T="03">2005 Payment.</E> For services furnished in CY 2005, payment is based on 20 percent of the reasonable charge or reasonable cost, as applicable, plus 80 percent of the ambulance fee schedule amount. The reasonable charge and reasonable cost portion in CY 2005 is equal to the supplier's reasonable charge or provider's reasonable cost for CY 2004, multiplied by the statutory inflation factor for ambulance services.</P> <P>(e) <E T="03">2006 and Beyond Payment.</E> For services furnished in CY 2006 and thereafter, the payment is based solely on the ambulance fee schedule amount.</P> <P>(f) <E T="03">Updates.</E> The portion of the transition payment that is based on the existing payment methodology (that is, the non-fee-schedule portion) is updated annually for inflation by a factor equal to the percentage increase in the CPI-U (U.S. city average) for the 12-month period ending with June of the previous year. The CY 2002 inflation update factor used to update the 2001 payment amounts is applied to the annualized (average) payment amounts for CY 2001. For the period January 1, 2001 through June 30, 2001, the inflation update factor is 2.7 percent. For the period July 1, 2001 through December 31, 2001, the inflation update factor is 4.7 percent. The average for the year is 3.7 percent. Thus, the annualized (average) CY 2001 payment amounts used to derive the CY 2002 payment amounts are equivalent to the CY 2001 payment amounts that would have been determined had the inflation update factor for the entire CY 2001 been 3.7 percent. Both portions of the transition payment (that is, the portion that is based on reasonable charge or reasonable cost and the portion that is based on the ambulance fee schedule) are updated annually for inflation by the inflation factor described in § 414.610(f).</P> <P>(g) <E T="03">Exception.</E> There will be no blended payment allowance as described in paragraphs (a), (b), (c), and (d) of this section for ground mileage in those States where the Medicare carrier paid separately for all out-of-county ground ambulance mileage, but did not, before the implementation of the Medicare ambulance fee schedule, make a separate payment for any ground ambulance mileage within the county in which the beneficiary was transported. Payment for ground ambulance mileage in that State will be made based on the full ambulance fee schedule amount for ground mileage. This exception applies only to carrier-processed claims and only in those States in which the carrier paid separately for out-of-county ambulance mileage, but did not make separate payment for any in-county mileage throughout the entire State.</P> </SECTION> <SECTION> <SECTNO>§ 414.617</SECTNO> <SUBJECT>Transition from regional to national ambulance fee schedule.</SUBJECT> <P>For services furnished during the period July 1, 2004 through December 31, 2009, the amount for the ground ambulance base rate is subject to a floor amount determined by establishing nine fee schedules based on each of the nine census divisions using the same methodology as used to establish the national fee schedule. If the regional fee schedule methodology for a given census division results in an amount <PRTPAGE P="39"/>that is less than or equal to the national ground base rate, then it is not used, and the national FS amount applies. If the regional fee schedule methodology for a given census division results in an amount that is greater than the national ground base rate, then the FS portion of the base rate for that census division is equal to a blend of the national rate and the regional rate in accordance with the following schedule:</P> <GPOTABLE CDEF="s25,8,8" COLS="3" OPTS="L2"> <BOXHD> <CHED H="1">Time period</CHED> <CHED H="1">Regional percent</CHED> <CHED H="1">National percent</CHED> </BOXHD> <ROW> <ENT I="01">7/1/04-12/31/04</ENT> <ENT>80</ENT> <ENT>20</ENT> </ROW> <ROW> <ENT I="01">CY 2005</ENT> <ENT>60</ENT> <ENT>40</ENT> </ROW> <ROW> <ENT I="01">CY 2006</ENT> <ENT>40</ENT> <ENT>60</ENT> </ROW> <ROW> <ENT I="01">CY 2007-CY 2009</ENT> <ENT>20</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">CY 2010 and thereafter</ENT> <ENT>0</ENT> <ENT>100</ENT> </ROW> </GPOTABLE> <CITA>[69 FR 40292, July 1, 2004]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.620</SECTNO> <SUBJECT>Publication of the ambulance fee schedule.</SUBJECT> <P>Changes in payment rates resulting from incorporation of the annual inflation factor described in § 414.610(f) will be announced by notice in the <E T="04">Federal Register</E> without opportunity for prior comment. CMS will follow applicable rulemaking procedures in publishing revisions to the fee schedule for ambulance services that result from any factors other than the inflation factor.</P> </SECTION> <SECTION> <SECTNO>§ 414.625</SECTNO> <SUBJECT>Limitation on review.</SUBJECT> <P>There will be no administrative or judicial review under section 1869 of the Act or otherwise of the amounts established under the fee schedule for ambulance services, including the following:</P> <P>(a) Establishing mechanisms to control increases in expenditures for ambulance services.</P> <P>(b) Establishing definitions for ambulance services that link payments to the type of services provided.</P> <P>(c) Considering appropriate regional and operational differences.</P> <P>(d) Considering adjustments to payment rates to account for inflation and other relevant factors.</P> <P>(e) Phasing in the application of the payment rates under the fee schedule in an efficient and fair manner.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart I—Payment for Drugs and Biologicals</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>69 FR 1116, Jan. 7, 2004, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 414.701</SECTNO> <SUBJECT>Purpose.</SUBJECT> <P>This subpart implements section 1842(o) of the Social Security Act by specifying the methodology for determining the payment allowance limit for drugs and biologicals covered under Part B of Title XVIII of the Act (hereafter in this subpart referred to as the “program”) that are not paid on a cost or prospective payment system basis. Examples of drugs that are subject to the rules contained in this subpart are: drugs furnished incident to a physician's service; durable medical equipment (DME) drugs; separately billable drugs at independent dialysis facilities not under the ESRD composite rate; statutorily covered drugs, for example, influenza, pneumococcal and hepatitis vaccines, antigens, hemophilia blood clotting factor, immunosuppressive drugs and certain oral anti-cancer drugs.</P> </SECTION> <SECTION> <SECTNO>§ 414.704</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart, the following definition applies. <E T="03">Drug</E> refers to both drugs and biologicals.</P> </SECTION> <SECTION> <SECTNO>§ 414.707</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> <P>(a) <E T="03">Method of payment.</E> (1) Payment for a drug in calendar year 2004 is based on the lesser of—</P> <P>(i) The actual charge on the claim for program benefits; or</P> <P>(ii) 85 percent of the average wholesale price determined as of April 1, 2003, subject to the exceptions as specified in paragraphs (a)(2) through (a)(8) of this section.</P> <P>(2) The payment limits for the following drugs are calculated using 95 percent of the average wholesale price:</P> <P>(i) Blood clotting factors.</P> <P>(ii) A drug or biological furnished during 2004 that was not available for Medicare payment as of April 1, 2003.</P> <P>(iii) Pneumococcal and influenza vaccines as well as hepatitis B vaccine that is furnished to individuals at high or intermediate risk of contracting <PRTPAGE P="40"/>hepatitis B (as determined by the Secretary).</P> <P>(iv) A drug or biological furnished during 2004 in connection with the furnishing of renal dialysis services if separately billed by renal dialysis facilities.</P> <P>(3) The payment limits for infusion drugs furnished through a covered item of durable medical equipment are calculated using 95 percent of the average wholesale price in effect on October 1, 2003.</P> <P>(4) The payments limits for drugs contained in the following table are calculated based on the percentages of the average wholesale price determined as of April 1, 2003 that are specified in the table.</P> <GPOTABLE CDEF="s50,10" COLS="2" OPTS="L2,tp0,p7,7/8,i1"> <BOXHD> <CHED H="1">Drug</CHED> <CHED H="1">Percentage used to calculate 2004 payment limit</CHED> </BOXHD> <ROW> <ENT I="01">EPOETIN ALFA</ENT> <ENT>87</ENT> </ROW> <ROW> <ENT I="01">LEUPROLIDE ACETATE</ENT> <ENT>81</ENT> </ROW> <ROW> <ENT I="01">GOSERELIN ACETATE</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">RITUXIMAB</ENT> <ENT>81</ENT> </ROW> <ROW> <ENT I="01">PACLITAXEL</ENT> <ENT>81</ENT> </ROW> <ROW> <ENT I="01">DOCETAXEL</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">CARBOPLATIN</ENT> <ENT>81</ENT> </ROW> <ROW> <ENT I="01">IRINOTECAN</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">GEMCITABINE HCL</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">PAMIDRONATE DISODIUM</ENT> <ENT>85</ENT> </ROW> <ROW> <ENT I="01">DOLASETRON MESYLATE</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">FILGRASTIM</ENT> <ENT>81</ENT> </ROW> <ROW> <ENT I="01">HYLAN G-F 20</ENT> <ENT>82</ENT> </ROW> <ROW> <ENT I="01">MYCOPHENOLATE MOFETIL</ENT> <ENT>86</ENT> </ROW> <ROW> <ENT I="01">GRANISETRON HCL</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">ONDANSETRON</ENT> <ENT>87</ENT> </ROW> <ROW> <ENT I="01">VINORELBINE TARTATE</ENT> <ENT>81</ENT> </ROW> <ROW> <ENT I="01">SARGRAMOSTIM</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">TOPOTECAN</ENT> <ENT>84</ENT> </ROW> <ROW> <ENT I="01">IPRATROPIUM BROMIDE</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">ALBUTEROL SULFATE</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">IMMUNE GLOBULIN</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">LEUCOVORIN CALCIUM</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">DOXORUBICIN HCL</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">DEXAMETHOSONE SODIUM PHOSPHATE</ENT> <ENT>86</ENT> </ROW> <ROW> <ENT I="01">HEPARIN SODIUM LOCK-FLUSH</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">CROMOLYN SODIUM</ENT> <ENT>80</ENT> </ROW> <ROW> <ENT I="01">ACETYLCYSTEINE</ENT> <ENT>80</ENT> </ROW> </GPOTABLE> <P>(5) The payment limits for imiglucerase and alglucerase are calculated using 94 percent of the average wholesale price determined as of April 1, 2003.</P> <P>(6) Exception. The payment limit for a drug otherwise subject to paragraph (a)(1)(ii) or paragraph (a)(4) of this section may be calculated using the percentage of the average wholesale price as the Secretary deems appropriate based on data and information submitted by the drug manufacturer.</P> <P>(i) The manufacturer must submit data after October 15, 2003 and before January 1, 2004.</P> <P>(ii) The percentage only applies for drugs furnished on or after April 1, 2004.</P> <P>(7) In the case of blood and blood products (other than blood clotting factors), the payment limits shall be determined in the same manner as such payment limit was determined on October 1, 2003.</P> <P>(b) <E T="03">Mandatory assignment.</E> Effective with services furnished on or after February 1, 2001, payment for any drug covered under Part B of Medicare may be made on an assignment-related basis only. All billers must accept the program allowed charge as payment in full and may not bill nor collect from the beneficiary any amount other than the unmet Part B deductible and Part B coinsurance amounts, if applicable. Violations of this requirement may subject the supplier to sanctions, as provided by the statute (<E T="03">See</E> § 402 of this chapter).</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart J—Submission of Manufacturer's Average Sales Price Data</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>69 FR 17938, Apr. 6, 2004, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 414.800</SECTNO> <SUBJECT>Purpose.</SUBJECT> <P>This subpart implements section 1847A of the Act by specifying the requirements for submission of a manufacturer's average sales price data for certain drugs and biologicals covered under Part B of Title XVIII of the Act that are paid under sections 1842(o)(1)(D), 1847A, and 1881(b)(13)(A)(ii) of the Act.</P> </SECTION> <SECTION> <SECTNO>§ 414.802</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart, unless the context indicates otherwise—</P> <P> <E T="03">Drug</E> means both drugs and biologicals.</P> <P> <E T="03">Manufacturer</E> means any entity that is engaged in the following (This term <PRTPAGE P="41"/>does not include a wholesale distributor of drugs or a retail pharmacy licensed under State law):</P> <P>(1) Production, preparation, propagation, compounding, conversion or processing of prescription drug products, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis.</P> <P>(2) The packaging, repackaging, labeling, relabeling, or distribution of prescription drug products.</P> <P> <E T="03">Unit</E> means the product represented by the 11-digit National Drug Code. During the first 3 years of the CAP (as defined in § 414.902), the method of counting units excludes units of CAP drugs (as defined in § 414.902) sold to an approved CAP vendor (as defined in § 414.902) for use under the CAP (as defined in § 414.902).</P> <CITA>[70 FR 69 FR 17938, Apr. 6, 2004, as amended at 71 FR 48143, Aug. 18, 2006]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.804</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> <P>(a) <E T="03">Calculation of manufacturer's average sales price.</E> (1) The manufacturer's average sales price for a quarter for a drug or biological represented by a particular 11-digit National Drug Code must be calculated as the manufacturer's sales to all purchasers in the United States for that particular 11-digit National Drug Code (after deducting the types of items and transactions listed in paragraph (a)(2) of this section and excluding sales referenced in paragraph (a)(4) of this section) divided by the total number of units sold by the manufacturer in that quarter (after excluding units associated with sales referenced in paragraph (a)(4) of this section).</P> <P>(2) In calculating the manufacturer's average sales price, a manufacturer must deduct the following types of transactions and items:</P> <P>(i) Volume discounts.</P> <P>(ii) Prompt pay discounts.</P> <P>(iii) Cash discounts.</P> <P>(iv) Free goods that are contingent on any purchase requirement.</P> <P>(v) Chargebacks and rebates (other than rebates under the Medicaid drug rebate program).</P> <P>(3) To the extent that data on price concessions, as described in paragraph (a)(2) of this section, are available on a lagged basis, the manufacturer must estimate this amount in accordance with the methodology described in paragraphs (a)(3)(i) through (a)(3)(iv) of this section.</P> <P>(i) For each such National Drug Code, the manufacturer calculates a percentage equal to the sum of the price concessions for the most recent 12-month period available associated with sales subject to the average sales price reporting requirement divided by the total in dollars for the sales subject to the average sales price reporting requirement for the same 12-month period.</P> <P>(ii) The manufacturer then multiplies the percentage described in paragraph (a)(3)(i) of this section by the total in dollars for the sales subject to the average sales price reporting requirement for the quarter being submitted. (The manufacturer must carry a sufficient number of decimal places in the calculation of the price concessions percentage in order to round accurately the net total sales amount for the quarter to the nearest whole dollar.) The result of this multiplication is then subtracted from the total in dollars for the sales subject to the average sales price reporting requirement for the quarter being submitted.</P> <P>(iii) The manufacturer then uses the result of the calculation described in paragraph (a)(3)(ii) of this section as the numerator and the number of units sold in the quarter as the denominator to calculate the manufacturer's average sales price for the National Drug Code in the quarter being submitted.</P> <P>(iv) <E T="03">Example.</E> The total lagged price concessions (discounts, rebates, etc.) over the most recent 12-month period available associated with direct sales for National Drug Code 12345-6789-01 subject to the ASP reporting requirement equal $200,000. The total in dollars for the sales subject to the average sales price reporting requirement for the same period equals $600,000. The lagged price concessions percentage for this period equals 200,000/600,000 = .33333. The total in dollars for the direct sales subject to the average sales price reporting requirement for the quarter being reported equals $50,000 for 10,000 units sold. Assuming no non-<PRTPAGE P="42"/>lagged price concessions apply, the manufacturer's average sales price calculation for this National Drug Code for this quarter is: $50,000−(0.33333 × $50,000) = $33,334 (net total sales amount); $33,334/10,000 = $3.33 (average sales price).</P> <P>(4) In calculating the manufacturer's average sales price, a manufacturer must exclude sales that are exempt from the Medicaid best price calculation under sections 1927(c)(1)(C)(i) and 1927(c)(1)(C)(ii)(III) of the Act.</P> <P>(5) The manufacturer's average sales price must be calculated by the manufacturer every calendar quarter and submitted to CMS within 30 days of the close of the quarter. The first quarter submission must be submitted by April 30, 2004. Subsequent reports are due not later than 30 days after the last day of each calendar quarter.</P> <P>(6) Each report must be certified by one of the following:</P> <P>(i) The manufacturer's Chief Executive Officer (CEO).</P> <P>(ii) The manufacturer's Chief Financial Officer (CFO).</P> <P>(iii) An individual who has delegated authority to sign for, and who reports directly to, the manufacturer's CEO or CFO.</P> <CITA>[69 FR 17938, Apr. 6, 2004, as amended at 69 FR 55764, Sept. 16, 2004; 70 FR 70332, Nov. 21, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.806</SECTNO> <SUBJECT>Penalties associated with the failure to submit timely and accurate ASP data.</SUBJECT> <P>Section 1847A(d)(4) specifies the penalties associated with misrepresentations associated with ASP data. If the Secretary determines that a manufacturer has made a misrepresentation in the reporting of ASP data, a civil money penalty in an amount of up to $10,000 may be applied for each price misrepresentation and for each day in which the price misrepresentation was applied. Section 1927(b)(3)(C) of the Act, as amended by section 303(i)(4) of the MMA, specifies the penalties associated with a manufacturer's failure to submit timely information or the submission of false information.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart K—Payment for Drugs and Biologicals Under Part B</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>69 FR 66424, Nov. 15, 2004, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 414.900</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) This subpart implements sections 1842(o), 1847A, and 1847B of the Act and outlines two payment methodologies applicable to drugs and biologicals covered under Medicare Part B that are not paid on a cost or prospective payment system basis.</P> <P>(b) Examples of drugs that are subject to the requirements specified in this subpart are:</P> <P>(1) Drugs furnished incident to a physician's service; durable medical equipment (DME) drugs.</P> <P>(2) Separately billable drugs at independent dialysis facilities not under the ESRD composite rate.</P> <P>(3) Statutorily covered drugs, for example—</P> <P>(i) Influenza.</P> <P>(ii) Pneumococcal and Hepatitis B vaccines.</P> <P>(iii) Antigens.</P> <P>(iv) Hemophilia blood clotting factor.</P> <P>(v) Immunosuppressive drugs.</P> <P>(vi) Certain oral anti-cancer drugs.</P> <CITA>[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 39093, July 6, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.902</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart, unless the context indicates otherwise—</P> <P> <E T="03">Approved CAP vendor</E> means an entity that has been awarded a contract by CMS to participate in the competitive acquisition program under 1847B of the Act.</P> <P> <E T="03">Bid</E> means an offer to furnish a CAP drug within a category of CAP drugs in a competitive acquisition area for a particular price and time period.</P> <P> <E T="03">CAP drug</E> means a physician-administered drug or biological furnished on or after January 1, 2006 described in section 1842(o)(1)(C) of the Act and supplied by an approved CAP vendor under the CAP as provided in this subpart.</P> <P> <E T="03">Competitive acquisition area</E> means a geographic area established by the Secretary for purposes of implementing the CAP required by section 1847B of the Act.<PRTPAGE P="43"/> </P> <P> <E T="03">Competitive acquisition program</E> (CAP) means a program as defined under section 1847B of the Act.</P> <P> <E T="03">Designated carrier</E> means an entity assigned by CMS to process and pay claims for drugs and biologicals under the CAP.</P> <P> <E T="03">Drug</E> means both drugs and biologicals.</P> <P> <E T="03">Emergency delivery</E> means delivery of a CAP drug within one business day in appropriate shipping and packaging, in all areas of the United States and its territories, with the exception of the Pacific Territories. In the Pacific Territories, emergency delivery means delivery of a CAP drug within 5 business days in appropriate shipping and packaging. In each case, this timeframe shall be reduced if product stability requires it, meaning that the manufacturer's labeling instructions, drug compendia, or specialized drug stability references indicate that a shorter delivery timeframe is necessary to avoid adversely affecting the product's integrity, safety, or efficacy.</P> <P> <E T="03">Emergency situation</E> means, for the purposes of the CAP, an unforeseen occurrence or situation determined by the participating CAP physician, in his or her clinical judgment, to require prompt action or attention for purposes of permitting the participating CAP physician to use a drug from his or her own stock, if the other requirements of § 414.906(e) are met.</P> <P> <E T="03">Local carrier</E> means an entity assigned by CMS to process and pay claims for administration of drugs and biologicals under the CAP.</P> <P> <E T="03">Manufacturer's average sales price</E> means the price calculated and reported by a manufacturer under part 414, subpart J of this chapter.</P> <P> <E T="03">Multiple source drug</E> means a drug described by section 1847A(c)(6)(C) of the Act.</P> <P> <E T="03">Pacific Territories</E> means, for purposes of the CAP, American Samoa, Guam, or the Northern Mariana Islands.</P> <P> <E T="03">Participating CAP physician</E> means a physician electing to participate in the CAP, as described in this subpart. The participating CAP physician must complete and sign the participating CAP physician election agreement. Physicians who do not participate in Medicare but who elect to participate in the CAP must agree to accept assignment for CAP drug administration claims.</P> <P> <E T="03">Participating CAP physician election agreement</E> means the agreement that the physician signs to notify CMS of the physician's election to participate in the CAP and to agree to the terms and conditions of CAP participation as set forth in this subpart.</P> <P> <E T="03">Prescription order</E> means a written order submitted by the participating CAP physician to the approved CAP vendor that meets the requirements of this subpart.</P> <P> <E T="03">Routine delivery</E> means delivery of a drug within 2 business days in appropriate shipping and packaging in all areas of the United States and its territories, with the exception of the Pacific Territories. In the Pacific Territories, routine delivery of drug means delivery of a CAP drug within 7 business days in appropriate shipping and packaging. In each case, this timeframe will be reduced if product stability requires it, meaning that the manufacturer's labeling instructions, drug compendia, or specialized drug stability references indicate that a shorter delivery timeframe is necessary to avoid adversely affecting the product's integrity, safety, or efficacy.</P> <P> <E T="03">Single source drug</E> means a drug described by section 1847A(c)(6)(D) of the Act.</P> <P> <E T="03">Timely delivery</E> means delivery of a CAP drug within the defined routine and emergency delivery timeframes. Compliance with timely delivery standards is also a factor for evaluation of potential and approved CAP vendors.</P> <P> <E T="03">Unit</E> is defined as in part 414, subpart J of this chapter.</P> <P> <E T="03">Wholesale acquisition cost (WAC)</E> means the price described by section 1847A(c)(6)(B) of the Act.</P> <CITA>[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 39093, July 6, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.904</SECTNO> <SUBJECT>Average sales price as the basis for payment.</SUBJECT> <P>(a) <E T="03">Method of payment.</E> Payment for a drug furnished on or after January 1, 2005 is based on the lesser of—</P> <P>(1) The actual charge on the claim for program benefits; or<PRTPAGE P="44"/> </P> <P>(2) 106 percent of the average sales price, subject to the applicable limitations specified in paragraph (d) of this section or subject to the exceptions described in paragraph (e) of this section.</P> <P>(b) <E T="03">Multiple source drugs</E>—(1) <E T="03">Average sales prices.</E> The average sales price for all drug products included within the same multiple source drug billing and payment code is the volume-weighted average of the manufacturers' average sales prices for those drug products.</P> <P>(2) <E T="03">Calculation of the average sales price.</E> The average sales price is determined by—</P> <P>(i) Computing the sum of the products (for each National Drug Code assigned to the drug products) of the manufacturer's average sales price and the total number of units sold; and</P> <P>(ii) Dividing that sum by the sum of the total number of units sold for all NDCs assigned to the drug products.</P> <P>(c) <E T="03">Single source drugs</E>—(1) <E T="03">Average sales price.</E> The average sales price is the volume-weighted average of the manufacturers' average sales prices for all National Drug Codes assigned to the drug or biological product.</P> <P>(2) <E T="03">Calculation of the average sales price.</E> The average sales price is determined by computing—</P> <P>(i) The sum of the products (for each National Drug Code assigned to the drug product) of the manufacturer's average sales price and the total number of units sold; and</P> <P>(ii) Dividing that sum by the sum of the total number of units sold for all NDCs assigned to the drug product.</P> <P>(d) <E T="03">Limitations on the average sales price</E>—(1) <E T="03">Wholesale acquisition cost for a single source drug.</E> The payment limit for a single source drug product is the lesser of 106 percent of the average sales price for the product or 106 percent of the wholesale acquisition cost for the product.</P> <P>(2) <E T="03">Payment limit for a drug furnished to an end-stage renal disease patient.</E> (i) Effective for drugs and biologicals furnished in 2005, the payment for such drugs and biologicals, including erythropoietin, furnished to an end-stage renal disease patient that is separately billed by an end-stage renal disease facility and not paid on a cost basis is acquisition cost as determined by the Inspector General report as required by section 623(c) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 inflated by the percentage increase in the Producer Price Index.</P> <P>(ii) Except as provided in paragraph (a) of this section, the payment for drugs and biologicals, furnished to an end-stage renal disease patient that is separately billed by an end-stage renal disease facility, is based on 106 percent of the average sales price.</P> <P>(iii) Effective for drugs and biologicals furnished in 2006, the payment for such drugs and biologicals furnished in connection with renal dialysis services and separately billed by freestanding and hospital-based renal dialysis facilities not paid on a cost basis is 106 percent of the average sales price.</P> <P>(3) <E T="03">Widely available market price and average manufacturer price.</E> If the Inspector General finds that the average sales price exceeds the widely available market price or the average manufacturer price by 5 percent or more in calendar year 2006, the payment limit in the quarter following the transmittal of this information to the Secretary is the lesser of the widely available market price or 103 percent of the average manufacturer price.</P> <P>(e) <E T="03">Exceptions to the average sales price</E>—(1) <E T="03">Vaccines.</E> The payment limits for hepatitis B vaccine furnished to individuals at high or intermediate risk of contracting hepatitis B (as determined by the Secretary), pneumococcal vaccine, and influenza vaccine and are calculated using 95 percent of the average wholesale price.</P> <P>(2) <E T="03">Infusion drugs furnished through a covered item of durable medical equipment.</E> The payment limit for an infusion drug furnished through a covered item of durable medical equipment is calculated using 95 percent of the average wholesale price in effect on October 1, 2003 and is not updated in 2006.</P> <P>(3) <E T="03">Blood and blood products.</E> In the case of blood and blood products (other than blood clotting factors), the payment limits are determined in the same manner as the payment limits were determined on October 1, 2003.</P> <P>(4) <E T="03">Payment limit in a case where the average sales price during the first quarter of sales is unavailable.</E> In the case of <PRTPAGE P="45"/>a drug during an initial period (not to exceed a full calendar quarter) in which data on the prices for sales of the drug are not sufficiently available from the manufacturer to compute an average sales price for the drug, the payment limit is based on the wholesale acquisition cost or the applicable Medicare Part B drug payment methodology in effect on November 1, 2003.</P> <P>(f) Except as otherwise specified (see paragraph (e)(2) of this section) for infusion drugs, the payment limits are updated quarterly.</P> <P>(g) The payment limit is computed without regard to any special packaging, labeling, or identifiers on the dosage form or product or package.</P> <P>(h) The payment amount is subject to applicable deductible and coinsurance.</P> <CITA>[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 70332, Nov. 21, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.906</SECTNO> <SUBJECT>Competitive acquisition program as the basis for payment.</SUBJECT> <P>(a) <E T="03">Program payment.</E> Beginning in 2006, as an alternative to payment under § 414.904, payment for a CAP drug may be made through the CAP if the following occurs:</P> <P>(1) The CAP drug is supplied under the CAP by an approved CAP vendor as specified in § 414.908(b).</P> <P>(2) The claim for the prescribed drug is submitted by the approved CAP vendor that supplied the drug, and payment is made only to that vendor.</P> <P>(3) The approved CAP vendor collects applicable deductible and coinsurance with respect to the drug furnished under the CAP only after the drug is administered to the beneficiary.</P> <P>(4) The approved CAP vendor delivers CAP drugs directly to the participating CAP physician in unopened vials or other original containers as supplied by the manufacturer or from a distributor that has acquired the products directly from the manufacturer and includes language with the shipping material stating that the drug was acquired in a manner consistent with all statutory requirements. If the approved CAP vendor opts to split shipments, the participating CAP physician must be notified in writing which can be included with the initial shipment, and each incremental shipment must arrive at least 2 business days before the anticipated date of administration.</P> <P>(5) The approved CAP vendor bills Medicare only for the amount of the drug administered to the patient, and the beneficiary's coinsurance will be calculated from the quantity of drug that is administered.</P> <P>(b) <E T="03">Exceptions to competitive acquisition.</E> Specific CAP drugs, including a category of these drugs, may be excluded from the CAP if the application of competitive bidding to these drugs—</P> <P>(1) Is not likely to result in significant savings; or</P> <P>(2) Is likely to have an adverse impact on access to those drugs.</P> <P>(c) <E T="03">Computation of payment amount.</E> (1) Except as specified in paragraph (c)(2) of this section, payment for CAP drugs is based on bids submitted, as a result of the bidding process as described in § 414.910. Based on these bids, a single payment amount for each CAP drug in the competitive acquisition area is determined on the basis of the bids submitted and accepted and updated from the bidding period to the payment year. This single payment amount is then updated on an annual basis based on the approved CAP vendor's reasonable net acquisition costs for that category as determined by CMS, based, in part, on information disclosed to CMS and limited by the weighted payment amount established under section 1847A of the Act across all drugs for which a composite bid is required in the category, and limited by the payment amount established under section 1847A of the Act for each other drug for which the approved CAP vendor submits a bid in accordance with § 414.910. Adjustment to the payment amounts may be made more often than annually, but no more often than quarterly, in any of the following cases:</P> <P>(i) Introduction of new drugs.</P> <P>(ii) Expiration of a drug patent or availability of a generic drug.</P> <P>(iii) Material shortage that results in a significant price increase for the drug.</P> <P>(iv) Withdrawal of a drug from the market.</P> <P>(2) The alternative payment amount established under section 1847A of the Act may be used to establish payment for a CAP drug if—<PRTPAGE P="46"/> </P> <P>(i) The drug is properly assigned to a category established under the CAP; and</P> <P>(ii) It is a drug for which a HCPCS code must be established.</P> <P>(d) <E T="03">Adjustments.</E> There is an established process for adjustments to payments to account for drugs that were billed, but which were not administered.</P> <P>(e) <E T="03">Resupply of participating CAP physician drug inventory.</E> A participating CAP physician may acquire drugs under the CAP to resupply his or her private inventory if all of the following requirements are met:</P> <P>(1) The drugs were required immediately.</P> <P>(2) The participating CAP physician could not have anticipated the need for the drugs.</P> <P>(3) The approved CAP vendor could not have delivered the drugs in a timely manner. For purposes of this section, timely manner means delivery within the emergency delivery timeframe, as defined in § 414.902.</P> <P>(4) The participating CAP physician administered the drugs in an emergency situation, as defined in § 414.902.</P> <P>(f) <E T="03">Substitution or addition of drugs on an approved CAP vendor's CAP drug list</E>—(1) <E T="03">Short-term substitution of a CAP drug.</E> On an occasional basis (for a period of time less than 2 weeks), an approved CAP vendor may agree to furnish a substitute NDC within a HCPCS code on the approved CAP vendor's CAP drug list if the approved CAP vendor—</P> <P>(i) Is willing to accept the payment amount that was established for the HCPCS code under this section; and</P> <P>(ii) Obtains the participating CAP physician's prior approval.</P> <P>(2) <E T="03">Long-term substitution or addition of a CAP drug.</E> An approved CAP vendor may submit a request, as specified in paragraph (f)(3) of this section, for approval to substitute an NDC supplied by the approved CAP vendor for another NDC within the same HCPCS code or to add an NDC to the approved CAP vendor's drug list, if at least one of the following criteria is met:</P> <P>(i) Proposed substitution of an NDC for a period of 2 weeks or longer.</P> <P>(ii) Proposed addition of one or more NDCs within a HCPCS code included in the CAP drug category specified by CMS or on the approved CAP vendor's approved CAP drug list.</P> <P>(iii) Proposed addition of—</P> <P>(A) One or more newly issued HCPCS codes; or</P> <P>(B) One of the following single indication orphan drug J codes or their updates: J0205, J0256, J9300, J1785, J2355, J3240, J7513, J9010, J9015, J9017, J9160, J9216.</P> <P>(iv) Beginning January 1, 2007, the proposed addition of a drug(s) that has not yet been assigned a HCPCS code, but for which a HCPCS code must be established.</P> <P>(3) <E T="03">Requesting the addition or substitution of CAP drug</E>. An approved CAP vendor that meets the one of the criteria specified in paragraph (f)(2) must submit a written request to CMS or its designee. The request must—</P> <P>(i) Specify the NDC(s) and the respective HCPCS code that is to be added or substituted.</P> <P>(ii) Address the rationale for the substitution or addition of the NDC(s) or the addition of the HCPCS code(s) as applicable; and</P> <P>(iii) Address the impact of the substitution of the NDC(s) or the addition of the NDC(s) or HCPCS code(s), or both on—</P> <P>(A) Patient and drug safety;</P> <P>(B) Drug waste; and</P> <P>(C) The potential for cost savings.</P> <P>(4) <E T="03">Approval of a request(s)</E>. CMS or its designee notifies the approved CAP vendor of its decision.</P> <P>(i) Except as specified in paragraph (f)(4)(ii) of this section, an approved request is effective at the beginning of the next calendar quarter.</P> <P>(ii) Approved substitutions for request based on a drug shortage or other exigent circumstance may become effective immediately provided that—</P> <P>(A) CMS approves the immediate substitution; and</P> <P>(B) The approved CAP vendor's notifies its CAP participating physicians of the substitution immediately following CMS approval.</P> <P>(5) <E T="03">Payment for an approved drug change(s)</E>. The payment for—</P> <P>(i) Substituted or added CAP drugs that are within a HCPCS code for which payment is computed under paragraph (c)(1) of this section is the <PRTPAGE P="47"/>single payment for that HCPCS code, as determined and updated in accordance with paragraph (c)(1) of this section; or</P> <P>(ii) Added CAP drugs that are not within a HCPCS code for which payment is computed under paragraph (c)(1) of this section is specified under paragraph (c)(2) of this section.</P> <CITA>[70 FR 39094, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005; 71 FR 9460, Feb. 24, 2006]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.908</SECTNO> <SUBJECT>Competitive acquisition program.</SUBJECT> <P>(a) Participating CAP <E T="03">physician selection of an approved CAP vendor.</E> (1) CMS provides the participating CAP physician with a process for the selection of an approved CAP vendor on an annual basis, with exceptions as specified in § 414.908(a)(2). Participating CAP physicians will also receive information about the CAP in the enrollment process for Medicare participation set forth in section 1842(h) of the Act.</P> <P>(2) A participating CAP physician may select an approved CAP vendor outside the annual selection process or opt out of the CAP for the remainder of the annual selection period when—</P> <P>(i) The selected approved CAP vendor ceases participation in the CAP;</P> <P>(ii) The physician leaves a group practice participating in CAP;</P> <P>(iii) The participating CAP physician relocates to another competitive acquisition area; or</P> <P>(iv) For other exigent circumstances defined by CMS.</P> <P>(3) The physician participating in the CAP—</P> <P>(i) Elects to use an approved CAP vendor for the drug category and area as set forth in § 414.908(b);</P> <P>(ii) Completes and signs the CAP election agreement;</P> <P>(iii) Submits a written prescription order to the approved CAP vendor with complete patient information for patients new to the approved CAP vendor or when information changes. Abbreviated information may be sent on all subsequent orders for a patient for which the approved CAP vendor has previously received complete information and that has no changes to the original information. Prescription orders may be initiated by telephone, with a follow-up written order provided within 8 hours for routine deliveries and immediately for emergency deliveries;</P> <P>(iv) Does not receive payment for the CAP drug;</P> <P>(v) Except where applicable State pharmacy law prohibits it, provides the following information to the approved CAP vendor to facilitate collection of applicable deductible and coinsurance as described in § 414.906(a)(3):</P> <P>(A) Date of order.</P> <P>(B) Beneficiary name, address, and phone number.</P> <P>(C) Physician identifying information:</P> <P>Name, practice location/shipping address, group practice information (if applicable), PIN, and UPIN.</P> <P>(D) Drug name.</P> <P>(E) Strength.</P> <P>(F) Quantity ordered.</P> <P>(G) Dose.</P> <P>(H) Frequency/instructions.</P> <P>(I) Anticipated date of administration.</P> <P>(J) Beneficiary Medicare information/Health insurance (HIC) number.</P> <P>(K) Supplementary insurance information (if applicable).</P> <P>(L) Medicaid information (if applicable).</P> <P>(M) Additional patient information: date of birth, allergies, height/weight, ICD-9-CM (if necessary).</P> <P>(vi) Agrees to accept the particular National Drug Codes (NDCs) supplied by the approved CAP vendor for the duration of the participating CAP physician's enrollment with the approved CAP vendor, subject to paragraphs (a)(3)(vii) and (a)(3)(xiv) of this section. By electing to participate with an approved CAP vendor, the participating CAP physician also agrees to accept the changes to the approved CAP vendor's CAP drug list that have been approved in accordance with § 414.906(f).</P> <P>(vii) Agrees to place routine orders for CAP drugs at the HCPCs level, except when medical necessity requires a particular formulation on the approved CAP vendor's CAP drug list. Medical necessity must be documented. When the conditions of this paragraph are met, the participating CAP physician may submit a prescription order to the <PRTPAGE P="48"/>approved CAP vendor that specifies the NDC.</P> <P>(viii) Notifies the approved CAP vendor when a drug is not administered or a smaller amount was administered than was originally ordered. The participating CAP physician and the approved CAP vendor agree on how to handle the unused CAP drug. If it is agreed that the participating CAP physician will maintain the CAP drug in his inventory for administration at a later date, the participating CAP physician submits a new prescription order at that time. This prescription order specifies that the CAP drug is being obtained from the participating CAP physician's CAP inventory and shipment should not occur;</P> <P>(ix) Maintains a separate electronic or paper inventory for each CAP drug obtained;</P> <P>(x) Agrees to file the Medicare claim within 14 calendar days of the date of drug administration;</P> <P>(xi) Agrees to submit an appeal accompanied by all required documentation (such as medical records or a certification) necessary to support payment if the participating CAP physician's drug administration claim for a CAP drug is denied;</P> <P>(xii) Agrees not to transport CAP drugs from one practice location (place of service) to another location;</P> <P>(xiii) Agrees to provide the CMS-developed CAP fact sheet to beneficiaries; and</P> <P>(xiv) May receive payment under the ASP system when medical necessity requires a certain brand or formulation of a drug that the approved CAP vendor has not been contracted to furnish under the CAP.</P> <P>(4) Physician group practices. If a physician group practice using a group billing number(s) elects to participate in the CAP, all physicians in the group are considered to be participating CAP physicians when using the group's billing number(s).</P> <P>(5) <E T="03">Additional opt out provision</E>. In addition to the circumstances listed in paragraph (a)(2) of this section, if the approved CAP vendor refuses to ship to the participating CAP physician because the conditions of § 414.914(h) were met, the physician can withdraw from the CAP category for the remainder of the year immediately upon notice to CMS and the approved CAP vendor.</P> <P>(b) <E T="03">Program requirements.</E> (1) CMS selects approved CAP vendors through a competition among entities based on the following:</P> <P>(i) Submission of the bid prices using the OMB-approved Vendor Application and Bid Form for CAP drugs within the category and competitive acquisition area that—</P> <P>(A) Places the vendor among the qualified bidders with the lowest five composite bids; and</P> <P>(B) Does not exceed the weighted payment amount established under section 1847A of the Act across all drugs in that category.</P> <P>(ii) Ability to ensure product integrity.</P> <P>(iii) Customer service/Grievance process.</P> <P>(iv) At least 3 years experience in furnishing Part B injectable drugs.</P> <P>(v) Financial performance and solvency.</P> <P>(vi) Record of integrity and the implementation of internal integrity measures.</P> <P>(vii) Internal financial controls.</P> <P>(viii) Acquisition of all CAP drugs directly from the manufacturer or from a distributor that has acquired the products directly from the manufacturer.</P> <P>(ix) Maintenance of appropriate licensure to supply CAP drugs in States in which they are supplying CAP drugs.</P> <P>(x) Cost-sharing assistance as described in § 414.914(g).</P> <P>(xi) Other factors as determined by CMS.</P> <P>(2) Approved CAP vendors must also meet the contract requirements under § 414.914.</P> <P>(c) <E T="03">Additional considerations.</E> CMS may refuse to award a contract or terminate an approved CAP vendor contract based upon the following:</P> <P>(1) Suspension or revocation by the Federal or State government of the entity's license for distribution of drugs, including controlled substances.</P> <P>(2) Exclusion of the entity under section 1128 of the Act from participation in Medicare or other Federal health care programs. These considerations are in addition to CMS' ability to terminate the approved CAP vendor for cause as specified in § 414.914(a).<PRTPAGE P="49"/> </P> <P>(3) Past violations or misconduct related to the pricing, marketing, distribution, or handling of drugs provided incident to a physician's service.</P> <P>(d) <E T="03">Multiple source drugs.</E> In the case of multiple source drugs, there must be a competition among entities for the acquisition of at least one CAP drug within each billing and payment code within each category for each competitive acquisition area.</P> <P>(e) <E T="03">Multiple contracts for a category and area.</E> The number of bidding qualified entities that are awarded a contract for a given category and area may be limited to no fewer than two.</P> <CITA>[70 FR 39094, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.910</SECTNO> <SUBJECT>Bidding process.</SUBJECT> <P>(a) Entities may bid to furnish CAP drugs in all competitive acquisition areas of the United States, or one or more specific competitive acquisition areas.</P> <P>(b) The amount of the bid for any CAP drug for a specific competitive acquisition area must be uniform for all portions of that competitive acquisition area.</P> <P>(c) A submitted bid price must include the following:</P> <P>(1) All costs related to the delivery of the drug to the participating CAP physician.</P> <P>(2) The costs of dispensing (including shipping) of the drug and management fees. The costs related to the administration of the drug or wastage, spillage, or spoilage may not be included.</P> <CITA>[70 FR 39095, July 6, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.912</SECTNO> <SUBJECT>Conflicts of interest</SUBJECT> <P>(a) Approved CAP vendors and applicants that bid to participate in the CAP are subject to the following:</P> <P>(1) The conflict of interest standards and requirements of the Federal Acquisition Regulation (FAR) organizational conflict of interest guidance, found under FAR subpart 9.5.</P> <P>(2) Those requirements and standards contained in each individual contract awarded to perform functions under section 1847B of the Act.</P> <P>(b) <E T="03">Post-award conflicts of interest.</E> Approved CAP vendors must have a code of conduct that establishes policies and procedures for recognizing and resolving conflicts of interest between the approved CAP vendor and any entity, including the Federal Government, with whom it does business. The code of conduct which is submitted as part of the application must—</P> <P>(1) State the need for management, employees, contractors, and agents to comply with the approved CAP vendor's code of conduct, and policies and procedures for conflicts of interest; and</P> <P>(2) State the approved CAP vendor's expectations for management, employees, contractors, and agents to comply with the approved CAP vendor's code of conduct, and policies and procedures for detecting, preventing, and resolving conflicts of interest.</P> <CITA>[70 FR 39094, July 6, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.914</SECTNO> <SUBJECT>Terms of contract.</SUBJECT> <P>(a) The contract between CMS and the approved CAP vendor will be for a term of 3 years, unless terminated or suspended earlier as provided in this section or provided in § 414.917. The contract may be terminated—</P> <P>(1) By CMS for default if the approved CAP vendor violates any term of the contract; or</P> <P>(2) In the absence of a contract violation, by either CMS or the approved CAP vendor, if the terminating party notifies the other party by June 30 for an effective date of termination of December 31 of that year.</P> <P>(b) The contract will provide for a code of conduct for the approved CAP vendor that includes standards relating to conflicts of interest standards as set forth at § 414.912.</P> <P>(c) The approved CAP vendor will have and implement a compliance plan that contains policies and procedures that control program fraud, waste, and abuse, and consists of the following minimum elements:</P> <P>(1) Written policies, procedures, and standards of conduct articulating the organization's commitment to comply with all applicable Federal and State laws, regulations, and guidance, including, but not limited to, the Prescription Drug Marketing Act (PDMA), the physician self-referral (“Stark”) prohibition, the Anti-Kickback statute and the False Claims Act.<PRTPAGE P="50"/> </P> <P>(2) The designation of a compliance officer and compliance committee accountable to senior management.</P> <P>(3) Effective training and education of the compliance officer and organization employees, contractors, agents, and directors.</P> <P>(4) Enforcement of standards through well publicized disciplinary guidelines.</P> <P>(5) Procedures for effective internal monitoring and auditing.</P> <P>(6) Procedures for ensuring prompt responses to detected offenses and development of corrective action initiatives relating to the organization's contract as an approved CAP vendor.</P> <P>(i) If the approved CAP vendor discovers evidence of misconduct related to payment or delivery of drugs or biologicals under the contract, it will conduct a timely and reasonable inquiry into that conduct.</P> <P>(ii) The approved CAP vendor will conduct appropriate corrective actions including, but not limited to, repayment of overpayments and disciplinary actions against responsible individuals, in response to potential violations referenced at paragraph (c)(6)(i) of this section.</P> <P>(7) Procedures to voluntarily self-report potential fraud or misconduct related to the CAP to the appropriate government agency.</P> <P>(d) The contract must provide for disclosure of the approved CAP vendor's reasonable, net acquisition costs for a specified period of time, not to exceed quarterly.</P> <P>(e) The contract must provide for appropriate adjustments as described in § 414.906(c)(1).</P> <P>(f) Under the terms of the contract, the approved CAP vendor must also—</P> <P>(1) Have sufficient arrangements to acquire and deliver CAP drugs within the category in the competitive acquisition area specified by the contract;</P> <P>(2) Have arrangements in effect for shipment at least 5 weekdays each week of CAP drugs under the contract, including the ability to comply with the routine and emergency delivery timeframes defined in § 414.902;</P> <P>(3) Have procedures in place to address and resolve complaints of participating CAP physicians and individuals and inquiries regarding shipment of CAP drugs;</P> <P>(4) Have a grievance and appeals process for dispute resolution;</P> <P>(5) Respond within 2 business days to any inquiry, or sooner if the inquiry is related to drug quality;</P> <P>(6) Staff a toll-free telephone line from 8:30 a.m. or earlier and until 5 p.m. or later for all time zones served in the continental United States by the CAP vendor on business days (Monday through Friday excluding Federal holidays) to provide customer assistance, and establish reasonable hours of operation for Hawaii, Alaska, Puerto Rico, and the other U.S. territories;</P> <P>(7) Staff an emergency toll-free telephone line for weekend and evening access when the call center is closed, and determine what hours on Saturday and Sunday the call center is staffed and which hours a toll-free emergency line is activated; and</P> <P>(8) Include assistance for the disabled, the hearing impaired, and Spanish-speaking inquirers in all customer service operations.</P> <P>(9) Meet applicable licensure requirements in each State in which it supplies drugs under the CAP;</P> <P>(10) Be enrolled in Medicare as a participating supplier;</P> <P>(11) Comply with all applicable Federal and State laws, regulations and guidance related to the prevention of fraud and abuse;</P> <P>(12) Supply CAP drugs upon receipt of a prescription order to all participating CAP physicians who have selected the approved CAP vendor, except when the conditions of § 414.914(h) are met;</P> <P>(13) Provide direct notification to participating CAP physicians enrolled with them of updates to the approved CAP vendor's CAP drug list on a quarterly basis. Changes must be disseminated at least 30 days before the approved changes are due to take effect, unless immediate notification as described in § 414.906(f)(4) is required. The approved CAP vendor's entire CAP drug list must be disseminated at least once yearly; and approved CAP vendors must make a complete list that incorporates the most recent updates available to physicians on an ongoing basis. CMS posts on its web site the updated CAP drug lists for each approved CAP vendor.<PRTPAGE P="51"/> </P> <P>(14) Ensure that subcontractors who are involved in providing services under the approved CAP contractor's CAP contract meet all requirements and comply with all laws and regulations relating to the services they provide under the CAP program. Notwithstanding any relationship the CAP vendor may have with any subcontractor, the approved CAP vendor maintains ultimate responsibility for adhering to and otherwise fully complying with all terms and conditions of its contract with CMS;</P> <P>(15) Comply with product integrity and record keeping requirements including but not limited to drug acquisition, handling, storage, shipping, drug waste, and return processes; and</P> <P>(16) Comply with such other terms and conditions as CMS may specify in the CAP contract consistent with section 1847B of the Act.</P> <P>(g) Under the terms of the contract, the approved CAP vendor must provide assistance to beneficiaries experiencing financial difficulty in paying their cost-sharing amounts through any one or all of the following:</P> <P>(1) Referral to a bona fide and independent charitable organization.</P> <P>(2) Implementation of a reasonable payment plan.</P> <P>(3) A full or partial waiver of the cost-sharing amount after determining in good faith that the individual is in financial need or the failure of reasonable collection efforts, provided that the waiver meets all of the requirements of section 1128A(i)(6)(A) of the Act and the corresponding regulations at paragraph (1) of the definition of “Remuneration” in § 1003.101 of this title. The availability of waivers may not be advertised or be made as part of a solicitation. Approved CAP vendors must inform beneficiaries that they generally make available the categories of assistance described in paragraphs (g)(1), (g)(2), and (g)(3) of this section. In no event may the approved CAP vendor include or make any statements or representations that promise or guarantee that beneficiaries receive cost-sharing waivers.</P> <P>(h) The approved CAP vendor must comply with the following procedures before it may refuse to make further shipments of CAP drugs to a participating CAP physician on behalf of a beneficiary:</P> <P>(1) Subsequent to receipt of final payment by Medicare, or the verification of drug administration by the participating CAP physician, the approved CAP vendor must bill any applicable supplemental insurance policies.</P> <P>(2) If a balance remains, after the supplemental insurer pays their share of the bill, or if there is no supplemental insurance, the approved CAP vendor may bill the beneficiary.</P> <P>(3) At the time of billing the beneficiary, or the participating CAP physician's presentation of the bill on behalf of the approved CAP vendor, the approved CAP vendor must inform the beneficiary of any types of cost-sharing assistance that may be available consistent with the requirements of section 1128A(a)(5) of the Act and § 414.914(g).</P> <P>(4) If the beneficiary demonstrates a financial need, the approved CAP vendor must follow the conditions outlined in paragraph (g) of this section.</P> <P>(5) For purposes of paragraph (h) delivery means postmark date, or the date the coinsurance bill or notice was presented to the beneficiary by the participating CAP physician on behalf of the approved CAP vendor.</P> <P>(i) Except as specified in paragraph (h)(5)(ii), if after 45 days from delivery of the approved CAP vendor's bill to the beneficiary, the beneficiary's cost-sharing obligation remains unpaid, the approved CAP vendor may refuse further shipments to the participating CAP physician for that beneficiary.</P> <P>(ii) If the beneficiary has requested cost-sharing assistance within 45 days of receiving delivery of the approved CAP vendor's bill, provisions of paragraphs (h)(6), (h)(7), or (h)(8) of this section, apply.</P> <P>(6) If the approved CAP vendor implements a reasonable payment plan, as specified in § 414.914(g)(2), the approved CAP vendor must continue to ship CAP drugs for the beneficiary, as long as the beneficiary remains in compliance with the payment plan and makes an initial payment under the plan within 15 days after the delivery of the approved CAP vendor's written notice to the beneficiary offering the payment plan.<PRTPAGE P="52"/> </P> <P>(7) If the approved CAP vendor has waived the cost-sharing obligations in accordance with section 1128A of the Act and § 414.914(g)(3), the approved CAP vendor may not refuse to ship drugs for that beneficiary.</P> <P>(8) If the approved CAP vendor refers the beneficiary to a bona fide and independent charity in accordance with § 414.914(g)(1), the approved CAP vendor may refuse to ship drugs if the past due balance is not paid 15 days after the date of delivery of the approved CAP vendor's written notice to the beneficiary containing the referral for cost-sharing assistance.</P> <P>(9) The approved CAP vendor may refuse to make further shipments to that participating CAP physician on behalf of the beneficiary for the lesser of the end of the calendar year or until the beneficiary's balance is paid in full.</P> <CITA>[70 FR 39096, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.916</SECTNO> <SUBJECT>Dispute resolution for vendors and beneficiaries.</SUBJECT> <P>(a) <E T="03">General rule.</E> Cases of an approved CAP vendor's dissatisfaction with denied drug claims are resolved through a voluntary alternative dispute resolution process delivered by the designated carrier, and a reconsideration process provided by CMS.</P> <P>(b) <E T="03">Dispute resolution.</E> (1) When an approved CAP vendor is not paid on claims submitted to the designated carrier, the vendor may appeal to the designated carrier to counsel the responsible participating CAP physician on his or her agreement to file a clean claim and pursue an administrative appeal in accordance with subpart H of part 405 of this chapter. If problems persist, the approved CAP vendor may ask the designated carrier to—</P> <P>(i) Review the participating CAP physician's performance; and</P> <P>(ii) Potentially recommend to CMS that CMS suspend the participating CAP physician's CAP election agreement.</P> <P>(2) The designated carrier—</P> <P>(i) Gathers information from the local carrier, the participating CAP physician, the beneficiary, and the approved CAP vendor; and</P> <P>(ii) Makes a recommendation to CMS on whether the participating CAP physician has been filing his or her CAP drug administration claims in accordance with the requirements for physician participation in the CAP as set forth in § 414.908(a)(3). The recommendation will include numbered findings of fact.</P> <P>(3) CMS will review the recommendation of the designated carrier and gather relevant additional information from the participating CAP physician before deciding whether to suspend the participating CAP physician's CAP election agreement. A suspension commencing before October 1 will conclude on December 31 of the same year. A suspension commencing on or after October 1 will conclude on December 31 of the next year.</P> <P>(4) The participating CAP physician may appeal that suspension by requesting a reconsideration of CMS' decision. The reconsideration will address whether the participating CAP physician's denied claims and appeals were the result of the participating CAP physician's failure to participate in accordance with the requirements of § 414.908(a)(3).</P> <P>(c) <E T="03">Reconsideration</E>—(1) <E T="03">Right to reconsideration.</E> A participating CAP physician dissatisfied with a determination that his or her CAP election agreement has been suspended by CMS is entitled to a reconsideration as provided in this subpart.</P> <P>(2) <E T="03">Eligibility for reconsideration.</E> CMS reconsiders any determination to suspend a participating CAP physician's election agreement if the participating CAP physician files a written request for reconsideration in accordance with paragraphs (c)(3) and (c)(4) of this section.</P> <P>(3) <E T="03">Manner and timing of request for reconsideration.</E> A participating CAP physician who is dissatisfied with a CMS decision to suspend his or her CAP election agreement may request a reconsideration of the decision by filing a request with CMS. The request must be filed within 30 days of receipt of the CMS decision letter notifying the participating CAP physician of CMS' decision to suspend his or her CAP election agreement. From the date of receipt of the decision letter until the day the reconsideration determination is final, the ASP payment methodology under <PRTPAGE P="53"/>section 1847A of the Act applies to the physician.</P> <P>(4) <E T="03">Content of request.</E> The request for reconsideration must specify—</P> <P>(i) The findings or issues with which the participating CAP physician disagrees;</P> <P>(ii) The reasons for the disagreement;</P> <P>(iii) A recital of the facts and law supporting the participating CAP physician's position;</P> <P>(iv) Any supporting documentation; and</P> <P>(v) Any supporting statements from approved CAP vendors, local carriers, or beneficiaries.</P> <P>(5) <E T="03">Withdrawal of request for reconsideration.</E> A participating CAP physician may withdraw his or her request for reconsideration at any time before the issuance of a reconsideration determination.</P> <P>(6) <E T="03">Discretionary informal hearing.</E> In response to a request for reconsideration, CMS may, at its discretion, provide the participating CAP physician the opportunity for an informal hearing that—</P> <P>(i) Is conducted by a hearing officer appointed by the director of the CMS Center for Medicare Management or his or her designee; and</P> <P>(ii) Provides the participating CAP physician the opportunity to present, by telephone or in person, evidence to rebut CMS' decision to suspend or terminate a participating CAP physician's CAP election agreement.</P> <P>(7) <E T="03">Informal hearing procedures.</E> (i) CMS provides written notice of the time and place of the informal hearing at least 10 days before the scheduled date.</P> <P>(ii) The informal reconsideration hearing will be conducted in accordance with the following procedures:</P> <P>(A) The hearing is open to CMS and the participating CAP physician requesting the reconsideration, including—</P> <P>(<E T="03">1</E>) Authorized representatives;</P> <P>(<E T="03">2</E>) Technical advisors (individuals with knowledge of the facts of the case or presenting interpretation of the facts);</P> <P>(<E T="03">3</E>) Representatives from the local carrier;</P> <P>(<E T="03">4</E>) Representatives from the approved CAP vendor; and</P> <P>(<E T="03">5</E>) Legal counsel.</P> <P>(B) The hearing is conducted by the hearing officer who receives relevant testimony;</P> <P>(C) Testimony and other evidence may be accepted by the hearing officer even though it would be inadmissible under the rules of evidence applied in Federal courts;</P> <P>(D) Either party may call witnesses from among those individuals specified in paragraph (c)(7)(ii)(A) of this section; and</P> <P>(E) The hearing officer does not have the authority to compel by subpoena the production of witnesses, papers, or other evidence.</P> <P>(8) <E T="03">Hearing officer's findings.</E> (i) Within 30 days of the hearing officer's receipt of the hearing request, the hearing officer presents the findings and recommendations to the participating CAP physician who requested the reconsideration. If the hearing officer decides to conduct an in-person or telephone hearing, the hearing officer will send a hearing notice to the participating CAP physician within 10 days of receipt of the hearing request, and the findings and recommendations are due to the participating CAP physician within 30 days of the hearing's conclusion.</P> <P>(ii) The written report of the hearing officer includes separate numbered findings of fact and the legal conclusions of the hearing officer.</P> <P>(9) <E T="03">Final reconsideration determination.</E> (i) The hearing officer's decision is final unless the director of the CMS Center for Medicare Management or his or her designee chooses to review that decision within 30 days. If the decision is favorable to the participating CAP physician, then the participating CAP physician may resume his or her participation in CAP. The hearing officer and the CMS official may review decisions that are favorable or unfavorable to the participating CAP physician.</P> <P>(ii) The CMS official may accept, reject, or modify the hearing officer's findings.</P> <P>(iii) If the CMS official reviews the hearing officer's decision, the CMS official issues a final reconsideration determination to the participating CAP physician on the basis of the hearing <PRTPAGE P="54"/>officer's findings and recommendations and other relevant information.</P> <P>(iv) The reconsideration determination of the CMS official is final. If the final decision is unfavorable to the participating CAP physician, then the participating CAP physician's CAP election agreement is terminated.</P> <P>(d) The approved CAP vendor may not charge the beneficiary for the full drug coinsurance amount if the designated contractor did not pay the approved CAP vendor in full, unless a properly executed advance beneficiary notice is in place. When a beneficiary receives an inappropriate coinsurance bill, the beneficiary may participate in the approved CAP vendor's grievance process to request correction of the approved CAP vendor's file. If the beneficiary is dissatisfied with the result of the approved CAP vendor's grievance process, the beneficiary may request intervention from the designated carrier. This is in addition to, rather than in place of, any other beneficiary appeal rights. The designated carrier will first investigate the facts and then facilitate correction to the appropriate claim record and beneficiary file.</P> <CITA>[70 FR 39097, July 6, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.917</SECTNO> <SUBJECT>Dispute resolution and process for suspension or termination of approved CAP contract.</SUBJECT> <P>(a) <E T="03">General rule.</E> If a participating CAP physician finds an approved CAP vendor's service, or the quality of a CAP drug supplied by the approved CAP vendor to be unsatisfactory, then the physician may address the issue first through the approved CAP vendor's grievance process, and second through an alternative dispute resolution process administered by the designated carrier and CMS. If CMS suspends an approved CAP vendor's CAP contract for noncompliance or terminates the CAP contract in accordance with § 414.914(a), the approved CAP vendor may request a reconsideration in accordance with paragraph (c) of this section.</P> <P>(b) <E T="03">Dispute resolution.</E> (1) When a participating CAP physician is dissatisfied with an approved CAP vendor's service or the quality of a CAP drug supplied by the approved CAP vendor, then the participating CAP physician may use the approved CAP vendor's grievance process. If the service or quality issues are not resolved through the grievance process to the physician's satisfaction, then the participating CAP physician may ask the designated carrier to—</P> <P>(i) Review the approved CAP vendor's performance; and</P> <P>(ii) Potentially recommend termination of the approved CAP vendor's CAP contract.</P> <P>(2) <E T="03">Responsibility of the designated carrier.</E> The designated carrier—</P> <P>(i) Gathers information from the local carrier, the participating CAP physician, the beneficiary, and the approved CAP vendor; and</P> <P>(ii) Makes a recommendation to CMS on whether the approved CAP vendor has been meeting the service and quality obligations of its CAP contract. This recommendation will include numbered findings of fact.</P> <P>(3) CMS will review the recommendation of the designated carrier and, gather relevant additional information from the approved CAP vendor, the participating CAP physician, the local carrier, and the beneficiary before deciding whether to terminate the approved CAP vendor's CAP contract.</P> <P>(4) The approved CAP vendor may appeal that termination by requesting a reconsideration. A determination must be made as to whether the approved CAP vendor has been meeting the service and quality obligations of its CAP contract.</P> <P>(c) <E T="03">Reconsideration</E>—(1) <E T="03">Right to reconsideration</E>. An approved CAP vendor dissatisfied with a determination that its CAP contract has been suspended or terminated by CMS is entitled to a reconsideration as provided in this subpart.</P> <P>(2) <E T="03">Eligibility for reconsideration.</E> CMS will reconsider any determination to suspend or terminate an approved CAP vendor's contract if the approved CAP vendor files a written request for reconsideration in accordance with paragraphs (c)(3) and (c)(4) of this section.</P> <P>(3) <E T="03">Manner and timing of request for reconsideration.</E> An approved CAP vendor that is dissatisfied with a CMS decision to suspend or terminate its CAP contract may request a reconsideration of the decision by filing a request with CMS. The request must be filed within <PRTPAGE P="55"/>30 days of receipt of the CMS decision letter notifying the approved CAP vendor of the suspension or termination of its CAP contract.</P> <P>(4) <E T="03">Content of request.</E> The request for reconsideration must specify—</P> <P>(i) The findings or issues with which the approved CAP vendor disagrees;</P> <P>(ii) The reasons for the disagreement;</P> <P>(iii) A recital of the facts and law supporting the approved CAP vendor's position;</P> <P>(iv) Any supporting documentation; and</P> <P>(v) Any supporting statements from participating CAP physicians, the local carrier, or beneficiaries.</P> <P>(5) <E T="03">Withdrawal of request for reconsideration.</E> An approved CAP vendor may withdraw its request for reconsideration at any time before the issuance of a reconsideration determination.</P> <P>(6) <E T="03">Discretionary informal hearing.</E> In response to a request for reconsideration, CMS may, at its discretion, provide the approved CAP vendor the opportunity for an informal hearing that—</P> <P>(i) Is conducted by a hearing officer appointed by the Director of the CMS Center for Medicare Management or his or her designee; and</P> <P>(ii) Provides the approved CAP vendor the opportunity to present, by telephone or in person, evidence to rebut CMS' decision to suspend or terminate the approved CAP vendor's CAP contract.</P> <P>(7) <E T="03">Informal hearing procedures.</E> (i) CMS will provide written notice of the time and place of the informal hearing at least 10 days before the scheduled date.</P> <P>(ii) The informal reconsideration hearing will be conducted in accordance with the following procedures:</P> <P>(A) The hearing is open to CMS and the approved CAP vendor requesting the reconsideration, including—</P> <P>(<E T="03">1</E>) Authorized representatives;</P> <P>(<E T="03">2</E>) Technical advisors (individuals with knowledge of the facts of the case or presenting interpretation of the facts);</P> <P>(<E T="03">3</E>) Representatives from the local carriers and the designated carrier;</P> <P>(<E T="03">4</E>) The participating CAP physician who requested the suspension, if any; and</P> <P>(<E T="03">5</E>) Legal counsel.</P> <P>(B) The hearing will be conducted by the hearing officer, who will receive relevant testimony;</P> <P>(C) Testimony and other evidence may be accepted by the hearing officer even though it would be inadmissible under the rules of evidence applied in Federal courts;</P> <P>(D) Either party may call witnesses from among those individuals specified in the paragraph (c)(7)(ii)(A) of this section; and</P> <P>(E) The hearing officer does not have the authority to compel by subpoena the production of witnesses, papers, or other evidence.</P> <P>(8) <E T="03">Hearing officer's findings.</E> (i) Within 30 days of the hearing officer's receipt of the hearing request, the hearing officer will present the findings and recommendations to the approved CAP vendor that requested the reconsideration. If the hearing officer conducts a hearing in person or by phone, the hearing officer will send a hearing notice to the approved CAP vendor within 10 days of receipt of the hearing request, and the findings and recommendations are due to the approved CAP vendor within 30 days from of the hearing's conclusion.</P> <P>(ii) The written report of the hearing officer will include separate numbered findings of fact and the legal conclusions of the hearing officer.</P> <P>(9) <E T="03">Final reconsideration determination.</E> (i) The hearing officer's decision is final unless the Director of the CMS Center for Medicare Management or his or her designee (CMS official) chooses to review that decision within 30 days. If the decision is favorable to the approved CAP vendor, then the approved CAP vendor may resume participation in CAP. The hearing officer and the CMS official may review decisions that are favorable or unfavorable to the approved CAP vendor.</P> <P>(ii) The CMS official may accept, reject, or modify the hearing officer's findings.</P> <P>(iii) If the CMS official reviews the hearing officer's decision, the CMS official will issue a final reconsideration determination to the approved CAP vendor on the basis of the hearing officer's findings and recommendations and other relevant information.<PRTPAGE P="56"/> </P> <P>(iv) The reconsideration determination of the CMS official is final.</P> <CITA>[70 FR 39098, July 6, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.918</SECTNO> <SUBJECT>Assignment.</SUBJECT> <P>Payment for a CAP drug may be made only on an assignment-related basis.</P> <CITA>[70 FR 39099, July 6, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.920</SECTNO> <SUBJECT>Judicial review.</SUBJECT> <P>The following areas under the CAP are not subject to administrative or judicial review:</P> <P>(a) The establishment of payment amounts.</P> <P>(b) The awarding of vendor contracts.</P> <P>(c) The establishment of competitive acquisition areas.</P> <P>(d) The selection of CAP drugs.</P> <P>(e) The bidding structure.</P> <P>(f) The number of vendors selected.</P> <CITA>[70 FR 39099, July 6, 2005]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart L—Supplying and Dispensing Fees</HD> <SECTION> <SECTNO>§ 414.1000</SECTNO> <SUBJECT>Purpose.</SUBJECT> <P>This subpart implements section 1842(o)(2) and section 1842(o)(6) of the Act, as added by section 303(e)(2) of the MMA, by specifying a supplying fee for drugs and biologicals covered under Part B of Title XVIII of the Act that are described in sections 1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act.</P> <CITA>[69 FR 66425, Nov. 15, 2004]</CITA> </SECTION> <SECTION> <SECTNO>§ 414.1001</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> <P>(a) <E T="03">Supplying fees</E>. Beginning in CY 2006—</P> <P>(1) A supplying fee of $24 is paid to a pharmacy for the first prescription of drugs and biologicals described in sections 1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act, that the pharmacy provided to a beneficiary during a 30-day period.</P> <P>(2) A supplying fee of $16 is paid to a pharmacy for each prescription following the first prescription (as specified in paragraph (a)(1) of this section) of drugs and biologicals described in sections 1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act, that the pharmacy provided to a beneficiary during a 30-day period.</P> <P>(3) A separate supplying fee is paid to a pharmacy for each prescription of drugs and biologicals described in sections 1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act.</P> <P>(b) <E T="03">Supplying fees following transplant</E>. Beginning CY 2006—(1) A supplying fee of $50 is paid to pharmacy for the initial supplied prescription of drugs and biologicals described in section 1861(s)(2)(J) of the Act, that the pharmacy provided to a patient during the first 30-day period following a transplant.</P> <P>(2) A supplying fee of $16 is paid to a pharmacy for each prescription following an initial prescription after a transplant (as specified in paragraph (b)(1) of this section) of drugs and biologicals describe in section 1861(s)(2)(J) of the Act, that the pharmacy provided to a beneficiary during a 30-day period.</P> <P>(c) <E T="03">30-day dispensing fees</E>. Beginning CY 2006—(1) A dispensing fee of $57 is paid to a supplier to the extent that the prescription is for the initial dispensed 30-day supply of inhalation drugs furnished through durable medical equipment covered under section 1861(n) of the Act, regardless of the number of partial shipments of that 30-day supply.</P> <P>(2) Except for supplied inhalation drugs that meet criteria described in paragraph (c)(1) of this section, a dispensing fee of $33 is paid for each dispensed 30-day supply of inhalation drugs furnished through durable medical equipment covered under section 1861(n) of the Act, regardless of the number of partial shipments of that 30-day supply.</P> <P>(d) <E T="03">90-day dispensing fee</E>. Beginning CY 2006, a dispensing fee of $66 is paid to a supplier for each dispensed 90-day supply of inhalation drugs furnished through durable medical equipment covered under section 1861(n) of the Act, regardless of the number of partial shipments of that 90-day supply.</P> <CITA>[70 FR 70334, Nov. 21, 2005]</CITA> </SECTION> </SUBPART> </PART> <PART> <PRTPAGE P="57"/> <EAR>Pt. 415</EAR> <HD SOURCE="HED">PART 415—SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS, SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN CERTAIN SETTINGS</HD> <CONTENTS> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions</HD> <SECHD>Sec.</SECHD> <SECTNO>415.1</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Fiscal Intermediary Payments to Providers for Physician Services</HD> <SECTNO>415.50</SECTNO> <SUBJECT>Scope.</SUBJECT> <SECTNO>415.55</SECTNO> <SUBJECT>General payment rules.</SUBJECT> <SECTNO>415.60</SECTNO> <SUBJECT>Allocation of physician compensation costs.</SUBJECT> <SECTNO>415.70</SECTNO> <SUBJECT>Limits on compensation for physician services in providers.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Part B Carrier Payments for Physician Services to Beneficiaries in Providers</HD> <SECTNO>415.100</SECTNO> <SUBJECT>Scope.</SUBJECT> <SECTNO>415.102</SECTNO> <SUBJECT>Conditions for fee schedule payment for physician services to beneficiaries in providers.</SUBJECT> <SECTNO>415.105</SECTNO> <SUBJECT>Amounts of payment for physician services to beneficiaries in providers.</SUBJECT> <SECTNO>415.110</SECTNO> <SUBJECT>Conditions for payment: Medically directed anesthesia services.</SUBJECT> <SECTNO>415.120</SECTNO> <SUBJECT>Conditions for payment: Radiology services.</SUBJECT> <SECTNO>415.130</SECTNO> <SUBJECT>Conditions for payment: Physician pathology services.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Physician Services in Teaching Settings</HD> <SECTNO>415.150</SECTNO> <SUBJECT>Scope.</SUBJECT> <SECTNO>415.152</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>415.160</SECTNO> <SUBJECT>Election of reasonable cost payment for direct medical and surgical services of physicians in teaching hospitals: General provisions.</SUBJECT> <SECTNO>415.162</SECTNO> <SUBJECT>Determining payment for physician services furnished to beneficiaries in teaching hospitals.</SUBJECT> <SECTNO>415.164</SECTNO> <SUBJECT>Payment to a fund.</SUBJECT> <SECTNO>415.170</SECTNO> <SUBJECT>Conditions for payment on a fee schedule basis for physician services in a teaching setting.</SUBJECT> <SECTNO>415.172</SECTNO> <SUBJECT>Physician fee schedule payment for services of teaching physicians.</SUBJECT> <SECTNO>415.174</SECTNO> <SUBJECT>Exception: Evaluation and management services furnished in certain centers.</SUBJECT> <SECTNO>415.176</SECTNO> <SUBJECT>Renal dialysis services.</SUBJECT> <SECTNO>415.178</SECTNO> <SUBJECT>Anesthesia services.</SUBJECT> <SECTNO>415.180</SECTNO> <SUBJECT>Teaching setting requirements for the interpretation of diagnostic radiology and other diagnostic tests.</SUBJECT> <SECTNO>415.184</SECTNO> <SUBJECT>Psychiatric services.</SUBJECT> <SECTNO>415.190</SECTNO> <SUBJECT>Conditions of payment: Assistants at surgery in teaching hospitals.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Services of Residents</HD> <SECTNO>415.200</SECTNO> <SUBJECT>Services of residents in approved GME programs.</SUBJECT> <SECTNO>415.202</SECTNO> <SUBJECT>Services of residents not in approved GME programs.</SUBJECT> <SECTNO>415.204</SECTNO> <SUBJECT>Services of residents in skilled nursing facilities and home health agencies.</SUBJECT> <SECTNO>415.206</SECTNO> <SUBJECT>Services of residents in nonprovider settings.</SUBJECT> <SECTNO>415.208</SECTNO> <SUBJECT>Services of moonlighting residents.</SUBJECT> </SUBPART> </CONTENTS> <AUTH> <HD SOURCE="HED">Authority:</HD> <P>Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).</P> </AUTH> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>60 FR 63178, Dec. 8, 1995, unless otherwise noted.</P> </SOURCE> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions</HD> <SECTION> <SECTNO>§ 415.1</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) <E T="03">Basis.</E> This part is based on the provisions of the following sections of the Act: Section 1848 establishes a fee schedule for payment for physician services. Section 1861(q) specifies what is included in the term “physician services” covered under Medicare. Section 1862(a)(14) sets forth the exclusion of nonphysician services furnished to hospital patients under Part B of Medicare. Section 1886(d)(5)(B) provides for a payment adjustment under the prospective payment system for the operating costs of inpatient hospital services furnished to Medicare beneficiaries in cost reporting periods beginning on or after October 1, 1983, to account for the indirect costs of medical education. Section 1886(h) establishes the methodology for Medicare payment of the cost of direct GME activities.</P> <P>(b) <E T="03">Scope.</E> This part sets forth rules for fiscal intermediary payments to providers for physician services, Part B carrier payments for physician services to beneficiaries in providers, physician services in teaching settings, and services of residents.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Fiscal Intermediary Payments to Providers for Physician Services</HD> <SECTION> <SECTNO>§ 415.50</SECTNO> <SUBJECT>Scope.</SUBJECT> <P>This subpart sets forth rules for payment by fiscal intermediaries to providers for services furnished by physicians. Payment for covered services is <PRTPAGE P="58"/>made either under the prospective payment system (PPS) to PPS-participating providers in accordance with part 412 of this chapter or under the reasonable cost method to non-PPS participating providers in accordance with part 413 of this chapter.</P> </SECTION> <SECTION> <SECTNO>§ 415.55</SECTNO> <SUBJECT>General payment rules.</SUBJECT> <P>(a) <E T="03">Allowable costs.</E> Except as specified otherwise in §§ 413.102 of this chapter (concerning compensation of owners), 415.60 (concerning allocation of physician compensation costs), and 415.162 (concerning payment for physician services furnished to beneficiaries in teaching hospitals), costs a provider incurs for services of physicians are allowable only if the following conditions are met:</P> <P>(1) The services do not meet the conditions in § 415.102(a) regarding fee schedule payment for services of physicians to a beneficiary in a provider.</P> <P>(2) The services include a surgeon's supervision of services of a qualified anesthetist, but do not include physician availability services, except for reasonable availability services furnished for emergency rooms and the services of standby surgical team physicians.</P> <P>(3) The provider has incurred a cost for salary or other compensation it furnished the physician for the services.</P> <P>(4) The costs incurred by the provider for the services meet the requirements in § 413.9 of this chapter regarding costs related to patient care.</P> <P>(5) The costs do not include supervision of interns and residents unless the provider elects reasonable cost payment as specified in § 415.160, or any other costs incurred in connection with an approved GME program that are payable under §§ 413.75 through 413.83 of this chapter.</P> <P>(b) <E T="03">Allocation of allowable costs.</E> The provider must follow the rules in § 415.60 regarding allocation of physician compensation costs to determine its costs of services.</P> <P>(c) <E T="03">Limits on allowable costs.</E> The intermediary must apply the limits on compensation set forth in § 415.70 to determine its payments to a provider for the costs of services.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.60</SECTNO> <SUBJECT>Allocation of physician compensation costs.</SUBJECT> <P>(a) <E T="03">Definition.</E> For purposes of this subpart, <E T="03">physician compensation costs</E> means monetary payments, fringe benefits, deferred compensation, and any other items of value (excluding office space or billing and collection services) that a provider or other organization furnishes a physician in return for the physician services. Other organizations are entities related to the provider within the meaning of § 413.17 of this chapter or entities that furnish services for the provider under arrangements within the meaning of the Act.</P> <P>(b) <E T="03">General rule.</E> Except as provided in paragraph (d) of this section, each provider that incurs physician compensation costs must allocate those costs, in proportion to the percentage of total time that is spent in furnishing each category of services, among—</P> <P>(1) Physician services to the provider (as described in § 415.55);</P> <P>(2) Physician services to patients (as described in § 415.102); and</P> <P>(3) Activities of the physician, such as funded research, that are not paid under either Part A or Part B of Medicare.</P> <P>(c) <E T="03">Allowable physician compensation costs.</E> Only costs allocated to payable physician services to the provider (as described in § 415.55) are allowable costs to the provider under this subpart.</P> <P>(d) <E T="03">Allocation of all compensation to services to the provider.</E> Generally, the total physician compensation received by a physician is allocated among all services furnished by the physician, unless—</P> <P>(1) The provider certifies that the compensation is attributable solely to the physician services furnished to the provider; and</P> <P>(2) The physician bills all patients for the physician services he or she furnishes to them and personally receives the payment from or on behalf of the patients. If returned directly or indirectly to the provider or an organization related to the provider within the meaning of § 413.17 of this chapter, these payments are not compensation for physician services furnished to the provider.<PRTPAGE P="59"/> </P> <P>(e) <E T="03">Assumed allocation of all compensation to beneficiary services.</E> If the provider and physician agree to accept the assumed allocation of all the physician services to direct services to beneficiaries as described under § 415.102(a), CMS does not require a written allocation agreement between the physician and the provider.</P> <P>(f) <E T="03">Determination and payment of allowable physician compensation costs.</E> (1) Except as provided under paragraph (e) of this section, the intermediary pays the provider for these costs only if—</P> <P>(i) The provider submits to the intermediary a written allocation agreement between the provider and the physician that specifies the respective amounts of time the physician spends in furnishing physician services to the provider, physician services to patients, and services that are not payable under either Part A or Part B of Medicare; and</P> <P>(ii) The compensation is reasonable in terms of the time devoted to these services.</P> <P>(2) In the absence of a written allocation agreement, the intermediary assumes, for purposes of determining reasonable costs of the provider, that 100 percent of the physician compensation cost is allocated to services to beneficiaries as specified in paragraph (b)(2) of this section.</P> <P>(g) <E T="03">Recordkeeping requirements.</E> Except for services furnished in accordance with the assumed allocation under paragraph (e) of this section, each provider that claims payment for services of physicians under this subpart must meet all of the following requirements:</P> <P>(1) Maintain the time records or other information it used to allocate physician compensation in a form that permits the information to be validated by the intermediary or the carrier.</P> <P>(2) Report the information on which the physician compensation allocation is based to the intermediary or the carrier on an annual basis and promptly notify the intermediary or carrier of any revisions to the compensation allocation.</P> <P>(3) Retain each physician compensation allocation, and the information on which it is based, for at least 4 years after the end of each cost reporting period to which the allocation applies.</P> </SECTION> <SECTION> <SECTNO>§ 415.70</SECTNO> <SUBJECT>Limits on compensation for physician services in providers.</SUBJECT> <P>(a) <E T="03">Principle and scope.</E> (1) Except as provided in paragraphs (a)(2) and (a)(3) of this section, CMS establishes reasonable compensation equivalency limits on the amount of compensation paid to physicians by providers. These limits are applied to a provider's costs incurred in compensating physicians for services to the provider, as described in § 415.55(a).</P> <P>(2) Limits established under this section do not apply to costs of physician compensation attributable to furnishing inpatient hospital services that are paid for under the prospective payment system implemented under part 412 of this chapter or to costs of physician compensation attributable to approved GME programs that are payable under §§ 413.75 through 413.83 of this chapter.</P> <P>(3) Compensation that a physician receives for activities that may not be paid for under either Part A or Part B of Medicare is not considered in applying these limits.</P> <P>(b) <E T="03">Methodology for establishing limits.</E> CMS establishes a methodology for determining annual reasonable compensation equivalency limits and, to the extent possible, considers average physician incomes by specialty and type of location using the best available data.</P> <P>(c) <E T="03">Application of limits.</E> If the level of compensation exceeds the limits established under paragraph (b) of this section, Medicare payment is based on the level established by the limits.</P> <P>(d) <E T="03">Adjustment of the limits.</E> The intermediary may adjust limits established under paragraph (b) of this section to account for costs incurred by the physician or the provider related to malpractice insurance, professional memberships, and continuing medical education.</P> <P>(1) For the costs of membership in professional societies and continuing medical education, the intermediary may adjust the limit by the lesser of—</P> <P>(i) The actual cost incurred by the provider or the physician for these activities; or<PRTPAGE P="60"/> </P> <P>(ii) Five percent of the appropriate limit.</P> <P>(2) For the cost of malpractice expenses incurred by either the provider or the physician, the intermediary may adjust the reasonable compensation equivalency limit by the cost of the malpractice insurance expense related to the physician service furnished to patients in providers.</P> <P>(e) <E T="03">Exception to limits.</E> An intermediary may grant a provider an exception to the limits established under paragraph (b) of this section only if the provider can demonstrate to the intermediary that it is unable to recruit or maintain an adequate number of physicians at a compensation level within these limits.</P> <P>(f) <E T="03">Notification of changes in methodologies and payment limits.</E> (1) Before the start of a cost reporting period to which limits established under this section will be applied, CMS publishes a notice in the <E T="04">Federal Register</E> that sets forth the amount of the limits and explains how it calculated the limits.</P> <P>(2) If CMS proposes to revise the methodology for establishing payment limits under this section, CMS publishes a notice, with opportunity for public comment, in the <E T="04">Federal Register.</E> The notice explains the proposed basis and methodology for setting limits, specifies the limits that would result, and states the date of implementation of the limits.</P> <P>(3) If CMS updates limits by applying the most recent economic index data without revising the limit methodology, CMS publishes the revised limits in a notice in the <E T="04">Federal Register</E> without prior publication of a proposal or public comment period.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Part B Carrier Payments for Physician Services to Beneficiaries in Providers</HD> <SECTION> <SECTNO>§ 415.100</SECTNO> <SUBJECT>Scope.</SUBJECT> <P>This subpart implements section 1887(a)(1)(A) of the Act by providing general conditions that must be met in order for services furnished by physicians to beneficiaries in providers to be paid for on the basis of the physician fee schedule under part 414 of this chapter. Section 415.102 sets forth the conditions for fee schedule payment for physician services to beneficiaries in providers. Section 415.105 sets forth general requirements for determining the amounts of payment for services that meet the conditions of this section. Sections 415.120 and 415.130 set forth additional conditions for payment for physician services in the specialties of radiology and pathology (laboratory services).</P> </SECTION> <SECTION> <SECTNO>§ 415.102</SECTNO> <SUBJECT>Conditions for fee schedule payment for physician services to beneficiaries in providers.</SUBJECT> <P>(a) <E T="03">General rule.</E> If the physician furnishes services to beneficiaries in providers, the carrier pays on a fee schedule basis provided the following requirements are met:</P> <P>(1) The services are personally furnished for an individual beneficiary by a physician.</P> <P>(2) The services contribute directly to the diagnosis or treatment of an individual beneficiary.</P> <P>(3) The services ordinarily require performance by a physician.</P> <P>(4) In the case of radiology or laboratory services, the additional requirements in § 415.120 or § 415.130, respectively, are met.</P> <P>(b) <E T="03">Exception.</E> If a physician furnishes services in a provider that do not meet the requirements in paragraph (a) of this section, but are related to beneficiary care furnished by the provider, the intermediary pays for those services, if otherwise covered. The intermediary follows the rules in §§ 415.55 and 415.60 for payment on the basis of reasonable cost or PPS, as appropriate.</P> <P>(c) <E T="03">Effect of billing charges for physician services to a provider.</E> (1) If a physician furnishes services that may be paid under the reasonable cost rules in § 415.55 or § 415.60, and paid by the intermediary, or would be paid under those rules except for the PPS rules in part 412 of this chapter, and under the payment rules for GME established by §§ 413.75 through 413.83 of this chapter, neither the provider nor the physician may seek payment from the carrier, beneficiary, or another insurer.</P> <P>(2) If a physician furnishes services to an individual beneficiary that do not <PRTPAGE P="61"/>meet the applicable conditions in §§ 415.120 (concerning conditions for payment for radiology services) and 415.130 (concerning conditions for payment for physician pathology services), the carrier does not pay on a fee schedule basis.</P> <P>(3) If the physician, the provider, or another entity bills the carrier or the beneficiary or another insurer for physician services furnished to the provider, as described in § 415.55(a), CMS considers the provider to which the services are furnished to have violated its provider participation agreement, and may terminate that agreement. See part 489 of this chapter for rules governing provider agreements.</P> <P>(d) <E T="03">Effect of physician assumption of operating costs.</E> If a physician or other entity enters into an agreement (such as a lease or concession) with a provider, and the physician (or entity) assumes some or all of the operating costs of the provider department in which the physician furnishes physician services, the following rules apply:</P> <P>(1) If the conditions set forth in paragraph (a) of this section are met, the carrier pays for the physician services under the physician fee schedule in part 414 of this chapter.</P> <P>(2) To the extent the provider incurs a cost payable on a reasonable cost basis under part 413 of this chapter, the intermediary pays the provider on a reasonable cost basis for the costs associated with producing these services, including overhead, supplies, equipment costs, and services furnished by nonphysician personnel.</P> <P>(3) The physician (or other entity) is treated as being related to the provider within the meaning of § 413.17 of this chapter (concerning cost to related organizations).</P> <P>(4) The physician (or other entity) must make its books and records available to the provider and the intermediary as necessary to verify the nature and extent of the costs of the services furnished by the physician (or other entity).</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.105</SECTNO> <SUBJECT>Amounts of payment for physician services to beneficiaries in providers.</SUBJECT> <P>(a) <E T="03">General rule.</E> The carrier determines amounts of payment for physician services to beneficiaries in providers in accordance with the general rules governing the physician fee schedule payment in part 414 of this chapter, except as provided in paragraph (b) of this section.</P> <P>(b) <E T="03">Application in certain settings</E>—(1) <E T="03">Teaching hospitals.</E> The carrier applies the rules in subpart D of this part (concerning physician services in teaching settings), in addition to those in this section, in determining whether fee schedule payment should be made for physician services to individual beneficiaries in a teaching hospital.</P> <P>(2) <E T="03">Hospital-based ESRD facilities.</E> The carrier applies §§ 414.310 through 414.314 of this chapter, which set forth determination of reasonable charges under the ESRD program, to determine the amount of payment for physician services furnished to individual beneficiaries in a hospital-based ESRD facility approved under part 405 subpart U.</P> </SECTION> <SECTION> <SECTNO>§ 415.110</SECTNO> <SUBJECT>Conditions for payment: Medically directed anesthesia services.</SUBJECT> <P>(a) <E T="03">General payment rule.</E> Medicare pays for the physician's medical direction of anesthesia services for one service or two through four concurrent anesthesia services furnished after December 31, 1998, only if each of the services meets the condition in § 415.102(a) and the following additional conditions:</P> <P>(1) For each patient, the physician—</P> <P>(i) Performs a pre-anesthetic examination and evaluation;</P> <P>(ii) Prescribes the anesthesia plan;</P> <P>(iii) Personally participates in the most demanding aspects of the anesthesia plan including, if applicable, induction and emergence;</P> <P>(iv) Ensures that any procedures in the anesthesia plan that he or she does not perform are performed by a qualified individual as defined in operating instructions;</P> <P>(v) Monitors the course of anesthesia administration at frequent intervals;<PRTPAGE P="62"/> </P> <P>(vi) Remains physically present and available for immediate diagnosis and treatment of emergencies; and</P> <P>(vii) Provides indicated post-anesthesia care.</P> <P>(2) The physician directs no more than four anesthesia services concurrently and does not perform any other services while he or she is directing the single or concurrent services so that one or more of the conditions in paragraph (a)(1) of this section are not violated.</P> <P>(3) If the physician personally performs the anesthesia service, the payment rules in § 414.46(c) of this chapter apply (Physician personally performs the anesthesia procedure).</P> <P>(b) <E T="03">Medical documentation.</E> The physician alone inclusively documents in the patient's medical record that the conditions set forth in paragraph (a)(1) of this section have been satisfied, specifically documenting that he or she performed the pre-anesthetic exam and evaluation, provided the indicated post-anesthesia care, and was present during the most demanding procedures, including induction and emergence where applicable.</P> <CITA>[63 FR 58912, Nov. 2, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.120</SECTNO> <SUBJECT>Conditions for payment: Radiology services.</SUBJECT> <P>(a) <E T="03">Services to beneficiaries.</E> The carrier pays for radiology services furnished by a physician to a beneficiary on a fee schedule basis only if the services meet the conditions for fee schedule payment in § 415.102(a) and are identifiable, direct, and discrete diagnostic or therapeutic services furnished to an individual beneficiary, such as interpretation of x-ray plates, angiograms, myelograms, pyelograms, or ultrasound procedures. The carrier pays for interpretations only if there is a written report prepared for inclusion in the patient's medical record maintained by the hospital.</P> <P>(b) <E T="03">Services to providers.</E> The carrier does not pay on a fee schedule basis for physician services to the provider (for example, administrative or supervisory services) or for provider services needed to produce the x-ray films or other items that are interpreted by the radiologist. However, the intermediary pays the provider for these services in accordance with § 415.55 for provider costs; § 415.102(d)(2) for costs incurred by a physician, such as under a lease or concession agreement; or part 412 of this chapter for payment under PPS.</P> </SECTION> <SECTION> <SECTNO>§ 415.130</SECTNO> <SUBJECT>Conditions for payment: Physician pathology services.</SUBJECT> <P>(a) <E T="03">Definitions.</E> The following definitions are used in this section.</P> <P>(1) <E T="03">Covered hospital</E> means, with respect to an inpatient or an outpatient, a hospital that had an arrangement with an independent laboratory that was in effect as of July 22, 1999, under which a laboratory furnished the technical component of physician pathology services to fee-for-service Medicare beneficiaries who were hospital inpatients or outpatients, and submitted claims for payment for this technical component directly to a Medicare carrier.</P> <P>(2) <E T="03">Fee-for-service Medicare beneficiaries</E> means those beneficiaries who are entitled to benefits under Part A or are enrolled under Part B of Title XVIII of the Act or both and are not enrolled in any of the following:</P> <P>(i) A Medicare+Choice plan under Part C of Title XVIII of the Act.</P> <P>(ii) A plan offered by an eligible organization under section 1876 of the Act;</P> <P>(iii) A program of all-inclusive care for the elderly (PACE) under 1894 of the Act; or</P> <P>(iv) A social health maintenance organization (SHMO) demonstration project established under section 4018(b) of the Omnibus Budget Reconciliation Act of 1987.</P> <P>(b) <E T="03">Physician pathology services.</E> The carrier pays for pathology services furnished by a physician to an individual beneficiary on a fee schedule basis only if the services meet the conditions for payment in § 415.102(a) and are one of the following services:</P> <P>(1) Surgical pathology services.</P> <P>(2) Specific cytopathology, hematology, and blood banking services that have been identified to require performance by a physician and are listed in program operating instructions.</P> <P>(3) Clinical consultation services that meet the requirements in paragraph (c) of this section.</P> <P>(4) Clinical laboratory interpretative services that meet the requirements of <PRTPAGE P="63"/>paragraphs (c)(1), (c)(3), and (c)(4) of this section and that are specifically listed in program operating instructions.</P> <P>(c) <E T="03">Clinical consultation services.</E> For purposes of this section, clinical consultation services must meet the following requirements:</P> <P>(1) Be requested by the beneficiary's attending physician.</P> <P>(2) Relate to a test result that lies outside the clinically significant normal or expected range in view of the condition of the beneficiary.</P> <P>(3) Result in a written narrative report included in the beneficiary's medical record.</P> <P>(4) Require the exercise of medical judgment by the consultant physician.</P> <P>(d) <E T="03">Physician pathology services furnished by an independent laboratory.</E> The technical component of physician pathology services furnished by an independent laboratory to a hospital inpatient or outpatient before January 1, 2001 may be paid to the laboratory on a fee schedule basis. After December 31, 2000 but before January 1, 2003, if an independent laboratory furnishes the technical component of a physician pathology service to a fee-for-service Medicare beneficiary who is an inpatient or outpatient of a covered hospital, the carrier will treat the technical component as a service for which payment will be made to the laboratory under the physician fee schedule. For these two years the service will not be treated as an inpatient hospital service for which payment is made to the hospital under section 1886(d) of the Act or as an outpatient hospital service for which payment is made to the hospital under section 1833(t) of the Act. After December 31, 2002, the technical component for physician pathology services furnished by an independent laboratory to a hospital inpatient or outpatient is paid only to the hospital.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 64 FR 59442, Nov. 2, 1999; 66 FR 55332, Nov. 1, 2001]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Physician Services in Teaching Settings</HD> <SECTION> <SECTNO>§ 415.150</SECTNO> <SUBJECT>Scope.</SUBJECT> <P>This subpart sets forth the rules governing payment for the services of physicians in teaching settings and the criteria for determining whether the payments are made as one of the following:</P> <P>(a) Services to the hospital under the reasonable cost election in §§ 415.160 through 415.164.</P> <P>(b) Provider services through the direct GME payment mechanism in §§ 413.75 through 413.83 of this chapter.</P> <P>(c) Physician services to beneficiaries under the physician fee schedule as set forth in part 414 of this chapter.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.152</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart—</P> <P> <E T="03">Approved graduate medical education (GME) program</E> means one of the following:</P> <P>(1) A residency program approved by the Accreditation Council for Graduate Medical Education of the American Medical Association, by the Committee on Hospitals of the Bureau of Professional Education of the American Osteopathic Association, by the Commission on Dental Accreditation of the American Dental Association, or by the Council on Podiatric Medicine Education of the American Podiatric Medical Association.</P> <P>(2) A program otherwise recognized as an “approved medical residency program” under § 413.75(b) of this chapter.</P> <P> <E T="03">Direct medical and surgical services</E> means services to individual beneficiaries that are either personally furnished by a physician or furnished by a resident under the supervision of a physician in a teaching hospital making the cost election described in §§ 415.160 through 415.162.</P> <P> <E T="03">Nonprovider setting</E> means a setting other than a hospital, skilled nursing facility, home health agency, or comprehensive outpatient rehabilitation facility in which residents furnish services. These include, but are not limited to, family practice or multispecialty clinics and physician offices.</P> <P> <E T="03">Resident</E> means one of the following:<PRTPAGE P="64"/> </P> <P>(1) An individual who participates in an approved GME program, including programs in osteopathy, dentistry, and podiatry.</P> <P>(2) A physician who is not in an approved GME program, but who is authorized to practice only in a hospital, for example, individuals with temporary or restricted licenses, or unlicensed graduates of foreign medical schools. For purposes of this subpart, the term <E T="03">resident</E> is synonymous with the terms <E T="03">intern</E> and <E T="03">fellow.</E> </P> <P> <E T="03">Teaching hospital</E> means a hospital engaged in an approved GME residency program in medicine, osteopathy, dentistry, or podiatry.</P> <P> <E T="03">Teaching physician</E> means a physician (other than another resident) who involves residents in the care of his or her patients.</P> <P> <E T="03">Teaching setting</E> means any provider, hospital-based provider, or nonprovider settings in which Medicare payment for the services of residents is made under the direct GME payment provisions of §§ 413.75 through 413.83, or on a reasonable-cost basis under the provisions of § 409.26 or § 409.40(f) for resident services furnished in skilled nursing facilities or home health agencies, respectively.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 61 FR 59554, Nov. 22, 1996; 63 FR 26359, May 12, 1998; 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.160</SECTNO> <SUBJECT>Election of reasonable cost payment for direct medical and surgical services of physicians in teaching hospitals: General provisions.</SUBJECT> <P>(a) <E T="03">Scope.</E> A teaching hospital may elect to receive payment on a reasonable cost basis for the direct medical and surgical services of its physicians in lieu of fee schedule payments that might otherwise be made for these services.</P> <P>(b) <E T="03">Conditions.</E> A teaching hospital may elect to receive these payments only if—</P> <P>(1) The hospital notifies its intermediary in writing of the election and meets the conditions of either paragraph (b)(2) or paragraph (b)(3) of this section;</P> <P>(2) All physicians who furnish services to Medicare beneficiaries in the hospital agree not to bill charges for these services; or</P> <P>(3) All physicians who furnish services to Medicare beneficiaries in the hospital are employees of the hospital and, as a condition of employment, are precluded from billing for these services.</P> <P>(c) <E T="03">Effect of election.</E> If a teaching hospital elects to receive reasonable cost payment for physician direct medical and surgical services furnished to beneficiaries—</P> <P>(1) Those services and the supervision of interns and residents furnishing care to individual beneficiaries are covered as hospital services, and</P> <P>(2) The intermediary pays the hospital for those services on a reasonable cost basis under the rules in § 415.162. (Payment for other physician compensation costs related to approved GME programs is made as described in § 413.78 of this chapter.)</P> <P>(d) <E T="03">Election declined.</E> If the teaching hospital does not make this election, payment is made—</P> <P>(1) For physician services furnished to beneficiaries on a fee schedule basis as described in part 414 subject to the rules in this subpart, and</P> <P>(2) For the supervision of interns and residents as described in §§ 413.75 through 413.83.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.162</SECTNO> <SUBJECT>Determining payment for physician services furnished to beneficiaries in teaching hospitals.</SUBJECT> <P>(a) <E T="03">General rule.</E> Payments for direct medical and surgical services of physicians furnished to beneficiaries and supervision of interns and residents furnishing care to beneficiaries is made by Medicare on the basis of reasonable cost if the hospital exercises the election as provided for in § 415.160. If this election is made, the following occurs:</P> <P>(1) Physician services furnished to beneficiaries and supervision of interns and residents furnishing care to beneficiaries are paid on a reasonable-cost basis, as provided for in paragraph (b) of this section.</P> <P>(2) Payment for certain medical school costs may be made as provided for in paragraph (c) of this section.<PRTPAGE P="65"/> </P> <P>(3) Payments for services donated by volunteer physicians to beneficiaries are made to a fund designated by the organized medical staff of the teaching hospital or medical school as provided for in paragraph (d) of this section.</P> <P>(b) <E T="03">Reasonable cost of physician services and supervision of interns and residents.</E> (1) Physician services furnished to beneficiaries and supervision of interns and residents furnishing care to beneficiaries in a teaching hospital are payable as provider services on a reasonable-cost basis.</P> <P>(2) For purposes of this paragraph, <E T="03">reasonable cost</E> is defined as the direct salary paid to these physicians, plus applicable fringe benefits.</P> <P>(3) The costs must be allocated to the services as provided by paragraph (j) of this section and apportioned to program beneficiaries as provided by paragraph (g) of this section.</P> <P>(4) Other allowable costs incurred by the provider related to the services described in this paragraph are payable subject to the requirements applicable to all other provider services.</P> <P>(c) <E T="03">Reasonable costs for the services furnished by a medical school or related organization in a hospital.</E> An amount is payable to the hospital by CMS under the Medicare program provided that the costs would be payable if incurred directly by the hospital rather than under the arrangement. The amount must not be in excess of the reasonable costs (as defined in paragraphs (c)(1) and (c)(2) of this section) incurred by a teaching hospital for services furnished by a medical school or organization as described in § 413.17 of this chapter for certain costs to the medical school (or a related organization) in furnishing services in the hospital.</P> <P>(1) <E T="03">Reasonable costs of physician services.</E> (i) <E T="03">When the medical school and the hospital are related organizations.</E> If the medical school (or organization related to the medical school) and the hospital are related by common ownership or control as described in § 413.17 of this chapter—</P> <P>(A) The costs of these services are allowable costs to the hospital under the provisions of § 413.17 of this chapter; and</P> <P>(B) The reimbursable costs to the hospital are determined under the provisions of this section in the same manner as the costs incurred for physicians on the hospital staff and without regard to payments made to the medical school by the hospital.</P> <P>(ii) <E T="03">When the medical school and the hospital are not related organizations.</E> (A) If the medical school and the hospital are not related organizations under the provisions of § 413.17 of this chapter and the hospital makes payment to the medical school for the costs of those services furnished to all patients, payment is made by Medicare to the hospital for the reasonable cost incurred by the hospital for its payments to the medical school for services furnished to beneficiaries.</P> <P>(B) Costs incurred under an arrangement must be allocated to the full range of services furnished to the hospital by the medical school physicians on the same basis as provided for under paragraph (j) of this section, and costs allocated to direct medical and surgical services furnished to hospital patients must be apportioned to beneficiaries as provided for under paragraph (g) of this section.</P> <P>(C) If the medical school and the hospital are not related organizations under the provisions of § 413.17 of this chapter and the hospital makes payment to the medical school only for the costs of those services furnished to beneficiaries, costs of the medical school not to exceed 105 percent of the sum of physician direct salaries, applicable fringe benefits, employer's portion of FICA taxes, Federal and State unemployment taxes, and workmen's compensation paid by the medical school or an organization related to the medical school may be recognized as allowable costs of the medical school.</P> <P>(D) These allowable medical school costs must be allocated to the full range of services furnished by the physicians of the medical school or organization related as provided by paragraph (j) of this section.</P> <P>(E) Costs allocated to direct medical and surgical services furnished to hospital patients must be apportioned to beneficiaries as provided by paragraph (g) of this section.</P> <P>(2) <E T="03">Reasonable costs of other than direct medical and surgical services.</E> These costs <PRTPAGE P="66"/>are determined in accordance with paragraph (c)(1) of this section except that—</P> <P>(i) If the hospital makes payment to the medical school for other than direct medical and surgical services furnished to beneficiaries and supervision of interns and residents furnishing care to beneficiaries, these payments are subject to the required cost-finding and apportionment methods applicable to the cost of other hospital services (except for direct medical and surgical services furnished to beneficiaries); or</P> <P>(ii) If the hospital makes payment to the medical school only for these services furnished to beneficiaries, the cost of these services is not subject to cost-finding and apportionment as otherwise provided by this subpart, and the reasonable cost paid by Medicare must be determined on the basis of the health insurance ratio(s) used in the apportionment of all other provider costs (excluding physician direct medical and surgical services furnished to beneficiaries) applied to the allowable medical school costs incurred by the medical school for the services furnished to all patients of the hospital.</P> <P>(d) <E T="03">“Salary equivalent” payments for direct medical and surgical services furnished by physicians on the voluntary staff of the hospital.</E> (1) CMS makes payments under the Medicare program to a fund as defined in § 415.164 for direct medical and surgical services furnished to beneficiaries on a regularly scheduled basis by physicians on the unpaid voluntary medical staff of the hospital (or medical school under arrangement with the hospital).</P> <P>(i) These payments represent compensation for contributed medical staff time which, if not contributed, would have to be obtained through employed staff on a payable basis.</P> <P>(ii) Payments for volunteer services are determined by applying to the regularly scheduled contributed time an hourly rate not to exceed the equivalent of the average direct salary (exclusive of fringe benefits) paid to all full-time, salaried physicians (other than interns and residents) on the hospital staff or, if the number of full-time salaried physicians is minimal in absolute terms or in relation to the number of physicians on the voluntary staff, to physicians at like institutions in the area.</P> <P>(iii) This “salary equivalent” is a single hourly rate covering all physicians regardless of specialty and is applied to the actual regularly scheduled time contributed by the physicians in furnishing direct medical and surgical services to beneficiaries including supervision of interns and residents in that care.</P> <P>(iv) A physician who receives any compensation from the hospital or a medical school related to the hospital by common ownership or control (within the meaning of § 413.17 of this chapter) for direct medical and surgical services furnished to any patient in the hospital is not considered an unpaid voluntary physician for purposes of this paragraph.</P> <P>(v) If, however, a physician receives compensation from the hospital or related medical school or organization only for services that are other than direct medical and surgical services, a salary equivalent payment for the physician's regularly scheduled direct medical and surgical services to beneficiaries in the hospital may be imputed. However, the sum of the imputed value for volunteer services and the physician's actual compensation from the hospital and the related medical school (or organization) may not exceed the amount that would have been imputed if all of the physician's hospital and medical school services (compensated and volunteer) had been volunteer services, or paid at the rate of $30,000 per year, whichever is less.</P> <P>(2) The following examples illustrate how the allowable imputed value for volunteer services is determined. In each example, it has been assumed that the average salary equivalent hourly rate is equal to the hourly rate for the individual physician's compensated services. </P> <EXAMPLE> <HD SOURCE="HED">Example No: 1.</HD> <P>Dr. Jones received $3,000 a year from Hospital X for services other than direct medical services to all patients, for example, utilization review and administrative services. Dr. Jones also voluntarily furnished direct medical services to beneficiaries. The imputed value of the volunteer services amounted to $10,000 for the cost reporting period. The full imputed value of Dr. Jones' volunteer direct medical services would be allowed since the total amount of <PRTPAGE P="67"/>the imputed value ($10,000) and the compensated services ($3,000) does not exceed $30,000.</P> </EXAMPLE> <EXAMPLE> <HD SOURCE="HED">Example No: 2.</HD> <P>Dr. Smith received $25,000 from Hospital X for services as a department head in a teaching hospital. Dr. Smith also voluntarily furnished direct medical services to beneficiaries. The imputed value of the volunteer services amounted to $10,000. Only $5,000 of the imputed value of volunteer services would be allowed since the total amount of the imputed value ($10,000) and the compensated services ($25,000) exceeds the $30,000 maximum amount allowable for all of Dr. Smith's services.</P> <HD SOURCE="HD1">Computation:</HD> <GPOTABLE CDEF="s50,8" COLS="2" OPTS="L0,7/8,g1,t1"> <ROW> <ENT I="01">Maximum amount allowable for all services performed by Dr. Smith for purposes of this computation</ENT> <ENT>$30,000</ENT> </ROW> <ROW> <ENT I="01">Less compensation received from Hospital X for other than direct medical services to individual patients</ENT> <ENT>$25,000</ENT> </ROW> <ROW> <ENT I="01">Allowable amount of imputed value for the volunteer services furnished by Dr. Smith</ENT> <ENT>$5,000</ENT> </ROW> </GPOTABLE> </EXAMPLE> <EXAMPLE> <HD SOURCE="HED">Example No. 3.</HD> <P>Dr. Brown is not compensated by Hospital X for any services furnished in the hospital. Dr. Brown voluntarily furnished direct surgical services to beneficiaries for a period of 6 months, and the imputed value of these services amounted to $20,000. The allowable amount of the imputed value for volunteer services furnished by Dr. Brown would be limited to $15,000 ($30,000×6/12).</P> </EXAMPLE> <P>(3) The amount of the imputed value for volunteer services applicable to beneficiaries and payable to a fund is determined in accordance with the aggregate per diem method described in paragraph (g) of this section.</P> <P>(4) Medicare payments to a fund must be used by the fund solely for improvement of care of hospital patients or for educational or charitable purposes (which may include but are not limited to medical and other scientific research).</P> <P>(i) No personal financial gain, either direct or indirect, from benefits of the fund may inure to any of the hospital staff physicians, medical school faculty, or physicians for whom Medicare imputes costs for purposes of payment into the fund.</P> <P>(ii) Expenses met from contributions made to the hospital from a fund are not included as a reimbursable cost when expended by the hospital, and depreciation expense is not allowed with respect to equipment or facilities donated to the hospital by a fund or purchased by the hospital from monies in a fund.</P> <P>(e) <E T="03">Requirements for payment</E>—(1) <E T="03">Physicians on the hospital staff.</E> The requirements under which the costs of physician direct medical and surgical services (including supervision of interns and residents) to beneficiaries are the same as those applicable to the cost of all other covered provider services except that the costs of these services are separately determined as provided by this section and are not subject to cost-finding as described in § 413.24 of this chapter.</P> <P>(2) <E T="03">Physicians on the medical school faculty.</E> Payment is made to a hospital for the costs of services of physicians on the medical school faculty, provided that if the medical school is not related to the hospital (within the meaning of § 413.17 of this chapter, concerning cost to related organizations), the hospital does not make payment to the medical school for services furnished to all patients and the following requirements are met: If the hospital makes payment to the medical school for services furnished to all patients, these requirements do not apply. (See paragraph (c)(1)(ii) of this section.)</P> <P>(i) There is a written agreement between the hospital and the medical school or organization, specifying the types and extent of services to be furnished by the medical school and specifying that the hospital must pay to the medical school an amount at least equal to the reasonable cost (as defined in paragraph (c) of this section) of furnishing the services to beneficiaries.</P> <P>(ii) The costs are paid to the medical school by the hospital no later than the date on which the cost report covering the period in which the services were furnished is due to CMS.</P> <P>(iii) Payment for the services furnished under an arrangement would have been made to the hospital had the services been furnished directly by the hospital.</P> <P>(3) <E T="03">Physicians on the voluntary staff of the hospital (or medical school under arrangement with the hospital).</E> If the conditions for payment to a fund outlined in § 415.164 are met, payments are made <PRTPAGE P="68"/>on a “salary equivalent” basis (as defined in paragraph (d) of this section) to a fund.</P> <P>(f) <E T="03">Requirements for payment for medical school faculty services other than physician direct medical and surgical services.</E> If the requirements for payment for physician direct medical and surgical services furnished to beneficiaries in a teaching hospital described in paragraph (e) of this section are met, payment is made to a hospital for the costs of medical school faculty services other than physician direct medical and surgical services furnished in a teaching hospital.</P> <P>(g) <E T="03">Aggregate per diem methods of apportionment</E>—(1) <E T="03">For the costs of physician direct medical and surgical services.</E> The cost of physician direct medical and surgical services furnished in a teaching hospital to beneficiaries is determined on the basis of an average cost per diem as defined in paragraph (h)(1) of this section for physician direct medical and surgical services to all patients (see §§ 415.172 through 415.184) for each of the following categories of physicians:</P> <P>(i) Physicians on the hospital staff.</P> <P>(ii) Physicians on the medical school faculty.</P> <P>(2) <E T="03">For the imputed value of physician volunteer direct medical and surgical services.</E> The imputed value of physician direct medical and surgical services furnished to beneficiaries in a teaching hospital is determined on the basis of an average per diem, as defined in paragraph (h)(1) of this section, for physician direct medical and surgical services to all patients except that the average per diem is derived from the imputed value of the physician volunteer direct medical and surgical services furnished to all patients.</P> <P>(h) <E T="03">Definitions.</E> (1) <E T="03">Average cost per diem for physician direct medical and surgical services (including supervision of interns and residents) furnished in a teaching hospital to patients in each category of physician services described in paragraph (g)(1) of this section</E> means the amount computed by dividing total reasonable costs of these services in each category by the sum of—</P> <P>(i) Inpatient days (as defined in paragraph (h)(2) of this section); and</P> <P>(ii) Outpatient visit days (as defined in paragraph (h)(3) of this section).</P> <P>(2) <E T="03">Inpatient days</E> are determined by counting the day of admission as 3.5 days and each day after a patient's day of admission, except the day of discharge, as 1 day.</P> <P>(3) <E T="03">Outpatient visit days</E> are determined by counting only one visit day for each calendar day that a patient visits an outpatient department or multiple outpatient departments.</P> <P>(i) <E T="03">Application.</E> (1) The following illustrates how apportionment based on the aggregate per diem method for costs of physician direct medical and surgical services furnished in a teaching hospital to patients is determined.</P> <EXTRACT> <HD SOURCE="HD1">Teaching Hospital Y</HD> <HD SOURCE="HD3">Statistical and financial data:</HD> <GPOTABLE CDEF="s50,10" COLS="2" OPTS="L0,7/8,g1,t1"> <ROW> <ENT I="01">Total inpatient days as defined in paragraph (h)(2) of this section and outpatient visit days as defined in paragraph (h)(3) of this section</ENT> <ENT>75,000</ENT> </ROW> <ROW> <ENT I="01">Total inpatient Part A days</ENT> <ENT>20,000</ENT> </ROW> <ROW> <ENT I="01">Total inpatient Part B days where Part A coverage is not available</ENT> <ENT>1,000</ENT> </ROW> <ROW> <ENT I="01">Total outpatient Part B visit days</ENT> <ENT>5,000</ENT> </ROW> <ROW> <ENT I="01">Total cost of direct medical and surgical services furnished to all patients by physicians on the hospital staff as determined in accordance with paragraph (i) of this section</ENT> <ENT>$1,500,000</ENT> </ROW> <ROW> <ENT I="01">Total cost of direct medical and surgical services furnished to all patients by physicians on the medical school faculty as determined in accordance with paragraph (i) of this section</ENT> <ENT>$1,650,000</ENT> </ROW> </GPOTABLE> <P>Computation of cost applicable to program for physicians on the hospital staff:</P> <P>Average cost per diem for direct medical and surgical services to patients by physicians on the hospital staff: $1,500,000 ÷ 75,000 = $20 per diem.</P> <GPOTABLE CDEF="s50,10" COLS="2" OPTS="L0,7/8,g1,t1"> <ROW> <ENT I="01">Cost of physician direct medical and surgical services furnished to inpatient beneficiaries covered under Part A: $20 per diem × 20,000</ENT> <ENT>$400,000</ENT> </ROW> <ROW> <ENT I="01">Cost of physician direct medical and surgical services furnished to inpatient beneficiaries covered under Part B: $20 per diem × 1,000</ENT> <ENT>$20,000</ENT> </ROW> <ROW> <PRTPAGE P="69"/> <ENT I="01">Cost of physician direct medical and surgical services furnished to outpatient beneficiaries covered under Part B: $20 per diem × 5,000</ENT> <ENT>$100,000</ENT> </ROW> </GPOTABLE> <P>Computation of cost applicable to program for physicians on the medical school faculty:</P> <P>Average cost per diem for direct medical and surgical services to patients by physicians on the medical school faculty: $1,650,000 ÷ 75,000 = $22 per diem.</P> <GPOTABLE CDEF="s50,10" COLS="2" OPTS="L0,7/8,g1,t1"> <ROW> <ENT I="01">Cost of physician direct medical and surgical services furnished to inpatient beneficiaries covered under Part A: $22 per diem × 20,000</ENT> <ENT>$440,000</ENT> </ROW> <ROW> <ENT I="01">Cost of physician direct medical and surgical services furnished to inpatient beneficiaries covered under Part B: $20 per diem × 1,000</ENT> <ENT>$22,000</ENT> </ROW> <ROW> <ENT I="01">Cost of physician direct medical and surgical services furnished to outpatient beneficiaries covered under Part B: $22 per diem × 5,000</ENT> <ENT>$110,000</ENT> </ROW> </GPOTABLE> <P>(2) The following illustrates how the imputed value of physician volunteer direct medical and surgical services furnished in a teaching hospital to beneficiaries is determined. </P> <EXAMPLE> <HD SOURCE="HED">Example:</HD> <P>The physicians on the medical staff of Teaching Hospital Y donated a total of 5,000 hours in furnishing direct medical and surgical services to patients of the hospital during a cost reporting period and did not receive any compensation from either the hospital or the medical school. Also, the imputed value for any physician volunteer services did not exceed the rate of $30,000 per year per physician.</P> </EXAMPLE> <HD SOURCE="HD1">Statistical and financial data:</HD> <GPOTABLE CDEF="s50,10" COLS="2" OPTS="L0,7/8,g1,t1"> <ROW> <ENT I="01">Total salaries paid to the full-time salaried physicians by the hospital (excluding interns and residents)</ENT> <ENT>$800,000</ENT> </ROW> <ROW> <ENT I="01">Total physicians who were paid for an average of 40 hours per week or 2,080 (52 weeks×40 hours per week) hours per year</ENT> <ENT>20</ENT> </ROW> <ROW> <ENT I="01">Average hourly rate equivalent: $800,000 ÷ 41,600 (2,080 × 20)</ENT> <ENT>$19.23</ENT> </ROW> </GPOTABLE> <P>Computation of total imputed value of physician volunteer services applicable to all patients:</P> <GPOTABLE CDEF="s50,10" COLS="2" OPTS="L0,7/8,g1,t1"> <ROW> <ENT I="01">(Total donated hours × average hourly rate equivalent): 5,000 × $19.23</ENT> <ENT>$96,150</ENT> </ROW> <ROW> <ENT I="01">Total inpatient days (as defined in paragraph (h)(2) of this section) and outpatient visit days (as defined in paragraph (h)(3) of this section)</ENT> <ENT>75,000</ENT> </ROW> <ROW> <ENT I="01">Total inpatient Part A days</ENT> <ENT>20,000</ENT> </ROW> <ROW> <ENT I="01">Total inpatient Part B days if Part A coverage is not available</ENT> <ENT>1,000</ENT> </ROW> <ROW> <ENT I="01">Total outpatient Part B visit days</ENT> <ENT>5,000</ENT> </ROW> </GPOTABLE> <P>Computation of imputed value of physician volunteer direct medical and surgical services furnished to Medicare beneficiaries:</P> <P>Average per diem for physician direct medical and surgical services to all patients: $96,150 ÷ 75,000 = $1.28 per diem</P> <GPOTABLE CDEF="s50,10" COLS="2" OPTS="L0,7/8,g1,t1"> <ROW> <ENT I="01">Imputed value of physician direct medical and surgical services furnished to inpatient beneficiaries covered under Part A: $1.28 per diem × 20,000</ENT> <ENT>$25,600</ENT> </ROW> <ROW> <ENT I="01">Imputed value of physician direct medical and surgical services furnished to inpatient beneficiaries covered under Part B: $1.28 per diem × 1,000</ENT> <ENT>$1,280</ENT> </ROW> <ROW> <ENT I="01">Imputed value of physician direct medical and surgical services furnished to outpatient beneficiaries covered under Part B: $1.28 per diem × 5,000</ENT> <ENT>$6,400</ENT> </ROW> <ROW> <ENT I="01">Total</ENT> <ENT>$33,280</ENT> </ROW> </GPOTABLE> </EXTRACT> <P>(j) <E T="03">Allocation of compensation paid to physicians in a teaching hospital.</E> (1) In determining reasonable cost under this section, the compensation paid by a teaching hospital, or a medical school or related organization under arrangement with the hospital, to physicians in a teaching hospital must be allocated to the full range of services implicit in the physician compensation arrangements. (However, see paragraph (d) of this section for the computation of the “salary equivalent” payments for volunteer services furnished to patients.)</P> <P>(2) This allocation must be made and must be capable of substantiation on the basis of the proportion of each physician's time spent in furnishing each type of service to the hospital or medical school.</P> </SECTION> <SECTION> <SECTNO>§ 415.164</SECTNO> <SUBJECT>Payment to a fund.</SUBJECT> <P>(a) <E T="03">General rules.</E> Payment for certain voluntary services by physicians in teaching hospitals (as these services are described in § 415.160) is made on a salary equivalent basis (as described in § 415.162(d)) subject to the conditions and limitations contained in parts 405 and 413 of this chapter and this part 415, to a single fund (as defined in paragraph (b) of this section) designated by <PRTPAGE P="70"/>the organized medical staff of the hospital (or, if the services are furnished in the hospital by the faculty of a medical school, to a fund as may be designated by the faculty), if the following conditions are met:</P> <P>(1) The hospital (or medical school furnishing the services under arrangement with the hospital) incurs no actual cost in furnishing the services.</P> <P>(2) The hospital has an agreement with CMS under part 489 of this chapter.</P> <P>(3) The intermediary, or CMS as appropriate, has received written assurances that—</P> <P>(i) The payment is used solely for the improvement of care of hospital patients or for educational or charitable purposes; and</P> <P>(ii) Neither the individuals who are furnished the services nor any other persons are charged for the services (and if charged, provision is made for the return of any monies incorrectly collected).</P> <P>(b) <E T="03">Definition of a fund.</E> For purposes of paragraph (a) of this section, a <E T="03">fund</E> is an organization that meets either of the following requirements:</P> <P>(1) The organization has and retains exemption, as a governmental entity or under section 501(c)(3) of the Internal Revenue Code (nonprofit educational, charitable, and similar organizations), from Federal taxation.</P> <P>(2) The organization is an organization of physicians who, under the terms of their employment by an entity that meets the requirements of paragraph (b)(1) of this section, are required to turn over to that entity all income that the physician organization derives from the physician services.</P> <P>(c) <E T="03">Status of a fund.</E> A fund approved for payment under paragraph (a) of this section has all the rights and responsibilities of a provider under Medicare except that it does not enter into an agreement with CMS under part 489 of this chapter.</P> </SECTION> <SECTION> <SECTNO>§ 415.170</SECTNO> <SUBJECT>Conditions for payment on a fee schedule basis for physician services in a teaching setting.</SUBJECT> <P>Services meeting the conditions for payment in § 415.102(a) furnished in teaching settings are payable under the physician fee schedule if—</P> <P>(a) The services are personally furnished by a physician who is not a resident; or</P> <P>(b) The services are furnished by a resident in the presence of a teaching physician except as provided in § 415.172 (concerning physician fee schedule payment for services of teaching physicians), § 415.174 (concerning an exception for services furnished in hospital outpatient and certain other ambulatory settings), § 415.176 (concerning renal dialysis services), and § 415.184 (concerning psychiatric services), as applicable.</P> </SECTION> <SECTION> <SECTNO>§ 415.172</SECTNO> <SUBJECT>Physician fee schedule payment for services of teaching physicians.</SUBJECT> <P>(a) <E T="03">General rule.</E> If a resident participates in a service furnished in a teaching setting, physician fee schedule payment is made only if a teaching physician is present during the key portion of any service or procedure for which payment is sought.</P> <P>(1) In the case of surgical, high-risk, or other complex procedures, the teaching physician must be present during all critical portions of the procedure and immediately available to furnish services during the entire service or procedure.</P> <P>(i) In the case of surgery, the teaching physician's presence is not required during opening and closing of the surgical field.</P> <P>(ii) In the case of procedures performed through an endoscope, the teaching physician must be present during the entire viewing.</P> <P>(2) In the case of evaluation and management services, the teaching physician must be present during the portion of the service that determines the level of service billed. (However, in the case of evaluation and management services furnished in hospital outpatient departments and certain other ambulatory settings, the requirements of § 415.174 apply.)</P> <P>(b) <E T="03">Documentation.</E> Except for services furnished as set forth in §§ 415.174 (concerning an exception for services furnished in hospital outpatient and certain other ambulatory settings), 415.176 (concerning renal dialysis services), and 415.184 (concerning psychiatric services), the medical records must <PRTPAGE P="71"/>document the teaching physician was present at the time the service is furnished. The presence of the teaching physician during procedures may be demonstrated by the notes in the medical records made by a physician, resident, or nurse. In the case of evaluation and management procedures, the teaching physician must personally document his or her participation in the service in the medical records.</P> <P>(c) <E T="03">Payment level.</E> In the case of services such as evaluation and management for which there are several levels of service codes available for reporting purposes, the appropriate payment level must reflect the extent and complexity of the service when fully furnished by the teaching physician.</P> </SECTION> <SECTION> <SECTNO>§ 415.174</SECTNO> <SUBJECT>Exception: Evaluation and management services furnished in certain centers.</SUBJECT> <P>(a) In the case of certain evaluation and management codes of lower and mid-level complexity (as specified by CMS in program instructions), carriers may make physician fee schedule payment for a service furnished by a resident without the presence of a teaching physician. For the exception to apply, all of the following conditions must be met:</P> <P>(1) The services must be furnished in a center that is located in an outpatient department of a hospital or another ambulatory care entity in which the time spent by residents in patient care activities is included in determining intermediary payments to a hospital under §§ 413.75 through 413.83.</P> <P>(2) Any resident furnishing the service without the presence of a teaching physician must have completed more than 6 months of an approved residency program.</P> <P>(3) The teaching physician must not direct the care of more than four residents at any given time and must direct the care from such proximity as to constitute immediate availability. The teaching physician must—</P> <P>(i) Have no other responsibilities at the time;</P> <P>(ii) Assume management responsibility for those beneficiaries seen by the residents;</P> <P>(iii) Ensure that the services furnished are appropriate;</P> <P>(iv) Review with each resident during or immediately after each visit, the beneficiary's medical history, physical examination, diagnosis, and record of tests and therapies; and</P> <P>(v) Document the extent of the teaching physician's participation in the review and direction of the services furnished to each beneficiary.</P> <P>(4) The range of services furnished by residents in the center includes all of the following:</P> <P>(i) Acute care for undifferentiated problems or chronic care for ongoing conditions.</P> <P>(ii) Coordination of care furnished by other physicians and providers.</P> <P>(iii) Comprehensive care not limited by organ system, or diagnosis.</P> <P>(5) The patients seen must be an identifiable group of individuals who consider the center to be the continuing source of their health care and in which services are furnished by residents under the medical direction of teaching physicians.</P> <P>(b) Nothing in paragraph (a) of this section may be construed as providing a basis for the coverage of services not determined to be covered under Medicare, such as routine physical checkups.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 61 FR 59554, Nov. 22, 1996; 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.176</SECTNO> <SUBJECT>Renal dialysis services.</SUBJECT> <P>In the case of renal dialysis services, physicians who are not paid under the physician monthly capitation payment method (as described in § 414.314 of this chapter) must meet the requirements of §§ 415.170 and 415.172 (concerning physician fee schedule payment for services of teaching physicians).</P> </SECTION> <SECTION> <SECTNO>§ 415.178</SECTNO> <SUBJECT>Anesthesia services.</SUBJECT> <P>(a) <E T="03">General rule.</E> An unreduced physician fee schedule payment may be made if a physician is involved in a single anesthesia procedure involving an anesthesia resident. In the case of anesthesia services, the teaching physician must be present during all critical portions of the procedure and immediately available to furnish services during the entire service or procedure. The teaching physician cannot receive an unreduced fee if he or she performs <PRTPAGE P="72"/>services involving other patients during the period the anesthesia resident is furnishing services in a single case. For additional rules for payment of anesthesia services involving residents, see § 414.46(c)(1)(iii)).</P> <P>(b) <E T="03">Documentation.</E> Documentation must indicate the physician's presence or participation in the administration of the anesthesia.</P> <CITA>[60 FR 63178, Dec. 8, 1995; 61 FR 42385, Aug. 15, 1996]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.180</SECTNO> <SUBJECT>Teaching setting requirements for the interpretation of diagnostic radiology and other diagnostic tests.</SUBJECT> <P>(a) <E T="03">General rule.</E> Physician fee schedule payment is made for the interpretation of diagnostic radiology and other diagnostic tests if the interpretation is performed or reviewed by a physician other than a resident.</P> <P>(b) <E T="03">Documentation.</E> Documentation must indicate that the physician personally performed the interpretation or reviewed the resident's interpretation with the resident.</P> </SECTION> <SECTION> <SECTNO>§ 415.184</SECTNO> <SUBJECT>Psychiatric services.</SUBJECT> <P>To qualify for physician fee schedule payment for psychiatric services furnished under an approved GME program, the physician must meet the requirements of §§ 415.170 and 415.172, including documentation, except that the requirement for the presence of the teaching physician during the service in which a resident is involved may be met by observation of the service by use of a one-way mirror, video equipment, or similar device.</P> </SECTION> <SECTION> <SECTNO>§ 415.190</SECTNO> <SUBJECT>Conditions of payment: Assistants at surgery in teaching hospitals.</SUBJECT> <P>(a) <E T="03">Basis, purpose, and scope.</E> This section describes the conditions under which Medicare pays on a fee schedule basis for the services of an assistant at surgery in a teaching hospital. This section is based on section 1842(b)(7)(D)(I) of the Act and applies only to hospitals with an approved GME residency program. Except as specified in paragraph (c) of this section, fee schedule payment is not available for assistants at surgery in hospitals with—</P> <P>(1) A training program relating to the medical specialty required for the surgical procedure; and</P> <P>(2) A resident in a training program relating to the specialty required for the surgery available to serve as an assistant at surgery.</P> <P>(b) <E T="03">Definition. Assistant at surgery</E> means a physician who actively assists the physician in charge of a case in performing a surgical procedure.</P> <P>(c) <E T="03">Conditions for payment for assistants at surgery.</E> Payment on a fee schedule basis is made for the services of an assistant at surgery in a teaching hospital only if the services meet one of the following conditions:</P> <P>(1) Are required as a result of exceptional medical circumstances.</P> <P>(2) Are complex medical procedures performed by a team of physicians, each performing a discrete, unique function integral to the performance of a complex medical procedure that requires the special skills of more than one physician.</P> <P>(3) Constitute concurrent medical care relating to a medical condition that requires the presence of, and active care by, a physician of another specialty during surgery.</P> <P>(4) Are medically required and are furnished by a physician who is primarily engaged in the field of surgery, and the primary surgeon does not use interns and residents in the surgical procedures that the surgeon performs (including preoperative and postoperative care).</P> <P>(5) Are not related to a surgical procedure for which CMS determines that assistants are used less than 5 percent of the time.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Services of Residents</HD> <SECTION> <SECTNO>§ 415.200</SECTNO> <SUBJECT>Services of residents in approved GME programs.</SUBJECT> <P>(a) <E T="03">General rules.</E> Services furnished in hospitals by residents in approved GME programs are specifically excluded from being paid as “physician services” defined in § 414.2 of this chapter and are payable as hospital services. This exclusion applies whether or not the resident is licensed to practice under the laws of the State in which he <PRTPAGE P="73"/>or she performs the service. The payment methodology for services of residents in hospitals and hospital-based providers is set forth in §§ 413.75 through 413.83 of this chapter.</P> <P>(b) <E T="03">Exception.</E> For low and mid-level evaluation and management services furnished under certain conditions in centers located in hospital outpatient departments and other ambulatory settings, see § 415.174.</P> <P>(c) <E T="03">Definitions.</E> See § 415.152 for definitions of terms used in this subpart E.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.202</SECTNO> <SUBJECT>Services of residents not in approved GME programs.</SUBJECT> <P>(a) <E T="03">General rules.</E> For services of a physician employed by a hospital who is authorized to practice only in a hospital setting and for the services of a resident who is not in any approved GME program, payment is made to the hospital on a Part B reasonable cost basis regardless of whether the services are furnished to hospital inpatients or outpatients.</P> <P>(b) <E T="03">Payment.</E> For services described in paragraph (a) of this section, payment is made under Part B by reducing the reasonable costs of furnishing the services by the beneficiary deductible and paying 80 percent of the remaining amount. No payment is made for other costs of unapproved programs, such as administrative costs related to teaching activities of physicians.</P> </SECTION> <SECTION> <SECTNO>§ 415.204</SECTNO> <SUBJECT>Services of residents in skilled nursing facilities and home health agencies.</SUBJECT> <P>(a) <E T="03">Medicare Part A payment.</E> Payment is made under Medicare Part A for interns' and residents' services furnished in the following settings that meet the specified requirements:</P> <P>(1) <E T="03">Skilled nursing facility.</E> Payment to a participating skilled nursing facility may include the cost of services of an intern or resident who is in an approved GME program in a hospital with which the skilled nursing facility has a transfer agreement that provides, in part, for the transfer of patients and the interchange of medical records.</P> <P>(2) <E T="03">Home health agency.</E> A participating home health agency may receive payment for the cost of the services of an intern or resident who is under an approved GME program of a hospital with which the home health agency is affiliated or under common control if these services are furnished as part of the home health visits for a Medicare beneficiary. (Nevertheless, see §§ 413.75 through 413.83 of this chapter for the costs of approved GME programs in hospital-based providers.)</P> <P>(b) <E T="03">Medicare Part B payment.</E> Medical services of a resident of a hospital that are furnished by a skilled nursing facility or home health agency are paid under Medicare Part B if payment is not provided under Medicare Part A. Payment is made under Part B for a resident's services by reducing the reasonable costs of furnishing the services by the beneficiary deductible and paying 80 percent of the remaining amount.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.206</SECTNO> <SUBJECT>Services of residents in nonprovider settings.</SUBJECT> <P>Patient care activities of residents in approved GME programs that are furnished in nonprovider settings are payable in one of the following two ways:</P> <P>(a) <E T="03">Direct GME payments.</E> If the conditions in § 413.78 regarding patient care activities and training of residents are met, the time residents spend in nonprovider settings such as clinics, nursing facilities, and physician offices in connection with approved GME programs is included in determining the number of full-time equivalency residents in the calculation of a teaching hospital's resident count. The teaching physician rules on carrier payments in §§ 415.170 through 415.184 apply in these teaching settings.</P> <P>(b) <E T="03">Physician fee schedule.</E> (1) Services furnished by a resident in a nonprovider setting are covered as physician services and payable under the physician fee schedule if the following requirements are met:</P> <P>(i) The resident is fully licensed to practice medicine, osteopathy, dentistry, or podiatry in the State in which the service is performed.</P> <P>(ii) The time spent in patient care activities in the nonprovider setting is not included in a teaching hospital's full-time equivalency resident count <PRTPAGE P="74"/>for the purpose of direct GME payments.</P> <P>(2) Payment may be made regardless of whether a resident is functioning within the scope of his or her GME program in the nonprovider setting.</P> <P>(3) If fee schedule payment is made for the resident's services in a nonprovider setting, payment must not be made for the services of a teaching physician.</P> <P>(4) The carrier must apply the physician fee schedule payment rules set forth in subpart A of part 414 of this chapter to payments for services furnished by a resident in a nonprovider setting.</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 415.208</SECTNO> <SUBJECT>Services of moonlighting residents.</SUBJECT> <P>(a) <E T="03">Definition.</E> For purposes of this section, the term <E T="03">services of moonlighting residents</E> refers to services that licensed residents perform that are outside the scope of an approved GME program.</P> <P>(b) <E T="03">Services in GME program hospitals.</E> (1) The services of residents to inpatients of hospitals in which the residents have their approved GME program are not covered as physician services and are payable under §§ 413.75 through 413.83 regarding direct GME payments.</P> <P>(2) Services of residents that are not related to their approved GME programs and are performed in an outpatient department or emergency department of a hospital in which they have their training program are covered as physician services and payable under the physician fee schedule if all of the following criteria are met:</P> <P>(i) The services are identifiable physician services and meet the conditions for payment of physician services to beneficiaries in providers in § 415.102(a).</P> <P>(ii) The resident is fully licensed to practice medicine, osteopathy, dentistry, or podiatry by the State in which the services are performed.</P> <P>(iii) The services performed can be separately identified from those services that are required as part of the approved GME program.</P> <P>(3) If the criteria specified in paragraph (b)(2) of this section are met, the services of the moonlighting resident are considered to have been furnished by the individual in his or her capacity as a physician, rather than in the capacity of a resident. The carrier must review the contracts and agreements for these services to ensure compliance with the criteria specified in paragraph (b)(2) of this section.</P> <P>(4) No payment is made for services of a “teaching physician” associated with moonlighting services, and the time spent furnishing these services is not included in the teaching hospital's full-time equivalency count for the indirect GME payment (§ 412.105 of this chapter) and for the direct GME payment (§§ 413.75 through 413.83 of this chapter).</P> <P>(c) <E T="03">Other settings.</E> Moonlighting services of a licensed resident in an approved GME program furnished outside the scope of that program in a hospital or other setting that does not participate in the approved GME program are payable under the physician fee schedule as set forth in § 415.206(b)(1).</P> <CITA>[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> </SUBPART> </PART> <PART> <EAR>Pt. 416</EAR> <HD SOURCE="HED">PART 416—AMBULATORY SURGICAL SERVICES</HD> <CONTENTS> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions and Definitions</HD> <SECHD>Sec.</SECHD> <SECTNO>416.1</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <SECTNO>416.2</SECTNO> <SUBJECT>Definitions.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—General Conditions and Requirements</HD> <SECTNO>416.25</SECTNO> <SUBJECT>Basic requirements.</SUBJECT> <SECTNO>416.26</SECTNO> <SUBJECT>Qualifying for an agreement.</SUBJECT> <SECTNO>416.30</SECTNO> <SUBJECT>Terms of agreement with CMS.</SUBJECT> <SECTNO>416.35</SECTNO> <SUBJECT>Termination of agreement.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Specific Conditions for Coverage</HD> <SECTNO>416.40</SECTNO> <SUBJECT>Condition for coverage—Compliance with State licensure law.</SUBJECT> <SECTNO>416.41</SECTNO> <SUBJECT>Condition for coverage—Governing body and management.</SUBJECT> <SECTNO>416.42</SECTNO> <SUBJECT>Condition for coverage—Surgical services.</SUBJECT> <SECTNO>416.43</SECTNO> <SUBJECT>Condition for coverage—Evaluation of quality.</SUBJECT> <SECTNO>416.44</SECTNO> <SUBJECT>Condition for coverage—Environment.<PRTPAGE P="75"/> </SUBJECT> <SECTNO>416.45</SECTNO> <SUBJECT>Condition for coverage—Medical staff.</SUBJECT> <SECTNO>416.46</SECTNO> <SUBJECT>Condition for coverage—Nursing services.</SUBJECT> <SECTNO>416.47</SECTNO> <SUBJECT>Condition for coverage—Medical records.</SUBJECT> <SECTNO>416.48</SECTNO> <SUBJECT>Condition for coverage—Pharmaceutical services.</SUBJECT> <SECTNO>416.49</SECTNO> <SUBJECT>Condition for coverage—Laboratory and radiologic services.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Scope of Benefits</HD> <SECTNO>416.60</SECTNO> <SUBJECT>General rules.</SUBJECT> <SECTNO>416.61</SECTNO> <SUBJECT>Scope of facility services.</SUBJECT> <SECTNO>416.65</SECTNO> <SUBJECT>Covered surgical procedures.</SUBJECT> <SECTNO>416.75</SECTNO> <SUBJECT>Performance of listed surgical procedures on an inpatient hospital basis.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Payment for Facility Services</HD> <SECTNO>416.120</SECTNO> <SUBJECT>Basis for payment.</SUBJECT> <SECTNO>416.125</SECTNO> <SUBJECT>ASC facility services payment rate.</SUBJECT> <SECTNO>416.130</SECTNO> <SUBJECT>Publication of revised payment methodologies.</SUBJECT> <SECTNO>416.140</SECTNO> <SUBJECT>Surveys.</SUBJECT> <SECTNO>416.150</SECTNO> <SUBJECT>Beneficiary appeals.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Adjustment in Payment Amounts for New Technology Intraocular Lenses Furnished by Ambulatory Surgical Centers</HD> <SECTNO>416.180</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>416.185</SECTNO> <SUBJECT>Payment review process.</SUBJECT> <SECTNO>416.190</SECTNO> <SUBJECT>Who may request a review.</SUBJECT> <SECTNO>416.195</SECTNO> <SUBJECT>A request to review.</SUBJECT> <SECTNO>416.200</SECTNO> <SUBJECT>Application of the payment adjustment.</SUBJECT> </SUBPART> </CONTENTS> <AUTH> <HD SOURCE="HED">Authority:</HD> <P>Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).</P> </AUTH> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>47 FR 34094, Aug. 5, 1982, unless otherwise noted.</P> </SOURCE> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions and Definitions</HD> <SECTION> <SECTNO>§ 416.1</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) <E T="03">Statutory basis.</E> (1) Section 1832(a)(2)(F)(i) of the Act provides for Medicare Part B coverage of facility services furnished in connection with surgical procedures specified by the Secretary under section 1833(i)(1) of the Act.</P> <P>(2) Section 1833(i)(1)(A) of the Act requires the Secretary to specify the surgical procedures that can be performed safely on an ambulatory basis in an ambulatory surgical center, or a hospital outpatient department.</P> <P>(3) Section 1833(i) (2)(A) and (3) specify the amounts to be paid for facility services furnished in connection with the specified surgical procedures when they are performed, respectively, in an ASC, or in a hospital outpatient department.</P> <P>(b) <E T="03">Scope.</E> This part sets forth—</P> <P>(1) The conditions that an ASC must meet in order to participate in the Medicare program;</P> <P>(2) The scope of covered services; and</P> <P>(3) The conditions for Medicare payment for facility services.</P> <CITA>[56 FR 8843, Mar. 1, 1991; 56 FR 23022, May 20, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.2</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this part:</P> <P> <E T="03">Ambulatory surgical center</E> or <E T="03">ASC</E> means any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization, has an agreement with CMS to participate in Medicare as an ASC, and meets the conditions set forth in subparts B and C of this part.</P> <P> <E T="03">ASC services</E> means facility services that are furnished in an ASC.</P> <P> <E T="03">Covered surgical procedures</E> means those surgical and other medical procedures that meet the criteria specified in § 416.65 and are published by CMS in the <E T="04">Federal Register.</E> </P> <P> <E T="03">Facility services</E> means services that are furnished in connection with covered surgical procedures performed in an ASC, or in a hospital on an outpatient basis.</P> <CITA>[56 FR 8843, Mar. 1, 1991; 56 FR 23022, May 20, 1991]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—General Conditions and Requirements</HD> <SECTION> <SECTNO>§ 416.25</SECTNO> <SUBJECT>Basic requirements.</SUBJECT> <P>Participation as an ASC is limited to facilities that—</P> <P>(a) Meet the definition in § 416.2; and</P> <P>(b) Have in effect an agreement obtained in accordance with this subpart.</P> <CITA>[56 FR 8843, Mar. 1, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.26</SECTNO> <SUBJECT>Qualifying for an agreement.</SUBJECT> <P>(a) <E T="03">Deemed compliance.</E> CMS may deem an ASC to be in compliance with any or all of the conditions set forth in subpart C of this part if—<PRTPAGE P="76"/> </P> <P>(1) The ASC is accredited by a national accrediting body, or licensed by a State agency, that CMS determines provides reasonable assurance that the conditions are met;</P> <P>(2) In the case of deemed status through accreditation by a national accrediting body, where State law requires licensure, the ASC complies with State licensure requirements; and</P> <P>(3) The ASC authorizes the release to CMS, of the findings of the accreditation survey.</P> <P>(b) <E T="03">Survey of ASCs.</E> (1) Unless CMS deems the ASC to be in compliance with the conditions set forth in subpart C of this part, the State survey agency must survey the facility to ascertain compliance with those conditions, and report its findings to CMS.</P> <P>(2) CMS surveys deemed ASCs on a sample basis as part of CMS's validation process.</P> <P>(c) <E T="03">Acceptance of the ASC as qualified to furnish ambulatory surgical services.</E> If CMS determines, after reviewing the survey agency recommendation and other evidence relating to the qualification of the ASC, that the facility meets the requirements of this part, it sends to the ASC—</P> <P>(1) Written notice of the determination; and</P> <P>(2) Two copies of the ASC agreement.</P> <P>(d) <E T="03">Filing of agreement by the ASC.</E> If the ASC wishes to participate in the program, it must—</P> <P>(1) Have both copies of the ASC agreement signed by its authorized representative; and</P> <P>(2) File them with CMS.</P> <P>(e) <E T="03">Acceptance by CMS.</E> If CMS accepts the agreement filed by the ASC, returns to the ASC one copy of the agreement, with a notice of acceptance specifying the effective date.</P> <P>(f) <E T="03">Appeal rights.</E> If CMS refuses to enter into an agreement or if CMS terminates an agreement, the ASC is entitled to a hearing in accordance with part 498 of this chapter.</P> <CITA>[56 FR 8843, Mar. 1, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.30</SECTNO> <SUBJECT>Terms of agreement with CMS.</SUBJECT> <P>As part of the agreement under § 416.26 the ASC must agree to the following:</P> <P>(a) <E T="03">Compliance with coverage conditions.</E> The ASC agrees to meet the conditions for coverage specified in subpart C of this part and to report promptly to CMS any failure to do so.</P> <P>(b) <E T="03">Limitation on charges to beneficiaries.</E> <SU>1</SU> <FTREF/> The ASC agrees to charge the beneficiary or any other person only the applicable deductible and coinsurance amounts for facility services for which the beneficiary—</P> <FTNT> <P> <SU>1</SU> For facility services furnished before July 1987, the ASC had to agree to make no charge to the beneficiary, since those services were not subject to the part B deductible and coinsurance provisions.</P> </FTNT> <P>(1) Is entitled to have payment made on his or her behalf under this part; or</P> <P>(2) Would have been so entitled if the ASC had filed a request for payment in accordance with § 410.165 of this chapter.</P> <P>(c) <E T="03">Refunds to beneficiaries.</E> (1) The ASC agrees to refund as promptly as possible any money incorrectly collected from beneficiaries or from someone on their behalf.</P> <P>(2) As used in this section, <E T="03">money incorrectly collected</E> means sums collected in excess of those specified in paragraph (b) of this section. It includes amounts collected for a period of time when the beneficiary was believed not to be entitled to Medicare benefits if—</P> <P>(i) The beneficiary is later determined to have been entitled to Medicare benefits; and</P> <P>(ii) The beneficiary's entitlement period falls within the time the ASC's agreement with CMS is in effect.</P> <P>(d) <E T="03">Furnishing information.</E> The ASC agrees to furnish to CMS, if requested, information necessary to establish payment rates specified in §§ 416.120-416.130 in the form and manner that CMS requires.</P> <P>(e) <E T="03">Acceptance of assignment.</E> The ASC agrees to accept assignment for all facility services furnished in connection with covered surgical procedures. For purposes of this section, assignment means an assignment under § 424.55 of this chapter of the right to receive payment under Medicare Part B and payment under § 424.64 of this chapter (when an individual dies before assigning the claim).</P> <P>(f) <E T="03">ASCs operated by a hopsital.</E> In an ASC operated by a hospital—<PRTPAGE P="77"/> </P> <P>(1) The agreement is made effective on the first day of the next Medicare cost reporting period of the hospital that operates the ASC; and</P> <P>(2) The ASC participates and is paid only as an ASC, without the option of converting to or being paid as a hospital outpatient department, unless CMS determines there is good cause to do otherwise.</P> <P>(3) Costs for the ASC are treated as a non-reimbursable cost center on the hopsital's cost report.</P> <P>(g) <E T="03">Additional provisions.</E> The agreement may contain any additional provisions that CMS finds necessary or desirable for the efficient and effective administration of the Medicare program.</P> <CITA>[47 FR 34094, Aug. 5, 1982, as amended at 51 FR 41351, Nov. 14, 1986; 56 FR 8844, Mar. 1, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.35</SECTNO> <SUBJECT>Termination of agreement.</SUBJECT> <P>(a) <E T="03">Termination by the ASC</E>—(1) <E T="03">Notice to CMS.</E> An ASC that wishes to terminate its agreement must send CMS written notice of its intent.</P> <P>(2) <E T="03">Date of termination.</E> The notice may state the intended date of termination which must be the first day of a calendar month.</P> <P>(i) If the notice does not specify a date, or the date is not acceptable to CMS, CMS may set a date that will not be more than 6 months from the date on the ASC's notice of intent.</P> <P>(ii) CMS may accept a termination date that is less than 6 months after the date on the ASC's notice if it determines that to do so would not unduly disrupt services to the community or otherwise interfere with the effective and efficient administration of the Medicare program.</P> <P>(3) <E T="03">Voluntary termination.</E> If an ASC ceases to furnish services to the community, that shall be deemed to be a voluntary termination of the agreement by the ASC, effective on the last day of business with Medicare beneficiaries.</P> <P>(b) <E T="03">Termination by CMS</E>—(1) <E T="03">Cause for termination.</E> CMS may terminate an agreement if it determines that the ASC—</P> <P>(i) No longer meets the conditions for coverage as specified under § 416.26; or</P> <P>(ii) Is not in substantial compliance with the provisions of the agreement, the requirements of this subpart, and other applicable regulations of subchapter B of this chapter, or any applicable provisions of title XVIII of the Act.</P> <P>(2) <E T="03">Notice of termination.</E> CMS sends notice of termination to the ASC at least 15 days before the effective date stated in the notice.</P> <P>(3) <E T="03">Appeal by the ASC.</E> An ASC may appeal the termination of its agreement in accordance with the provisions set forth in part 498 of this chapter.</P> <P>(c) <E T="03">Effect of termination.</E> Payment is not available for ASC services furnished on or after the effective date of termination.</P> <P>(d) <E T="03">Notice to the public.</E> Prompt notice of the date and effect of termination is given to the public, through publication in local newspapers by—</P> <P>(1) The ASC, after CMS has approved or set a termination date; or</P> <P>(2) CMS, when it has terminated the agreement.</P> <P>(e) <E T="03">Conditions for reinstatement after termination of agreement by CMS.</E> When an agreement with an ASC is terminated by CMS, the ASC may not file another agreement to participate in the Medicare program unless CMS—</P> <P>(1) Finds that the reason for the termination of the prior agreement has been removed; and</P> <P>(2) Is assured that the reason for the termination will not recur.</P> <CITA>[47 FR 34094, Aug. 5, 1982, as amended at 52 FR 22454, June 12, 1987; 56 FR 8844, Mar. 1, 1991; 61 FR 40347, Aug. 2, 1996]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Specific Conditions for Coverage</HD> <SECTION> <SECTNO>§ 416.40</SECTNO> <SUBJECT>Condition for coverage—Compliance with State licensure law.</SUBJECT> <P>The ASC must comply with State licensure requirements.</P> </SECTION> <SECTION> <SECTNO>§ 416.41</SECTNO> <SUBJECT>Condition for coverage—Governing body and management.</SUBJECT> <P>The ASC must have a governing body, that assumes full legal responsibility for determining, implementing, and monitoring policies governing the ASC's total operation and for ensuring that these policies are administered so as to provide quality health care in a <PRTPAGE P="78"/>safe environment. When services are provided through a contract with an outside resource, the ASC must assure that these services are provided in a safe and effective manner. <E T="03">Standard: Hospitalization.</E> The ASC must have an effective procedure for the immediate transfer to a hospital, of patients requiring emergency medical care beyond the capabilities of the ASC. This hospital must be a local, Medicare participating hospital or a local, nonparticipating hospital that meets the requirements for payment for emergency services under § 482.2 of this chapter. The ASC must have a written transfer agreement with such a hospital, or all physicians performing surgery in the ASC must have admitting privileges at such a hospital.</P> <CITA>[47 FR 34094, Aug. 5, 1982, as amended at 51 FR 22041, June 17, 1986]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.42</SECTNO> <SUBJECT>Condition for coverage—Surgical services.</SUBJECT> <P>Surgical procedures must be performed in a safe manner by qualified physicians who have been granted clinical privileges by the governing body of the ASC in accordance with approved policies and procedures of the ASC.</P> <P>(a) <E T="03">Standard: Anesthetic risk and evaluation.</E> A physician must examine the patient immediately before surgery to evaluate the risk of anesthesia and of the procedure to be performed. Before discharge from the ASC, each patient must be evaluated by a physician for proper anesthesia recovery.</P> <P>(b) <E T="03">Standard: Administration of anesthesia.</E> Anesthetics must be administered by only—</P> <P>(1) A qualified anesthesiologist; or</P> <P>(2) A physician qualified to administer anesthesia, a certified registered nurse anesthetist (CRNA) or an anesthesiologist's assistant as defined in § 410.69(b) of this chapter, or a supervised trainee in an approved educational program. In those cases in which a non-physician administers the anesthesia, unless exempted in accordance with paragraph (d) of this section, the anesthetist must be under the supervision of the operating physician, and in the case of an anesthesiologist's assistant, under the supervision of an anesthesiologist.</P> <P>(c) <E T="03">Standard: Discharge.</E> All patients are discharged in the company of a responsible adult, except those exempted by the attending physician.</P> <P>(d) <E T="03">Standard: State exemption.</E> (1) An ASC may be exempted from the requirement for physician supervision of CRNAs as described in paragraph (b)(2) of this section, if the State in which the ASC is located submits a letter to CMS signed by the Governor, following consultation with the State's Boards of Medicine and Nursing, requesting exemption from physician supervision of CRNAs. The letter from the Governor must attest that he or she has consulted with State Boards of Medicine and Nursing about issues related to access to and the quality of anesthesia services in the State and has concluded that it is in the best interests of the State's citizens to opt-out of the current physician supervision requirement, and that the opt-out is consistent with State law.</P> <P>(2) The request for exemption and recognition of State laws, and the withdrawal of the request may be submitted at any time, and are effective upon submission.</P> <CITA>[57 FR 33899, July 31, 1992, as amended at 66 FR 56768, Nov. 13, 2001.]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.43</SECTNO> <SUBJECT>Condition for coverage—Evaluation of quality.</SUBJECT> <P>The ASC, with the active participation of the medical staff, must conduct an ongoing, comprehensive self-assessment of the quality of care provided, including medical necessity of procedures performed and appropriateness of care, and use findings, when appropriate, in the revision of center policies and consideration of clinical privileges.</P> </SECTION> <SECTION> <SECTNO>§ 416.44</SECTNO> <SUBJECT>Condition for coverage—Environment.</SUBJECT> <EXT-XREF HREF="20060922" REFID="13">Link to an amendment published at 71 FR 55339, Sept. 22, 2006.</EXT-XREF> <P>The ASC must have a safe and sanitary environment, properly constructed, equipped, and maintained to protect the health and safety of patients.</P> <P>(a) <E T="03">Standard: Physical environment.</E> The ASC must provide a functional and sanitary environment for the provision of surgical services.</P> <P>(1) Each operating room must be designed and equipped so that the types of surgery conducted can be performed <PRTPAGE P="79"/>in a manner that protects the lives and assures the physical safety of all individuals in the area.</P> <P>(2) The ASC must have a separate recovery room and waiting area.</P> <P>(3) The ASC must establish a program for identifying and preventing infections, maintaining a sanitary environment, and reporting the results to appropriate authorities.</P> <P>(b) <E T="03">Standard: Safety from fire.</E> (1) Except as otherwise provided in this section, the ASC must meet the provisions applicable to Ambulatory Health Care Centers of the 2000 edition of the Life Safety Code of the National Fire Protection Association, regardless of the number of patients served. The Director of the Office of the Federal Register has approved the NFPA 101 <E T="51">®</E> 2000 edition of the Life Safety Code, issued January 14, 2000, for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. A copy of the Code is available for inspection at the CMS Information Resource Center, 7500 Security Boulevard, Baltimore, MD and at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: <E T="03">http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.</E> Copies may be obtained from the National Fire Protection Association, 1 Batterymarch Park, Quincy, MA 02269. If any changes in this edition of the Code are incorporated by reference, CMS will publish notice in the <E T="04">Federal Register</E> to announce the changes.</P> <P>(2) In consideration of a recommendation by the State survey agency, CMS may waive, for periods deemed appropriate, specific provisions of the Life Safety Code which, if rigidly applied, would result in unreasonable hardship upon an ASC, but only if the waiver will not adversely affect the health and safety of the patients.</P> <P>(3) The provisions of the Life Safety Code do not apply in a State if CMS finds that a fire and safety code imposed by State law adequately protects patients in an ASC.</P> <P>(4) An ASC must be in compliance with Chapter 21.2.9.1, Emergency Lighting, beginning on March 13, 2006.</P> <P>(5) Notwithstanding any provisions of the 2000 edition of the Life Safety Code to the contrary, an ASC may place alcohol-based hand rub dispensers in its facility if—</P> <P>(i) Use of alcohol-based hand rub dispensers does not conflict with any State or local codes that prohibit or otherwise restrict the placement of alcohol-based hand rub dispensers in health care facilities;</P> <P>(ii) The dispensers are installed in a manner that minimizes leaks and spills that could lead to falls;</P> <P>(iii) The dispensers are installed in a manner that adequately protects against access by vulnerable populations; and</P> <P>(iv) The dispensers are installed in accordance with the following provisions:</P> <P>(A) Where dispensers are installed in a corridor, the corridor shall have a minimum width of 6 ft (1.8m);</P> <P>(B) The maximum individual dispenser fluid capacity shall be:</P> <P>(<E T="03">1</E>) 0.3 gallons (1.2 liters) for dispensers in rooms, corridors, and areas open to corridors.</P> <P>(<E T="03">2</E>) 0.5 gallons (2.0 liters) for dispensers in suites of rooms;</P> <P>(C) The dispensers shall have a minimum horizontal spacing of 4 ft (1.2m) from each other;</P> <P>(D) Not more than an aggregate 10 gallons (37.8 liters) of ABHR solution shall be in use in a single smoke compartment outside of a storage cabinet;</P> <P>(E) Storage of quantities greater than 5 gallons (18.9 liters) in a single smoke compartment shall meet the requirements of NFPA 30, <E T="03">Flammable and Combustible Liquids Code;</E> </P> <P>(F) The dispensers shall not be installed over or directly adjacent to an ignition source; and</P> <P>(G) In locations with carpeted floor coverings, dispensers installed directly over carpeted surfaces shall be permitted only in sprinklered smoke compartments.</P> <P>(c) <E T="03">Standard: Emergency equipment.</E> Emergency equipment available to the operating rooms must include at least the following:</P> <P>(1) Emergency call system.</P> <P>(2) Oxygen.<PRTPAGE P="80"/> </P> <P>(3) Mechanical ventilatory assistance equipment including airways, manual breathing bag, and ventilator.</P> <P>(4) Cardiac defibrillator.</P> <P>(5) Cardiac monitoring equipment.</P> <P>(6) Tracheostomy set.</P> <P>(7) Laryngoscopes and endotracheal tubes.</P> <P>(8) Suction equipment.</P> <P>(9) Emergency medical equipment and supplies specified by the medical staff.</P> <P>(d) <E T="03">Standard: Emergency personnel.</E> Personnel trained in the use of emergency equipment and in cardiopulmonary resuscitation must be available whenever there is a patient in the ASC.</P> <CITA>[47 FR 34094, Aug. 5, 1982, amended at 53 FR 11508, Apr. 7, 1988; 54 FR 4026, Jan. 27, 1989; 68 FR 1385, Jan. 10, 2003; 69 FR 18803, Apr. 9, 2004; 70 FR 15237, Mar. 25, 2005]</CITA> <EFFDNOTP> <HD SOURCE="HED">Effective Date Note:</HD> <P>At 71 FR 55339, Sept. 22, 2006, § 416.44 was amended by revising paragraphs, (b)(5)(iii) and (iv)(F) and (G) and by adding paragraph (b)(5)(v), effective October 23, 2006. For the convenience of the user, the revised and added text is set forth as follows:</P> <REVTXT> <SECTION> <SECTNO>§ 416.44</SECTNO> <SUBJECT>Conditions for coverage-Environment.</SUBJECT> <STARS/> <P>(b) * * *</P> <P>(5) * * *</P> <P>(iii) The dispensers are installed in a manner that adequately protects against inappropriate access;</P> <P>(iv) * * *</P> <P>(F) The dispensers shall not be installed over or directly adjacent to an ignition source;</P> <P>(G) In locations with carpeted floor coverings, dispensers installed directly over carpeted surfaces shall be permitted only in sprinklered smoke compartments; and</P> <P>(v) The dispensers are maintained in accordance with dispenser manufacturer guidelines.<STARS/> </P> </SECTION> <SECTION> <SECTNO>§ 416.45</SECTNO> <SUBJECT>Condition for coverage—Medical staff.</SUBJECT> <P>The medical staff of the ASC must be accountable to the governing body.</P> <P>(a) <E T="03">Standard: Membership and clinical privileges.</E> Members of the medical staff must be legally and professionally qualified for the positions to which they are appointed and for the performance of privileges granted. The ASC grants privileges in accordance with recommendations from qualified medical personnel.</P> <P>(b) <E T="03">Standard: Reappraisals.</E> Medical staff privileges must be periodically reappraised by the ASC. The scope of procedures performed in the ASC must be periodically reviewed and amended as appropriate.</P> <P>(c) <E T="03">Standard: Other practitioners.</E> If the ASC assigns patient care responsibilities to practitioners other than physicians, it must have established policies and procedures, approved by the governing body, for overseeing and evaluating their clinical activities.</P> </SECTION> <SECTION> <SECTNO>§ 416.46</SECTNO> <SUBJECT>Condition for coverage—Nursing services.</SUBJECT> <P>The nursing services of the ASC must be directed and staffed to assure that the nursing needs of all patients are met.</P> <P>(a) <E T="03">Standard: Organization and staffing.</E> Patient care responsibilities must be delineated for all nursing service personnel. Nursing services must be provided in accordance with recognized standards of practice. There must be a registered nurse available for emergency treatment whenever there is a patient in the ASC.</P> <P>(b) [Reserved]</P> </SECTION> <SECTION> <SECTNO>§ 416.47</SECTNO> <SUBJECT>Condition for coverage—Medical records.</SUBJECT> <P>The ASC must maintain complete, comprehensive, and accurate medical records to ensure adequate patient care.</P> <P>(a) <E T="03">Standard: Organization.</E> The ASC must develop and maintain a system for the proper collection, storage, and use of patient records.</P> <P>(b) <E T="03">Standard: Form and content of record.</E> The ASC must maintain a medical record for each patient. Every record must be accurate, legible, and promptly completed. Medical records must include at least the following:</P> <P>(1) Patient identification.</P> <P>(2) Significant medical history and results of physical examination.</P> <P>(3) Pre-operative diagnostic studies (entered before surgery), if performed.<PRTPAGE P="81"/> </P> <P>(4) Findings and techniques of the operation, including a pathologist's report on all tissues removed during surgery, except those exempted by the governing body.</P> <P>(5) Any allergies and abnormal drug reactions.</P> <P>(6) Entries related to anesthesia administration.</P> <P>(7) Documentation of properly executed informed patient consent.</P> <P>(8) Discharge diagnosis.</P> </SECTION> <SECTION> <SECTNO>§ 416.48</SECTNO> <SUBJECT>Condition for coverage—Pharmaceutical services.</SUBJECT> <P>The ASC must provide drugs and biologicals in a safe and effective manner, in accordance with accepted professional practice, and under the direction of an individual designated responsible for pharmaceutical services.</P> <P>(a) <E T="03">Standard: Administration of drugs.</E> Drugs must be prepared and administered according to established policies and acceptable standards of practice.</P> <P>(1) Adverse reactions must be reported to the physician responsible for the patient and must be documented in the record.</P> <P>(2) Blood and blood products must be administered by only physicians or registered nurses.</P> <P>(3) Orders given orally for drugs and biologicals must be followed by a written order, signed by the prescribing physician.</P> <P>(b) [Reserved]</P> </SECTION> <SECTION> <SECTNO>§ 416.49</SECTNO> <SUBJECT>Condition for coverage—Laboratory and radiologic services.</SUBJECT> <P>If the ASC performs laboratory services, it must meet the requirements of part 493 of this chapter. If the ASC does not provide its own laboratory services, it must have procedures for obtaining routine and emergency laboratory services from a certified laboratory in accordance with part 493 of this chapter. The referral laboratory must be certified in the appropriate specialties and subspecialties of service to perform the referred tests in accordance with the requirements of part 493 of this chapter. The ASC must have procedures for obtaining radiologic services from a Medicare approved facility to meet the needs of patients.</P> <CITA>[57 FR 7135, Feb. 28, 1992]</CITA> </SECTION> <SUBPART> <HD SOURCE="HED">Subpart D—Scope of Benefits</HD> <SECTION> <SECTNO>§ 416.60</SECTNO> <SUBJECT>General rules.</SUBJECT> <P>(a) The services payable under this part are facility services furnished to Medicare beneficiaries, by a participating facility, in connection with covered surgical procedures specified in § 416.65.</P> <P>(b) The surgical procedures, including all preoperative and post-operative services that are performed by a physician, are covered as physician services under part 410 of this chapter.</P> <CITA>[56 FR 8844, Mar. 1, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.61</SECTNO> <SUBJECT>Scope of facility services.</SUBJECT> <P>(a) <E T="03">Included services.</E> Facility services include, but are not limited to—</P> <P>(1) Nursing, technician, and related services;</P> <P>(2) Use of the facilities where the surgical procedures are performed;</P> <P>(3) Drugs, biologicals, surgical dressings, supplies, splints, casts, and appliances and equipment directly related to the provision of surgical procedures;</P> <P>(4) Diagnostic or therapeutic services or items directly related to the provision of a surgical procedure;</P> <P>(5) Administrative, recordkeeping and housekeeping items and services; and</P> <P>(6) Materials for anesthesia.</P> <P>(7) Intra-ocular lenses (IOLs).</P> <P>(8) Supervision of the services of an anesthetist by the operating surgeon.</P> <P>(b) <E T="03">Excluded services.</E> Facility services do not include items and services for which payment may be made under other provisions of part 405 of this chapter, such as physicians' services, laboratory, X-ray or diagnostic procedures (other than those directly related to performance of the surgical procedure), prosthetic devices (except IOLs), ambulance services, leg, arm, back and neck braces, artificial limbs, and durable medical equipment for use in the patient's home. In addition, they do not include anesthetist services furnished on or after January 1, 1989.</P> <CITA>[56 FR 8844, Mar. 1, 1991, as amended at 57 FR 33899, July 31, 1992]</CITA> </SECTION> <SECTION> <PRTPAGE P="82"/> <SECTNO>§ 416.65</SECTNO> <SUBJECT>Covered surgical procedures.</SUBJECT> <P>Covered surgical procedures are those procedures that meet the standards described in paragraphs (a) and (b) of this section and are included in the list published in accordance with paragraph (c) of this section.</P> <P>(a) <E T="03">General standards.</E> Covered surgical procedures are those surgical and other medical procedures that—</P> <P>(1) Are commonly performed on an inpatient basis in hospitals, but may be safely performed in an ASC;</P> <P>(2) Are not of a type that are commonly performed, or that may be safely performed, in physicians' offices;</P> <P>(3) Are limited to those requiring a dedicated operating room (or suite), and generally requiring a post-operative recovery room or short-term (not overnight) convalescent room; and</P> <P>(4) Are not otherwise excluded under § 405.310 of this chapter.</P> <P>(b) <E T="03">Specific standards.</E> (1) Covered surgical procedures are limited to those that do not generally exceed—</P> <P>(i) A total of 90 minutes operating time; and</P> <P>(ii) A total of 4 hours recovery or convalescent time.</P> <P>(2) If the covered surgical procedures require anesthesia, the anesthesia must be—</P> <P>(i) Local or regional anesthesia; or</P> <P>(ii) General anesthesia of 90 minutes or less duration.</P> <P>(3) Covered surgical procedures may not be of a type that—</P> <P>(i) Generally result in extensive blood loss;</P> <P>(ii) Require major or prolonged invasion of body cavities;</P> <P>(iii) Directly involve major blood vessels; or</P> <P>(iv) Are generally emergency or life-threatening in nature.</P> <P>(c) <E T="03">Publication of covered procedures.</E> CMS will publish in the <E T="04">Federal Register</E> a list of covered surgical procedures and revisions as appropriate.</P> </SECTION> <SECTION> <SECTNO>§ 416.75</SECTNO> <SUBJECT>Performance of listed surgical procedures on an inpatient hospital basis.</SUBJECT> <P>The inclusion of any procedure as a covered surgical procedure under § 416.65 does not preclude its coverage in an inpatient hospital setting under Medicare.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Payment for Facility Services</HD> <SECTION> <SECTNO>§ 416.120</SECTNO> <SUBJECT>Basis for payment.</SUBJECT> <P>The basis for payment depends on where the services are furnished.</P> <P>(a) <E T="03">Hospital outpatient department.</E> Payment is in accordance with part 413 of this chapter.</P> <P>(b) [Reserved]</P> <P>(c) <E T="03">ASC</E>—(1) <E T="03">General rule.</E> Payment is based on a prospectively determined rate. This rate covers the cost of services such as supplies, nursing services, equipment, etc., as specified in § 416.61. The rate does not cover physician services or other medical services covered under part 410 of this chapter (for example, X-ray services or laboratory services) which are not directly related to the performance of the surgical procedures. Those services may be billed separately and paid on a reasonable charge basis.</P> <P>(2) <E T="03">Single and multiple surgical procedures.</E> (i) If one covered surgical procedure is furnished to a beneficiary in an operative session, payment is based on the prospectively determined rate for that procedure.</P> <P>(ii) If more than one surgical procedure is furnished in a single operative session, payment is based on—</P> <P>(A) The full rate for the procedure with the highest prospectively determined rate; and</P> <P>(B) One half of the prospectively determined rate for each of the other procedures.</P> <P>(3) <E T="03">Deductibles and coinsurance.</E> Part B deductible and coinsurance amounts apply as specified in § 410.152 (a) and (i) of this chapter.</P> <CITA>[56 FR 8844, Mar. 1, 1991; 56 FR 23022, May 20, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.125</SECTNO> <SUBJECT>ASC facility services payment rate.</SUBJECT> <P>(a) The payment rate is based on a prospectively determined standard overhead amount per procedure derived from an estimate of the costs incurred by ambulatory surgical centers generally in providing services furnished in connection with the performance of that procedure.</P> <P>(b) The payment must be substantially less than would have been paid under the program if the procedure had <PRTPAGE P="83"/>been performed on an inpatient basis in a hospital.</P> <CITA>[56 FR 8844, Mar. 1, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.130</SECTNO> <SUBJECT>Publication of revised payment methodologies.</SUBJECT> <P>Whenever CMS proposes to revise the payment rate for ASCs, CMS publishes a notice in the <E T="04">Federal Register</E> describing the revision. The notice also explains the basis on which the rates were established. After reviewing public comments, CMS publishes a notice establishing the rates authorized by this section. In setting these rates, CMS may adopt reasonable classifications of facilities and may establish different rates for different types of surgical procedures.</P> <CITA>[47 FR 34094, Aug. 5, 1982, as amended at 56 FR 8844, Mar. 1, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.140</SECTNO> <SUBJECT>Surveys.</SUBJECT> <P>(a) <E T="03">Timing, purpose, and procedures.</E> (1) No more often than once a year, CMS conducts a survey of a randomly selected sample of participating ASCs to collect data for analysis or reevaluation of payment rates.</P> <P>(2) CMS notifies the selected ASCs by mail of their selection and of the form and content of the report the ASCs are required to submit within 60 days of the notice.</P> <P>(3) If the facility does not submit an adequate report in response to CMS's survey request, CMS may terminate the agreement to participate in the Medicare program as an ASC.</P> <P>(4) CMS may grant a 30-day postponement of the due date for the survey report if it determines that the facility has demonstrated good cause for the delay.</P> <P>(b) <E T="03">Requirements for ASCs.</E> ASCs must—</P> <P>(1) Maintain adequate financial records, in the form and containing the data required by CMS, to allow determination of the payment rates for covered surgical procedures furnished to Medicare beneficiaries under this subpart.</P> <P>(2) Within 60 days of a request from CMS submit, in the form and detail as may be required by CMS, a report of—</P> <P>(i) Their operations, including the allowable costs actually incurred for the period and the actual number and kinds of surgical procedures furnished during the period; and</P> <P>(ii) Their customary charges for each surgical procedure furnished for the period.</P> <CITA>[47 FR 34094, Aug. 5, 1982, as amended at 56 FR 8845, Mar. 1, 1991]</CITA> </SECTION> <SECTION> <SECTNO>§ 416.150</SECTNO> <SUBJECT>Beneficiary appeals.</SUBJECT> <P>A beneficiary (or ASC as his or her assignee) may request a hearing by a carrier (subject to the limitations and conditions set forth in part 405, subpart H of this chapter) if the beneficiary or the ASC—</P> <P>(a) Is dissatisfied with a carrier's denial of a request for payment made on his or her behalf by an ASC;</P> <P>(b) Is dissatisfied with the amount of payment; or</P> <P>(c) Believes the request for payment is not being acted upon with reasonable promptness.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Adjustment in Payment Amounts for New Technology Intraocular Lenses Furnished by Ambulatory Surgical Centers</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>64 FR 32205, June 16, 1999, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 416.180</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart, the following definitions apply:</P> <P> <E T="03">Class of new technology intraocular lenses (IOLs)</E> means all of the IOLs, collectively, that CMS determines meet the definition of “new technology IOL” under the provisions of this subpart.</P> <P> <E T="03">Interested party</E> means any individual, partnership, corporation, association, society, scientific or academic establishment, professional or trade organization, or any other legal entity.</P> <P> <E T="03">New technology IOL</E> means an IOL that CMS determines has been approved by the FDA for use in labeling and advertising the IOL's claims of specific clinical advantages and superiority over existing IOLs with regard to reduced risk of intraoperative or postoperative complication or trauma, accelerated postoperative recovery, reduced induced astigmatism, improved <PRTPAGE P="84"/>postoperative visual acuity, more stable postoperative vision, or other comparable clinical advantages.</P> <P> <E T="03">New technology subset</E> means a group of IOLs that CMS determines meet the criterion for being treated as new technology IOLs and that share a common feature or features that distinguish them from other IOLs. For example, all new technology IOLs that are made of a particular bioengineered material could comprise one subset, while all that rely on a particular optical innovation could comprise another.</P> </SECTION> <SECTION> <SECTNO>§ 416.185</SECTNO> <SUBJECT>Payment review process.</SUBJECT> <P>(a) CMS publishes a <E T="04">Federal Register</E> notice announcing the deadline and requirements for submitting a request for CMS to review payment for an IOL.</P> <P>(b) CMS receives a request to review the appropriateness of the payment amount for an IOL.</P> <P>(c) CMS compiles a list of the requests it receives and identifies the IOL manufacturer's name, the model number of the IOL to be reviewed, the interested party or parties that submit requests, and a summary of the interested party's grounds for requesting review of the appropriateness of the IOL payment amount.</P> <P>(d) CMS publishes the list of requests in a <E T="04">Federal Register</E> notice with comment period, giving the public 30 days to comment on the IOLs for which review was requested.</P> <P>(e) CMS reviews the information submitted with the request to review, any timely public comments that are submitted regarding the list of IOLs published in the <E T="04">Federal Register,</E> and any other timely information that CMS deems relevant to decide whether to provide a payment adjustment as specified in § 416.200. CMS makes a determination of whether the IOL meets the definition of a new technology IOL in § 416.180.</P> <P>(f) If CMS determines that a lens is a new technology IOL, CMS establishes a payment adjustment as follows:</P> <P>(1) Before July 16, 2002—$50.</P> <P>(2) After July 16, 2002—$50 or the amount announced through proposed and final rulemaking in connection with ambulatory surgical center services.</P> <P>(g) CMS designates a predominant characteristic of a new technology IOL that both sets it apart from other IOLs and links it with other similar IOLs with the same characteristic to establish a specific subset of new technology within the “class of new technology IOLs.”</P> <P>(h) Within 90 days of the end of the comment period following the <E T="04">Federal Register</E> notice identified in paragraph (d) of this section, CMS publishes in the <E T="04">Federal Register</E> its determinations with regard to IOLs that it has determined are “new technology” lenses that qualify for a payment adjustment.</P> <P>(i) Payment adjustments are effective beginning 30 days after the publication of CMS's determinations in the <E T="04">Federal Register</E>.</P> </SECTION> <SECTION> <SECTNO>§ 416.190</SECTNO> <SUBJECT>Who may request a review.</SUBJECT> <P>Any party who is able to furnish the information required in § 416.195 may request that CMS review the appropriateness of the payment amount provided under section 1833(i)(2)(A)(iii) of the Act with respect to an IOL that meets the definition of a new technology IOL in § 416.180.</P> </SECTION> <SECTION> <SECTNO>§ 416.195</SECTNO> <SUBJECT>A request to review.</SUBJECT> <P>(a) <E T="03">Content of a request.</E> The request must include all of the following information:</P> <P>(1) The name of the manufacturer, the model number, and the trade name of the IOL.</P> <P>(2) A copy of the FDA's summary of the IOL's safety and effectiveness.</P> <P>(3) A copy of the labeling claims of specific clinical advantages approved by the FDA for the IOL.</P> <P>(4) A copy of the IOL's original FDA approval notification.</P> <P>(5) Reports of modifications made after the original FDA approval.</P> <P>(6) Other information that CMS finds necessary for identification of the IOL.</P> <P>(b) <E T="03">Confidential information.</E> To the extent that information received from an IOL manufacturer can reasonably be characterized as a trade secret or as privileged or confidential commercial or financial information, CMS maintains the confidentiality of the information and protects it from disclosure not otherwise authorized or required <PRTPAGE P="85"/>by Federal law as allowed under Exemption 4 of the Freedom of Information Act (5 U.S.C. 552(b)(4)) and, with respect to trade secrets, the Trade Secrets Act (18 U.S.C. 1905).</P> </SECTION> <SECTION> <SECTNO>§ 416.200</SECTNO> <SUBJECT>Application of the payment adjustment.</SUBJECT> <P>(a) CMS recognizes the IOL(s) that define a new technology subset for purposes of this subpart as belonging to the class of new technology IOLs for a period of 5 years effective from the date that CMS recognizes the first new technology IOL for a payment adjustment.</P> <P>(b) Any IOL that CMS subsequently recognizes as belonging to a new technology subset receives the new technology payment adjustment for the remainder of the 5-year period established with CMS's recognition of the first IOL in the subset.</P> <P>(c) Beginning 5 years after the effective date of CMS's initial recognition of a new technology subset, payment adjustments cease for all IOLs that CMS designates as belonging to that subset and payment reverts to the standard payment rate set under section 1833(i)(2)(A)(iii) of the Act for IOL insertion procedures performed in ASCs.</P> <P>(d) ASCs that furnish an IOL designated by CMS as belonging to the class of new technology IOLs must submit claims using specific billing codes to receive the new technology IOL payment adjustment.</P> </SECTION> </SUBPART> <PART> <EAR>Pt. 417</EAR> <HD SOURCE="HED">PART 417—HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS</HD> <CONTENTS> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions</HD> <SECHD>Sec.</SECHD> <SECTNO>417.1</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>417.2</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Qualified Health Maintenance Organizations: Services</HD> <SECTNO>417.101</SECTNO> <SUBJECT>Health benefits plan: Basic health services.</SUBJECT> <SECTNO>417.102</SECTNO> <SUBJECT>Health benefits plan: Supplemental health services.</SUBJECT> <SECTNO>417.103</SECTNO> <SUBJECT>Providers of basic and supplemental health services.</SUBJECT> <SECTNO>417.104</SECTNO> <SUBJECT>Payment for basic health services.</SUBJECT> <SECTNO>417.105</SECTNO> <SUBJECT>Payment for supplemental health services.</SUBJECT> <SECTNO>417.106</SECTNO> <SUBJECT>Quality assurance program; Availability, accessibility, and continuity of basic and supplemental health services.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Qualified Health Maintenance Organizations: Organization and Operation</HD> <SECTNO>417.120</SECTNO> <SUBJECT>Fiscally sound operation and assumption of financial risk.</SUBJECT> <SECTNO>417.122</SECTNO> <SUBJECT>Protection of enrollees.</SUBJECT> <SECTNO>417.124</SECTNO> <SUBJECT>Administration and management.</SUBJECT> <SECTNO>417.126</SECTNO> <SUBJECT>Recordkeeping and reporting requirements.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Application for Federal Qualification</HD> <SECTNO>417.140</SECTNO> <SUBJECT>Scope.</SUBJECT> <SECTNO>417.142</SECTNO> <SUBJECT>Requirements for qualification.</SUBJECT> <SECTNO>417.143</SECTNO> <SUBJECT>Application requirements.</SUBJECT> <SECTNO>417.144</SECTNO> <SUBJECT>Evaluation and determination procedures.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Inclusion of Qualified Health Maintenance Organizations in Employee Health Benefits Plans</HD> <SECTNO>417.150</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>417.151</SECTNO> <SUBJECT>Applicability.</SUBJECT> <SECTNO>417.153</SECTNO> <SUBJECT>Offer of HMO alternative.</SUBJECT> <SECTNO>417.155</SECTNO> <SUBJECT>How the HMO option must be included in the health benefits plan.</SUBJECT> <SECTNO>417.156</SECTNO> <SUBJECT>When the HMO must be offered to employees.</SUBJECT> <SECTNO>417.157</SECTNO> <SUBJECT>Contributions for the HMO alternative.</SUBJECT> <SECTNO>417.158</SECTNO> <SUBJECT>Payroll deductions.</SUBJECT> <SECTNO>417.159</SECTNO> <SUBJECT>Relationship of section 1310 of the Public Health Service Act to the National Labor Relations Act and the Railway Labor Act.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Continued Regulation of Federally Qualified Health Maintenance Organizations</HD> <SECTNO>417.160</SECTNO> <SUBJECT>Applicability.</SUBJECT> <SECTNO>417.161</SECTNO> <SUBJECT>Compliance with assurances.</SUBJECT> <SECTNO>417.162</SECTNO> <SUBJECT>Reporting requirements.</SUBJECT> <SECTNO>417.163</SECTNO> <SUBJECT>Enforcement procedures.</SUBJECT> <SECTNO>417.164</SECTNO> <SUBJECT>Effect of revocation of qualification on inclusion in employee's health benefit plans.</SUBJECT> <SECTNO>417.165</SECTNO> <SUBJECT>Reapplication for qualification.</SUBJECT> <SECTNO>417.166</SECTNO> <SUBJECT>Waiver of assurances.</SUBJECT> </SUBPART> <SUBPART> <RESERVED>Subparts G-I [Reserved]</RESERVED> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart J—Qualifying Conditions for Medicare Contracts</HD> <SECTNO>417.400</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <SECTNO>417.401</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>417.402</SECTNO> <SUBJECT>Effective date of initial regulations.</SUBJECT> <SECTNO>417.404</SECTNO> <SUBJECT>General requirements.<PRTPAGE P="86"/> </SUBJECT> <SECTNO>417.406</SECTNO> <SUBJECT>Application and determination.</SUBJECT> <SECTNO>417.407</SECTNO> <SUBJECT>Requirements for a Competitive Medical Plan (CMP).</SUBJECT> <SECTNO>417.408</SECTNO> <SUBJECT>Contract application process.</SUBJECT> <SECTNO>417.410</SECTNO> <SUBJECT>Qualifying conditions: General rules.</SUBJECT> <SECTNO>417.412</SECTNO> <SUBJECT>Qualifying condition: Administration and management.</SUBJECT> <SECTNO>417.413</SECTNO> <SUBJECT>Qualifying condition: Operating experience and enrollment.</SUBJECT> <SECTNO>417.414</SECTNO> <SUBJECT>Qualifying condition: Range of services.</SUBJECT> <SECTNO>417.416</SECTNO> <SUBJECT>Qualifying condition: Furnishing of services.</SUBJECT> <SECTNO>417.418</SECTNO> <SUBJECT>Qualifying condition: Quality assurance program.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart K—Enrollment, Entitlement, and Disenrollment Under Medicare Contract</HD> <SECTNO>417.420</SECTNO> <SUBJECT>Basic rules on enrollment and entitlement.</SUBJECT> <SECTNO>417.422</SECTNO> <SUBJECT>Eligibility to enroll in an HMO or CMP.</SUBJECT> <SECTNO>417.423</SECTNO> <SUBJECT>Special rules: ESRD and hospice patients.</SUBJECT> <SECTNO>417.424</SECTNO> <SUBJECT>Denial of enrollment.</SUBJECT> <SECTNO>417.426</SECTNO> <SUBJECT>Open enrollment requirements.</SUBJECT> <SECTNO>417.428</SECTNO> <SUBJECT>Marketing activities.</SUBJECT> <SECTNO>417.430</SECTNO> <SUBJECT>Application procedures.</SUBJECT> <SECTNO>417.432</SECTNO> <SUBJECT>Conversion of enrollment.</SUBJECT> <SECTNO>417.434</SECTNO> <SUBJECT>Reenrollment.</SUBJECT> <SECTNO>417.436</SECTNO> <SUBJECT>Rules for enrollees.</SUBJECT> <SECTNO>417.440</SECTNO> <SUBJECT>Entitlement to health care services from an HMO or CMP.</SUBJECT> <SECTNO>417.442</SECTNO> <SUBJECT>Risk HMO's and CMP's: Conditions for provision of additional benefits.</SUBJECT> <SECTNO>417.444</SECTNO> <SUBJECT>Special rules for certain enrollees of risk HMOs and CMPs.</SUBJECT> <SECTNO>417.446</SECTNO> <SUBJECT>[Reserved]</SUBJECT> <SECTNO>417.448</SECTNO> <SUBJECT>Restriction on payments for services received by Medicare enrollees of risk HMOs or CMPs.</SUBJECT> <SECTNO>417.450</SECTNO> <SUBJECT>Effective date of coverage.</SUBJECT> <SECTNO>417.452</SECTNO> <SUBJECT>Liability of Medicare enrollees.</SUBJECT> <SECTNO>417.454</SECTNO> <SUBJECT>Charges to Medicare enrollees.</SUBJECT> <SECTNO>417.456</SECTNO> <SUBJECT>Refunds to Medicare enrollees.</SUBJECT> <SECTNO>417.458</SECTNO> <SUBJECT>Recoupment of uncollected deductible and coinsurance amounts.</SUBJECT> <SECTNO>417.460</SECTNO> <SUBJECT>Disenrollment of beneficiaries by an HMO or CMP.</SUBJECT> <SECTNO>417.461</SECTNO> <SUBJECT>Disenrollment by the enrollee.</SUBJECT> <SECTNO>417.464</SECTNO> <SUBJECT>End of CMS's liability for payment: Disenrollment of beneficiaries and termination or default of contract.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart L—Medicare Contract Requirements</HD> <SECTNO>417.470</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <SECTNO>417.472</SECTNO> <SUBJECT>Basic contract requirements.</SUBJECT> <SECTNO>417.474</SECTNO> <SUBJECT>Effective date and term of contract.</SUBJECT> <SECTNO>417.476</SECTNO> <SUBJECT>Waived conditions.</SUBJECT> <SECTNO>417.478</SECTNO> <SUBJECT>Requirements of other laws and regulations.</SUBJECT> <SECTNO>417.479</SECTNO> <SUBJECT>Requirements for physician incentive plans.</SUBJECT> <SECTNO>417.480</SECTNO> <SUBJECT>Maintenance of records: Cost HMOs and CMPs.</SUBJECT> <SECTNO>417.481</SECTNO> <SUBJECT>Maintenance of records: Risk HMOs or CMPs.</SUBJECT> <SECTNO>417.482</SECTNO> <SUBJECT>Access to facilities and records.</SUBJECT> <SECTNO>417.484</SECTNO> <SUBJECT>Requirement applicable to related entities.</SUBJECT> <SECTNO>417.486</SECTNO> <SUBJECT>Disclosure of information and confidentiality.</SUBJECT> <SECTNO>417.488</SECTNO> <SUBJECT>Notice of termination and of available alternatives: Risk contract.</SUBJECT> <SECTNO>417.490</SECTNO> <SUBJECT>Renewal of contract.</SUBJECT> <SECTNO>417.492</SECTNO> <SUBJECT>Nonrenewal of contract.</SUBJECT> <SECTNO>417.494</SECTNO> <SUBJECT>Modification or termination of contract.</SUBJECT> <SECTNO>417.500</SECTNO> <SUBJECT>Sanctions against HMOs and CMPs.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart M—Change of Ownership and Leasing of Facilities: Effect on Medicare Contract</HD> <SECTNO>417.520</SECTNO> <SUBJECT>Effect on HMO and CMP contracts.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart N—Medicare Payment to HMOs and CMPs: General Rules</HD> <SECTNO>417.524</SECTNO> <SUBJECT>Payment to HMOs or CMPs: General.</SUBJECT> <SECTNO>417.526</SECTNO> <SUBJECT>Payment for covered services.</SUBJECT> <SECTNO>417.528</SECTNO> <SUBJECT>Payment when Medicare is not primary payer.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart O—Medicare Payment: Cost Basis</HD> <SECTNO>417.530</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <SECTNO>417.531</SECTNO> <SUBJECT>Hospice care services.</SUBJECT> <SECTNO>417.532</SECTNO> <SUBJECT>General considerations.</SUBJECT> <SECTNO>417.533</SECTNO> <SUBJECT>Part B carrier responsibilities.</SUBJECT> <SECTNO>417.534</SECTNO> <SUBJECT>Allowable costs.</SUBJECT> <SECTNO>417.536</SECTNO> <SUBJECT>Cost payment principles.</SUBJECT> <SECTNO>417.538</SECTNO> <SUBJECT>Enrollment and marketing costs.</SUBJECT> <SECTNO>417.540</SECTNO> <SUBJECT>Enrollment costs.</SUBJECT> <SECTNO>417.542</SECTNO> <SUBJECT>Reinsurance costs.</SUBJECT> <SECTNO>417.544</SECTNO> <SUBJECT>Physicians' services furnished directly by the HMO or CMP.</SUBJECT> <SECTNO>417.546</SECTNO> <SUBJECT>Physicians' services and other Part B supplier services furnished under arrangements.</SUBJECT> <SECTNO>417.548</SECTNO> <SUBJECT>Provider services through arrangements.</SUBJECT> <SECTNO>417.550</SECTNO> <SUBJECT>Special Medicare program requirements.</SUBJECT> <SECTNO>417.552</SECTNO> <SUBJECT>Cost apportionment: General provisions.</SUBJECT> <SECTNO>417.554</SECTNO> <SUBJECT>Apportionment: Provider services furnished directly by the HMO or CMP.</SUBJECT> <SECTNO>417.556</SECTNO> <SUBJECT>Apportionment: Provider services furnished by the HMO or CMP through arrangements with others.</SUBJECT> <SECTNO>417.558</SECTNO> <SUBJECT>Emergency, urgently needed, and out-of-area services for which the HMO or CMP accepts financial responsibility.</SUBJECT> <SECTNO>417.560</SECTNO> <SUBJECT>Apportionment: Part B physician and supplier services.</SUBJECT> <SECTNO>417.564</SECTNO> <SUBJECT>Apportionment and allocation of administrative and general costs.</SUBJECT> <SECTNO>417.566</SECTNO> <SUBJECT>Other methods of allocation and apportionment.<PRTPAGE P="87"/> </SUBJECT> <SECTNO>417.568</SECTNO> <SUBJECT>Adequate financial records, statistical data, and cost finding.</SUBJECT> <SECTNO>417.570</SECTNO> <SUBJECT>Interim per capita payments.</SUBJECT> <SECTNO>417.572</SECTNO> <SUBJECT>Budget and enrollment forecast and interim reports.</SUBJECT> <SECTNO>417.574</SECTNO> <SUBJECT>Interim settlement.</SUBJECT> <SECTNO>417.576</SECTNO> <SUBJECT>Final settlement.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart P—Medicare Payment: Risk Basis</HD> <SECTNO>417.580</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <SECTNO>417.582</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>417.584</SECTNO> <SUBJECT>Payment to HMOs or CMPs with risk contracts.</SUBJECT> <SECTNO>417.585</SECTNO> <SUBJECT>Special rules: Hospice care.</SUBJECT> <SECTNO>417.588</SECTNO> <SUBJECT>Computation of adjusted average per capita cost (AAPCC).</SUBJECT> <SECTNO>417.590</SECTNO> <SUBJECT>Computation of the average of the per capita rates of payment.</SUBJECT> <SECTNO>417.592</SECTNO> <SUBJECT>Additional benefits requirement.</SUBJECT> <SECTNO>417.594</SECTNO> <SUBJECT>Computation of adjusted community rate (ACR).</SUBJECT> <SECTNO>417.596</SECTNO> <SUBJECT>Establishment of a benefit stabilization fund.</SUBJECT> <SECTNO>417.597</SECTNO> <SUBJECT>Withdrawal from a benefit stabilization fund.</SUBJECT> <SECTNO>417.598</SECTNO> <SUBJECT>Annual enrollment reconciliation.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart Q—Beneficiary Appeals</HD> <SECTNO>417.600</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart R—Medicare Contract Appeals</HD> <SECTNO>417.640</SECTNO> <SUBJECT>Determinations subject to appeal.</SUBJECT> <SECTNO>417.642</SECTNO> <SUBJECT>Administrative actions that are not initial determinations.</SUBJECT> <SECTNO>417.644</SECTNO> <SUBJECT>Notice of initial determination.</SUBJECT> <SECTNO>417.646</SECTNO> <SUBJECT>Effect of initial determination.</SUBJECT> <SECTNO>417.648</SECTNO> <SUBJECT>Reconsideration: Applicability.</SUBJECT> <SECTNO>417.650</SECTNO> <SUBJECT>Request for reconsideration.</SUBJECT> <SECTNO>417.652</SECTNO> <SUBJECT>Opportunity to submit evidence.</SUBJECT> <SECTNO>417.654</SECTNO> <SUBJECT>Reconsidered determination.</SUBJECT> <SECTNO>417.656</SECTNO> <SUBJECT>Notice of reconsidered determination.</SUBJECT> <SECTNO>417.658</SECTNO> <SUBJECT>Effect of reconsidered determination.</SUBJECT> <SECTNO>417.660</SECTNO> <SUBJECT>Right to a hearing.</SUBJECT> <SECTNO>417.662</SECTNO> <SUBJECT>Request for hearing.</SUBJECT> <SECTNO>417.664</SECTNO> <SUBJECT>Postponement of effective date of initial determination.</SUBJECT> <SECTNO>417.666</SECTNO> <SUBJECT>Designation of hearing officer.</SUBJECT> <SECTNO>417.668</SECTNO> <SUBJECT>Disqualification of hearing officer.</SUBJECT> <SECTNO>417.670</SECTNO> <SUBJECT>Time and place of hearing.</SUBJECT> <SECTNO>417.672</SECTNO> <SUBJECT>Appointment of representatives.</SUBJECT> <SECTNO>417.674</SECTNO> <SUBJECT>Authority of representatives.</SUBJECT> <SECTNO>417.676</SECTNO> <SUBJECT>Conduct of hearing.</SUBJECT> <SECTNO>417.678</SECTNO> <SUBJECT>Evidence.</SUBJECT> <SECTNO>417.680</SECTNO> <SUBJECT>Witnesses.</SUBJECT> <SECTNO>417.682</SECTNO> <SUBJECT>Discovery.</SUBJECT> <SECTNO>417.684</SECTNO> <SUBJECT>Prehearing.</SUBJECT> <SECTNO>417.686</SECTNO> <SUBJECT>Record of hearing.</SUBJECT> <SECTNO>417.688</SECTNO> <SUBJECT>Authority of hearing officer.</SUBJECT> <SECTNO>417.690</SECTNO> <SUBJECT>Notice and effect of hearing decision.</SUBJECT> <SECTNO>417.692</SECTNO> <SUBJECT>Reopening of initial or reconsidered determination or decision of a hearing officer.</SUBJECT> <SECTNO>417.694</SECTNO> <SUBJECT>Effect of revised determination.</SUBJECT> </SUBPART> <SUBPART> <RESERVED>Subparts S-T [Reserved]</RESERVED> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart U—Health Care Prepayment Plans</HD> <SECTNO>417.800</SECTNO> <SUBJECT>Payment to HCPPs: Definitions and basic rules.</SUBJECT> <SECTNO>417.801</SECTNO> <SUBJECT>Agreements between CMS and health care prepayment plans.</SUBJECT> <SECTNO>417.802</SECTNO> <SUBJECT>Allowable costs.</SUBJECT> <SECTNO>417.804</SECTNO> <SUBJECT>Cost apportionment.</SUBJECT> <SECTNO>417.806</SECTNO> <SUBJECT>Financial records, statistical data, and cost finding.</SUBJECT> <SECTNO>417.808</SECTNO> <SUBJECT>Interim per capita payments.</SUBJECT> <SECTNO>417.810</SECTNO> <SUBJECT>Final settlement.</SUBJECT> <SECTNO>417.830</SECTNO> <SUBJECT>Scope of regulations on beneficiary appeals.</SUBJECT> <SECTNO>417.832</SECTNO> <SUBJECT>Applicability of requirements and procedures.</SUBJECT> <SECTNO>417.834</SECTNO> <SUBJECT>Responsibility for establishing administrative review procedures.</SUBJECT> <SECTNO>417.836</SECTNO> <SUBJECT>Written description of administrative review procedures.</SUBJECT> <SECTNO>417.838</SECTNO> <SUBJECT>Organization determinations.</SUBJECT> <SECTNO>417.840</SECTNO> <SUBJECT>Administrative review procedures.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart V—Administration of Outstanding Loans and Loan Guarantees</HD> <SECTNO>417.910</SECTNO> <SUBJECT>Applicability.</SUBJECT> <SECTNO>417.911</SECTNO> <SUBJECT>Definitions.</SUBJECT> <SECTNO>417.920</SECTNO> <SUBJECT>Planning and initial development.</SUBJECT> <SECTNO>417.930</SECTNO> <SUBJECT>Initial costs of operation.</SUBJECT> <SECTNO>417.931</SECTNO> <SUBJECT>[Reserved]</SUBJECT> <SECTNO>417.934</SECTNO> <SUBJECT>Reserve requirement.</SUBJECT> <SECTNO>417.937</SECTNO> <SUBJECT>Loan and loan guarantee provisions.</SUBJECT> <SECTNO>417.940</SECTNO> <SUBJECT>Civil action to enforce compliance with assurances.</SUBJECT> </SUBPART> </CONTENTS> <AUTH> <HD SOURCE="HED">Authority:</HD> <P>Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), secs. 1301, 1306, and 1310 of the Public Health Service Act (42 U.S.C. 300e, 300e-5, and 300e-9), and 31 U.S.C. 9701.</P> </AUTH> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions</HD> <SECTION> <SECTNO>§ 417.1</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this part, unless the context indicates otherwise—</P> <P> <E T="03">Basic health services</E> means health services described in § 417.101(a).</P> <P> <E T="03">Community rating system</E> means a system of fixing rates of payments for health services that meets the requirements of § 417.104(a)(3).</P> <P> <E T="03">Comprehensive health services</E> means as a minimum the following services which may be limited as to time and cost:</P> <P>(1) Physician services (§ 417.101(a)(1));</P> <P>(2) Outpatient services and inpatient hospital services (§ 417.101(a)(2));</P> <P>(3) Medically necessary emergency health services (§ 417.101(a)(3)); and<PRTPAGE P="88"/> </P> <P>(4) Diagnostic laboratory and diagnostic and therapeutic radiologic services (§ 417.101(a)(6)).</P> <P> <E T="03">Direct service contract</E> means a contract for the provision of basic or supplemental health services or both between an HMO and (1) a health professional other than a member of the staff of the HMO, or (2) an entity other than a medical group or an IPA.</P> <P> <E T="03">Enrollee</E> means an individual for whom an HMO, CMP, or HCPP assumes the responsibility, under a contract or agreement, for the furnishing of health care services on a prepaid basis.</P> <P> <E T="03">Full-time student</E> means a student who is enrolled for a sufficient number of credit hours in a semester or other academic term to enable the student to complete the course of study within not more than the number of semesters or other academic terms normally required to complete that course of study on a full-time basis at the school in which the student is enrolled.</P> <P> <E T="03">Furnished,</E> when used in connection with prepaid health care services, means services that are maid available to an enrollee either dierctly by, or under arrangements made by, the HMO, CMP, or HCPP.</P> <P> <E T="03">Health maintenance organization (HMO)</E> means a legal entity that provides or arranges for the provision of basic and supplemental health services to its enrollees in the manner prescribed by, is organized and operated in the manner prescribed by, and otherwise meets the requirements of, section 1301 of the PHS Act and the regulations in subparts B and C of this part.</P> <P> <E T="03">Health professionals</E> means physicians (doctors of medicine and doctors of osteopathy), dentists, nurses, podiatrists, optometrists, physicians' assistants, clinical psychologists, social workers, pharmacists, nutritionists, occupational therapists, physical therapists, and other professionals engaged in the delivery of health services who are licensed, practice under an institutional license, are certified, or practice under authority of the HMO, a medical group, individual practice association, or other authority consistent with State law.</P> <P> <E T="03">Individual practice association (IPA)</E> means a partnership, association, corporation, or other legal entity that delivers or arranges for the delivery of health services and which has entered into written services arrangement or arrangements with health professionals, a majority of whom are licensed to practice medicine or osteopathy. The written services arrangement must provide:</P> <P>(1) That these health professionals will provide their professional services in accordance with a compensation arrangement established by the entity; and</P> <P>(2) To the extent feasible, for the sharing by these health professionals of health (including medical) and other records, equipment, and professional, technical, and administrative staff.</P> <P> <E T="03">Medical group</E> means a partnership, association, corporation, or other group:</P> <P>(1) That is composed of health professionals licensed to practice medicine or osteopathy and of such other licensed health professionals (including dentists, optometrists, and podiatrists) as are necessary for the provision of health services for which the group is responsible;</P> <P>(2) A majority of the members of which are licensed to practice medicine or osteopathy; and</P> <P>(3) The members of which:</P> <P>(i) After the end of the 48 month period beginning after the month in which the HMO for which the group provides health services becomes a qualified HMO, as their principal professional activity (over 50 percent individually) engage in the coordinated practice of their profession and as a group responsibility have substantial responsibility (over 35 percent in the aggregate of their professional activity) for the delivery of health services to enrollees of an HMO;</P> <P>(ii) Pool their income from practice as members of the group and distribute it among themselves according to a prearranged salary or drawing account or other similar plan unrelated to the provision of specific health services;</P> <P>(iii) Share health (including medical) records and substantial portions of major equipment and of professional, technical, and administrative staff;</P> <P>(iv) Establish an arrangement whereby an enrollee's enrollment status is not known to the health professional <PRTPAGE P="89"/>who provides health services to the enrollee.</P> <P> <E T="03">Medical group members</E> means (1) a health professional engaged as a partner, associate, or shareholder in the medical group, or (2) any other health professional employed by the group who may be designated as a medical group member by the medical group.</P> <P> <E T="03">Medically underserved population</E> means the population of an urban or rural area as described in Sec. 417.912(d).</P> <P> <E T="03">Nonmetropolitan area</E> means an area no part of which is within a standard metropolitan statistical area as designated by the Office of Management and Budget and which does not contain a city whose population exceeds 50,000 individuals.</P> <P> <E T="03">Party in interest</E> means: (1) Any director, officer, partner, or employee responsible for management or administration of an HMO, any person who is directly or indirectly the beneficial owner of more than 5 percent of the equity of the HMO, any person who is the beneficial owner of a mortgage, deed of trust, note, or other interest secured by, and valuing more than 5 percent of the assets of the HMO, and, in the case of an HMO organized as a nonprofit corporation, an incorporator or member of the corporation under applicable State corporation law;</P> <P>(2) Any entity in which a person described in paragraph (1):</P> <P>(i) Is an officer or director;</P> <P>(ii) Is a partner (if the entity is organized as a partnership);</P> <P>(iii) Has directly or indirectly a beneficial interest of more than 5 percent of the equity; or</P> <P>(iv) Has a mortgage, deed of trust, note, or other interest valuing more than 5 percent of the assets of such entity;</P> <P>(3) Any spouse, child, or parent of an individual described in paragraph (1).</P> <P> <E T="03">Policymaking body</E> of an HMO means a board of directors, governing body, or other body of individuals that has the authority to establish policy for the HMO.</P> <P> <E T="03">Qualified HMO</E> means an HMO found by CMS to be qualified within the meaning of section 1310 of the PHS Act and subpart D of this part.</P> <P> <E T="03">Rural area</E> means any area not listed as a place having a population of 2,500 or more in Document #PC(1)A, “Number of Inhabitants,” Table VI, “Population of Places,” and not listed as an urbanized area in Table XI, “Population of Urbanized Areas” of the same document (1970 Census or most recent update of this document, Bureau of Census, U.S. Department of Commerce).</P> <P> <E T="03">Secretary</E> means the Secretary of Health and Human Services and any other officer or employee of the Department of Health and Human Services to whom the authority involved has been delegated.</P> <P> <E T="03">Service area</E> means a geographic area, defined through zip codes, census tracts, or other geographic measurements, that is the area, as determined by CMS, within which the HMO furnishes basic and supplemental health services and makes them available and accessible to all its enrollees in accordance with § 417.106(b).</P> <P> <E T="03">Significant business transaction</E> means any business transaction or series of transactions during any one fiscal year of the HMO, the total value of which exceeds the lesser of $25,000 or 5 percent of the total operating expenses of the HMO.</P> <P> <E T="03">Staff of the HMO</E> means health professionals who are employees of the HMO and who—</P> <P>(1) Provide services to HMO enrollees at an HMO facility subject to the staff policies and operational procedures of the HMO;</P> <P>(2) Engage in the coordinated practice of their profession and provide to enrollees of the HMO the health services that the HMO has contracted to provide;</P> <P>(3) Share medical and other records, equipment, and professional, technical, and administrative staff of the HMO; and</P> <P>(4) Provide their professional services in accordance with a compensation arrangement, other than fee-for-service, established by the HMO. This arrangement may include, but is not limited to, fee-for-time, retainer or salary.</P> <P> <E T="03">Subscriber</E> means an enrollee who has entered into a contractual relationship with the HMO or who is responsible for <PRTPAGE P="90"/>making payments for basic health services (and contracted for supplemental health services) to the HMO or on whose behalf these payments are made.</P> <P> <E T="03">Supplemental health services</E> means the health services described in § 417.102(a).</P> <P> <E T="03">Unusual or infrequently used health services</E> means:</P> <P>(1) Those health services that are projected to involve fewer than 1 percent of the encounters per year for the entire HMO enrollment, or,</P> <P>(2) Those health services the provision of which, given the enrollment projection of the HMO and generally accepted staffing patterns, is projected will require less than 0.25 full time equivalent health professionals.</P> <CITA>[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19338, May 5, 1982; 52 FR 22321, June 11, 1987. Redesignated at 52 FR 36746, Sept. 30, 1987. Redesignated and amended at 56 FR 51985, Oct. 17, 1991; 58 FR 38067, July 15, 1993; 60 FR 34887, July 5, 1995; 60 FR 45674, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.2</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) Subparts B through F of this part pertain to the Federal qualification of HMOs under title XIII of the Public Health Service (PHS) Act.</P> <P>(b) Subparts G through R of this part set forth the rules for Medicare contracts with, and payment to, HMOs and competitive medical plans (CMPs) under section 1876 of the Act.</P> <P>(c) Subpart U of this part pertains to Medicare payment to health care prepayment plans under section 1833(a)(1)(A) of the Act.</P> <P>(d) Subpart V of this part applies to the administration of outstanding loans and loan guarantees previously granted under title XIII of the PHS Act.</P> <CITA>[56 FR 51985, Oct. 17, 1991, as amended at 60 FR 45675, Sept. 1, 1995]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Qualified Health Maintenance Organizations: Services</HD> <SECTION> <SECTNO>§ 417.101</SECTNO> <SUBJECT>Health benefits plan: Basic health services.</SUBJECT> <P>(a) An HMO must provide or arrange for the provision of basic health services to its enrollees as needed and without limitations as to time and cost other than those prescribed in the PHS Act and these regulations, as follows:</P> <P>(1) Physician services (including consultant and referral services by a physician), which must be provided by a licensed physician, or if a service of a physician may also be provided under applicable State law by other health professionals, an HMO may provide the service through these other health professionals;</P> <P>(2)(i) Outpatient services, which must include diagnostic services, treatment services and x-ray services, for patients who are ambulatory and may be provided in a non-hospital based health care facility or at a hospital;</P> <P>(ii) Inpatient hospital services, which must include but not be limited to, room and board, general nursing care, meals and special diets when medically necessary, use of operating room and related facilities, use of intensive care unit and services, x-ray services, laboratory, and other diagnostic tests, drugs, medications, biologicals, anesthesia and oxygen services, special duty nursing when medically necessary, radiation therapy, inhalation therapy, and administration of whole blood and blood plasma;</P> <P>(iii) Outpatient services and inpatient hospital services must include short-term rehabilitation services and physical therapy, the provision of which the HMO determines can be expected to result in the significant improvement of a member's condition within a period of two months;</P> <P>(3) Instructions to its enrollees on procedures to be followed to secure medically necessary emergency health services both in the service area and out of the service area;</P> <P>(4) Twenty outpatient visits per enrollee per year, as may be necessary and appropriate for short-term evaluative or crisis intervention mental health services, or both;</P> <P>(5) Diagnosis, medical treatment and referral services (including referral services to appropriate ancillary services) for the abuse of or addiction to alcohol and drugs:</P> <P>(i) Diagnosis and medical treatment for the abuse of or addiction to alcohol and drugs must include detoxification for alcoholism or drug abuse on either an outpatient or inpatient basis, <PRTPAGE P="91"/>whichever is medically determined to be appropriate, in addition to the other required basic health services for the treatment of other medical conditions;</P> <P>(ii) Referral services may be either for medical or for nonmedical ancillary services. Medical services must be a part of basic health services; nonmedical ancillary services (such as vocational rehabilitation and employment counseling) and prolonged rehabilitation services in a specialized inpatient or residential facility need not be a part of basic health services;</P> <P>(6) Diagnostic laboratory and diagnostic and therapeutic radiologic services in support of basic health services;</P> <P>(7) Home health services provided at an enrollee's home by health care personnel, as prescribed or directed by the responsible physician or other authority designated by the HMO; and</P> <P>(8) Preventive health services, which must be made available to members and must include at least the following:</P> <P>(i) A broad range of voluntary family planning services;</P> <P>(ii) Services for infertility;</P> <P>(iii) Well-child care from birth;</P> <P>(iv) Periodic health evaluations for adults;</P> <P>(v) Eye and ear examinations for children through age 17, to determine the need for vision and hearing correction; and</P> <P>(vi) Pediatric and adult immunizations, in accord with accepted medical practice.</P> <P>(b) In addition, an HMO may include a health service described in § 417.102 as a supplemental health service in the basic health services that it provides or arranges for its enrollees for a basic health services payment.</P> <P>(c) To the extent that a natural disaster, war, riot, civil insurrection, epidemic or any other emergency or similar event not within the control of an HMO results in the facilities, personnel, or financial resources of an HMO being unavailable to provide or arrange for the provision of a basic or supplemental health service in accordance with the requirements of §§ 417.101 through 417.106 and §§ 417.168 and 417.169, the HMO is required only to make a good-faith effort to provide or arrange for the provision of the service, taking into account the impact of the event. For purposes of this paragraph, an event is not within the control of an HMO if the HMO cannot exercise influence or dominion over its occurrence.</P> <P>(d) The following are not required to be provided as basic health services:</P> <P>(1) Corrective appliances and artificial aids;</P> <P>(2) Mental health services, except as required under section 1302(1)(D) of the PHS Act and paragraph (a)(4) of this section;</P> <P>(3) Cosmetic surgery, unless medically necessary;</P> <P>(4) Prescribed drugs and medicines incidental to outpatient care;</P> <P>(5) Ambulance services, unless medically necessary;</P> <P>(6) Care for military service connected disabilities for which the enrollee is legally entitled to services and for which facilities are reasonably available to this enrollee;</P> <P>(7) Care for conditions that State or local law requires be treated in a public facility;</P> <P>(8) Dental services;</P> <P>(9) Vision and hearing care except as required by sections 1302(1)(A) and 1302(1)(H)(vi) of the PHS Act and paragraphs (a)(1) and (a)(8) of this section;</P> <P>(10) Custodial or domiciliary care;</P> <P>(11) Experimental medical, surgical, or other experimental health care procedures, unless approved as a basic health service by the policymaking body of the HMO;</P> <P>(12) Personal or comfort items and private rooms, unless medically necessary during inpatient hospitalization;</P> <P>(13) Whole blood and blood plasma;</P> <P>(14) Long-term physical therapy and rehabilitation;</P> <P>(15) Durable medical equipment for home use (such as wheel chairs, surgical beds, respirators, dialysis machines); and</P> <P>(16) Health services that are unusual and infrequently provided and not necessary for the protection of individual health, as approved by CMS upon application by the HMO.</P> <P>(e) An HMO may not offer to provide or arrange for the provision of basic health services on a prepayment basis that do not include all the basic health services set forth in paragraph (a) of <PRTPAGE P="92"/>this section or that are limited as to time and cost except in a manner prescribed by this subpart.</P> <CITA>[45 FR 72528, Oct. 31, 1980. Redesignated at 52 FR 36746, Sept. 30, 1987, and amended at 58 FR 38077, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.102</SECTNO> <SUBJECT>Health benefits plan: Supplemental health services.</SUBJECT> <P>(a) An HMO may provide to its enrollees any health service that is not included as a basic health service under § 417.101(a). These health services may be limited as to time and cost.</P> <P>(b) An HMO must determine the level and scope of supplemental health services included with basic health services provided to its enrollees for a basic health services payment or those services offered to its enrollees as supplemental health services.</P> <CITA>[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19339, May 5, 1982. Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38082, 38083, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.103</SECTNO> <SUBJECT>Providers of basic and supplemental health services.</SUBJECT> <P>(a)(1) The HMO must provide that the services of health professionals that are provided as basic health services will, except as provided in paragraph (c) of this section, be provided or arranged for through (i) health professionals who are staff of the HMO, (ii) a medical group or groups, (iii) an IPA or IPAs, (iv) physicians or other health professionals under direct service contracts with the HMO for the provision of these services, or (v) any combination of staff, medical group or groups, IPA or IPAs, or physicians or other health professionals under direct service contracts with the HMO.</P> <P>(2) A staff or medical group model HMO may have as providers of basic health services physicians who have also entered into written services arrangements with an IPA or IPAs, but only if either (i) these physicians number less than 50 percent of the physicians who have entered into arrangements with the IPA or IPAs, or (ii) if the sharing is 50 percent or greater, CMS approves the sharing as being consistent with the purposes of section 1310(b) of the PHS Act.</P> <P>(3) After the 4 year period beginning with the month following the month in that an HMO becomes a qualified HMO, an entity that meets the requirements of the definition of medical group in § 417.100, except for subdivision (3)(i) of that definition, may be considered a medical group if CMS determines that the principal professional activity (over 50 percent individually) of the entity's members is the coordinated practice of their profession, and if the HMO has demonstrated to the satisfaction of CMS that the entity is committed to the delivery of medical services on a prepaid group practice basis by either:</P> <P>(i) Presenting a reasonable time-phased plan for the entity to achieve compliance with the “substantial responsibility” requirement of subdivision (3)(i) of the definition of “medical group” in § 417.100. The HMO must update the plan annually and must demonstrate to the satisfaction of CMS that the entity is making continuous efforts and progress towards compliance with the requirements of the definition of “medical group,” or</P> <P>(ii) Demonstrating that compliance by the entity with the “substantial responsibility” requirement is unreasonable or impractical because (A) the HMO serves a non-metropolitan or rural area as defined in § 417.100, or (B) the entity is a multi-speciality group that provides medical consultation upon referral on a regional or national basis, or (C) the majority of the residents of the HMO's service area are not eligible for employer-employee health benefits plans and the HMO has an insufficient number of enrollees to require utilization of at least 35 percent of the entity's services.</P> <P>(b) HMOs must have effective procedures to monitor utilization and to control cost of basic and supplemental health services and to achieve utilization goals, which may include mechanisms such as risk sharing, financial incentives, or other provisions agreed to by providers.</P> <P>(c) Paragraph (a) of this section does not apply to the provision of the services of a physician:</P> <P>(1) Which the HMO determines are unusual or infrequently used services; or</P> <P>(2) Which, because of an emergency, it was medically necessary to provide <PRTPAGE P="93"/>to the enrollee other than as required by paragraph (a) of this section; or</P> <P>(3) Which are provided as part of the inpatient hospital services by employees or staff of a hospital or provided by staff of other entities such as community mental health centers, home health agencies, visiting nurses' associations, independent laboratories, or family planning agencies.</P> <P>(d) Supplemental health services must be provided or arranged for by the HMO and need not be provided by providers of basic health services under contract with the HMO.</P> <P>(e) Each HMO must:</P> <P>(1) Pay the provider, or reimburse its enrollees for the payment of reasonable charges for basic health services (or supplemental health services that the HMO agreed to provide on a prepayment basis) for which its enrollees have contracted, which were medically necessary and immediately required to be obtained other than through the HMO because of an unforeseen illness, injury, or condition, as determined by the HMO;</P> <P>(2) Adopt procedures to review promptly all claims from enrollees for reimbursement for the provision of health services described in paragraph (e)(1) of this section, including a procedure for the determination of the medical necessity for obtaining the services other than through the HMO; and</P> <P>(3) Provide instructions to its enrollees on procedures to be followed to secure these health services.</P> <SECAUTH>(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67 Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35, 95 Stat. 572-578 (42 U.S.C. 300e-300e-17)</SECAUTH> <CITA>[45 FR 72528, Oct. 31, 1980; 45 FR 77031, Nov. 21, 1980, as amended at 47 FR 19339, May 5, 1982; 50 FR 6174, Feb. 14, 1985. Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38082, 38083, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.104</SECTNO> <SUBJECT>Payment for basic health services.</SUBJECT> <P>(a) <E T="03">Basic health services payment.</E> Each HMO must provide or arrange for the provision of basic health services for a basic health services payment that:</P> <P>(1) Is to be paid on a periodic basis without regard to the dates these services are provided;</P> <P>(2) Is fixed without regard to the frequency, extent, or kind of basic health services actually furnished;</P> <P>(3) Except as provided in paragraph (c) of this section, is fixed under a community rating system, as described in paragraph (b) of this section; and</P> <P>(4) May be supplemented by nominal copayments which may be required for the provision of specific basic health services. Each HMO may establish one or more copayment options calculated on the basis of a community rating system.</P> <P>(i) An HMO may not impose copayment charges that exceed 50 percent of the total cost of providing any single service to its enrollees, nor in the aggregate more than 20 percent of the total cost of providing all basic health services.</P> <P>(ii) To insure that copayments are not a barrier to the utilization of health services or enrollment in the HMO, an HMO may not impose copayment charges on any subscriber (or enrollees covered by the subscriber's contract with the HMO) in any calendar year, when the copayments made by the subscriber (or enrollees) in that calendar year total 200 percent of the total annual premium cost which that subscriber (or enrollees) would be required to pay if he (or they) were enrolled under an option with no copayments. This limitation applies only if the subscriber (or enrollees) demonstrates that copayments in that amount have been paid in that year.</P> <P>(b) <E T="03">Community rating system.</E> Under a community rating system, rates of payment for health services may be determined on a per person or per family basis, as described in paragraph (b)(1) of this section or on a per group basis as described in paragraph (b)(2) of this section. An HMO may fix its rates of payment under the system described in paragraph (b)(1) or (b)(2) of this section or under both such systems, but an HMO may use only one such system for fixing its rates of payment for any one group.</P> <P>(1) A system of fixing rates of payment for health services may provide that the rates will be fixed on a per person or per family basis and may vary with the number of persons in a family. Except as otherwise authorized <PRTPAGE P="94"/>in this paragraph, these rates must be equivalent for all individuals and for all families of similar composition. Rates of payment may be based on either a schedule of rates charged to each subscriber group or on a per-enrollee-per-month (or per-subscriber-per-month) revenue requirement for the HMO. In the former event, rates may vary from group to group if the projected total revenue from each group is substantially equivalent to the revenue that would be derived if the schedule of rates were uniform for all groups. In the latter event, the payments from each group of subscribers must be calculated to yield revenues substantially equivalent to the product of the total number of enrollees (or subscribers) expected to be enrolled from the group and the per-enrollee-per-month (or per-subscriber-per-month) revenue requirement for the HMO. Under the system described in this paragraph, rates of payment may not vary because of actual or anticipated utilization of services by individuals associated with any specific group of subscribers. These provisions do not preclude changes in the rates of payment that are established for new enrollments or re-enrollments and that do not apply to existing contracts until the renewal of these contracts.</P> <P>(2) A system of fixing rates of payment for health services may provide that the rates will be fixed for individuals and families by groups. Except as otherwise authorized in this paragraph, such rates must be equivalent for all individuals in the same group and for all families of similar composition in the same group. If an HMO is to fix rates of payment for individuals and families by groups, it must:</P> <P>(i) Classify all of the enrollees of the organization into classes based on factors that the HMO determines predict the differences in the use of health services by the individuals or families in each class and which have not been disapproved by CMS,</P> <P>(ii) Determine its revenue requirements for providing services to the enrollees of each class established under paragraph (b)(2)(i) of this section, and</P> <P>(iii) Fix the rates of payment for the individuals and families of a group on the basis of a composite of the organization's revenue requirements determined under paragraph (b)(2)(ii) of this section for providing services to them as members of the classes established under paragraph (b)(2)(i) of this section. CMS will review the factors used by each HMO to establish classes under paragraph (b)(2)(i) of this section. If CMS determines that any such factor may not reasonably be used to predict the use of the health services by individuals and families, CMS will disapprove the factor for that purpose.</P> <P>(3)(i) Nominal differentials in rates may be established to reflect differences in marketing costs and the different administrative costs of collecting payments from the following categories of potential subscribers:</P> <P>(A) Individual (non-group) subscribers (including their families).</P> <P>(B) Small groups of subscribers (100 subscribers or fewer).</P> <P>(C) Large groups of subscribers (over 100 subscribers).</P> <P>(ii) Differentials in rates may be established for subscribers enrolled in an HMO: (A) Under a contract with a governmental authority under section 1079 (“Contracts for Medical Care for Spouses and Children: Plans”) or section 1086 (“Contracts for Health Benefits for Certain Members, Former Members and their Dependents”) of title 10 (“Armed Forces”), United States Code; or (B) under any other governmental program (other than the health benefits program authorized by chapter 89 (“Health Insurance”) of title 5 (“Government Organization and Employees”), United States Code; or (C) under any health benefits program for employees of States, political subdivisions of states, and other public entities.</P> <P>(4) An HMO may establish a separate community rate for separate regional components of the organization upon satisfactory demonstration to CMS of the following:</P> <P>(i) Each regional component is geographically distinct and separate from any other regional component; and</P> <P>(ii) Each regional component provides substantially the full range of basic health services to its enrollees, without extensive referral between components of the organization for these services, and without substantial utilization by any two components of <PRTPAGE P="95"/>the same health care facilities. The separate community rate for each regional component of the HMO must be based on the different costs of providing health services in the respective regions.</P> <P>(c) <E T="03">Exceptions to community rating requirement.</E> (1) In the case of an HMO that provided comprehensive health services on a prepaid basis before it became a qualifed HMO, the requirement of community rating shall not apply to the HMO during the forty-eight month period beginning with the month following the month in which it became a qualifed HMO.</P> <P>(2) The requirement of community rating does not apply to the basic health services payment for basic health services provided an enrollee who is a full-time student at an accredited institution of higher education.</P> <P>(d) <E T="03">Late payment penalty.</E> HMOs may charge a late payment penalty on accounts receivable that are in arrears.</P> <P>(e) <E T="03">Review procedures for evaluating the community rating by class system under paragraph (b)(2). </E> <SU>1</SU> <FTREF/> An HMO may establish a community rating system under paragraph (b)(2) of this section or revised factors used to establish classes after it receives written approval of the factors from CMS. CMS will give approval if it concludes that the factors can reasonably be used to predict the use of health services by individuals and families.</P> <FTNT> <P> <SU>1</SU> Further information entitled “Guidelines for Rating by Class” may be obtained from the Office of Prepaid Health Care, Division of Qualification Analysis, HHS Cohen Bldg., room 4360, 330 Independence Ave. SW., Washington, DC 20201.</P> </FTNT> <P>(1) An HMO must make a written request to CMS, listing the factors to be used in the community rating by class system under paragraph (b)(2) of this section.</P> <P>(2) CMS will notify each HMO within 30 days of receipt of the request and application of one of the following:</P> <P>(i) The application is approved;</P> <P>(ii) Additional information or data are required and CMS will notify the HMO of its decision within 30 days from the date of receipt of this information or data; or</P> <P>(iii) CMS needs additional time to review the written request and the HMO will be notified of CMS's decision within 90 days.</P> <APPRO>(Approved by the Office of Management and Budget under control number 0915-0051)</APPRO> <SECAUTH>(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67 Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35, 95 Stat. 572-578 (42 U.S.C. 300e-300e-17)</SECAUTH> <CITA>[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19339, May 5, 1982; 50 FR 6175, Feb. 14, 1985. Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 56 FR 8853, Mar. 1, 1991; 58 FR 38082, 38083, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.105</SECTNO> <SUBJECT>Payment for supplemental health services.</SUBJECT> <P>(a) An HMO may require supplemental health services payments, in addition to the basic health services payments, for the provision of each health service included in the supplemental health services set forth in § 417.102 for which subscribers have contracted, or it may include supplemental health services in the basic health services provided its enrollees for a basic health services payment.</P> <P>(b) Supplemental health services payments may be made in any agreed upon manner, such as prepayment or fee-for-service. Supplemental health services payments that are fixed on a prepayment basis, however, must be fixed under a community rating system, unless the supplemental health services payment is for a supplemental health service provided an enrollee who is a full-time student at an accredited institution of higher education. In the case of an HMO that provided comprehensive health services on a prepaid basis before it became a qualifed HMO, the community rating requirement shall not apply to that HMO during the forty-eight month period beginning with the month following the month in which it became a qualifed HMO.</P> <SECAUTH>(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67 Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35, 95 Stat. 572-578 (42 U.S.C. 300e-300e-17)</SECAUTH> <CITA>[45 FR 72528, Oct. 31, 1980, as amended at 50 FR 6175, Feb. 14, 1985. Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38082, 38083, July 15, 1993]</CITA> </SECTION> <SECTION> <PRTPAGE P="96"/> <SECTNO>§ 417.106</SECTNO> <SUBJECT>Quality assurance program; Availability, accessibility, and continuity of basic and supplemental health services.</SUBJECT> <P>(a) <E T="03">Quality assurance program.</E> Each HMO or CMP must have an ongoing quality assurance program for its health services that meets the following conditions:</P> <P>(1) Stresses health outcomes to the extent consistent with the state of the art.</P> <P>(2) Provides review by physicians and other health professionals of the process followed in the provision of health services.</P> <P>(3) Uses systematic data collection of performance and patient results, provides interpretation of these data to its practitioners, and institutes needed change.</P> <P>(4) Includes written procedures for taking appropriate remedial action whenever, as determined under the quality assurance program, inappropriate or substandard services have been provided or services that ought to have been furnished have not been provided.</P> <P>(b) <E T="03">Availability and accessibility of health care services.</E> Basic health services and those supplemental health services for which enrollees have contracted must be provided or arranged for by the HMO in accordance with the following rules:</P> <P>(1) Except as provided in paragraph (b)(2) of this section, the services must be available to each enrollee within the HMO's service area.</P> <P>(2) <E T="03">Exception.</E> If the HMO's service area is located wholly within a nonmetropolitan area, the HMO may make available outside its service area any basic health service that is not a primary care or emergency care service, if the number of providers of that basic health service who will provide the service to the HMO's enrollees is insufficient to meet the demand. As used in this paragraph, primary care includes general practice, family practice, general internal medicine, general pediatrics, and general obstetrics and gynecology. An HMO that provides the services covered by these fields through at least a general or family practitioner, or a pediatrician and a general internist, is considered to be providing primary care.</P> <P>(3) The services must be available and accessible with reasonable promptness to each of the HMO's enrollees as ensured through—</P> <P>(i) Staffing patterns within generally accepted norms for meeting the projected enrollment needs; and</P> <P>(ii) Geographic location, hours of operation, and arrangements for after-hours services. (Medically necessary emergency services must be available 24 hours a day, 7 days a week.)</P> <P>(c) Continuity of care. The HMO must ensure continuity or care through arrangements that include but are not limited to the following:</P> <P>(1) Use of a health professional who is primarily responsible for coordinating the enrollee's overall health care.</P> <P>(2) A system of health and medical records that accumulates pertinent information about the enrollee's health care and makes it available to appropriate professionals.</P> <P>(3) Arrangements made directly or through the HMO's providers to ensure that the HMO or the health professional who coordinates the enrollee's overall health care is kept informed about the services that the referral resources furnish to the enrollee.</P> <P>(d) <E T="03">Confidentiality of health records.</E> Each HMO must establish adequate procedures to ensure the confidentiality of the health and medical records of its enrollees.</P> <CITA>[58 FR 38068, July 15, 1993]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Qualified Health Maintenance Organizations: Organization and Operation</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>58 FR 38068, July 15, 1993, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 417.120</SECTNO> <SUBJECT>Fiscally sound operation and assumption of financial risk.</SUBJECT> <P>(a) <E T="03">Fiscally sound operation</E>—(1) <E T="03">General requirements.</E> Each HMO must have a fiscally sound operation, as demonstrated by the following:</P> <P>(i) Total assets greater than total unsubordinated liabilities. In evaluating assets and liabilities, loan funds awarded or guaranteed under section <PRTPAGE P="97"/>1306 of the PHS Act are not included as liabilities.</P> <P>(ii) Sufficient cash flow and adequate liquidity to meet obligations as they become due.</P> <P>(iii) A net operating surplus, or a financial plan that meets the requirements of paragraph (a)(2) of this section.</P> <P>(iv) An insolvency protection plan that meets the requirements of § 417.122(b) for protection of enrollees.</P> <P>(v) A fidelity bond or bonds, procured and maintained by the HMO, in an amount fixed by its policymaking body but not less than $100,000 per individual, covering each officer and employee entrusted with the handling of its funds. The bond may have reasonable deductibles, based upon the financial strength of the HMO.</P> <P>(vi) Insurance policies or other arrangements, secured and maintained by the HMO and approved by CMS to insure the HMO against losses arising from professional liability claims, fire, theft, fraud, embezzlement, and other casualty risks.</P> <P>(2) <E T="03">Financial plan requirement.</E> (i) If an HMO has not earned a cumulative net operating surplus during the three most recent fiscal years, did not earn a net operating surplus during the most recent fiscal year or does not have positive net worth, the HMO must submit a financial plan satisfactory to CMS to achieve net operating surplus within available fiscal resources.</P> <P>(ii) This plan must include—</P> <P>(A) A detailed marketing plan;</P> <P>(B) Statements of revenue and expense on an accrual basis;</P> <P>(C) Sources and uses of funds statements; and</P> <P>(D) Balance sheets.</P> <P>(b) <E T="03">Assumption of financial risk.</E> Each HMO must assume full financial risk on a prospective basis for the provision of basic health services, except that it may obtain insurance or make other arrangements as follows:</P> <P>(1) For the cost of providing to any enrollee basic health services with an aggregate value of more than $5,000 in any year.</P> <P>(2) For the cost of basic health services obtained by its enrollees from sources other than the HMO because medical necessity required that they be furnished before they could be secured through the HMO.</P> <P>(3) For not more than 90 percent of the amount by which its costs for any of its fiscal years exceed 115 percent of its income for that fiscal year.</P> <P>(4) For physicians or other health professionals, health care institutions, or any other combination of such individuals or institutions to assume all or part of the financial risk on a prospective basis for their furnishing of basic health services to the HMO's enrollees.</P> </SECTION> <SECTION> <SECTNO>§ 417.122</SECTNO> <SUBJECT>Protection of enrollees.</SUBJECT> <P>(a) <E T="03">Liability protection.</E> (1) Each HMO must adopt and maintain arrangements satisfactory to CMS to protect its enrollees from incurring liability for payment of any fees that are the legal obligation of the HMO. These arrangements may include any of the following:</P> <P>(i) Contractual arrangements that prohibit health care providers used by the enrollees from holding any enrollee liable for payment of any fees that are the legal obligation of the HMO.</P> <P>(ii) Insurance, acceptable to CMS.</P> <P>(iii) Financial reserves, acceptable to CMS, that are held for the HMO and restricted for use only in the event of insolvency.</P> <P>(iv) Any other arrangements acceptable to CMS.</P> <P>(2) The requirements of this paragraph do not apply to an HMO if CMS determines that State law protects the HMO enrollees from liability for payment of any fees that are the legal obligation of the HMO.</P> <P>(b) <E T="03">Protection against loss of benefits if the HMO becomes insolvent.</E> The insolvency protection plan required under § 417.120(a) must provide for continuation of benefits as follows:</P> <P>(1) For all enrollees, for the duration of the contract period for which payment has been made.</P> <P>(2) For enrollees who are in an inpatient facility on the date of insolvency, until they are discharged from the facility.</P> </SECTION> <SECTION> <SECTNO>§ 417.124</SECTNO> <SUBJECT>Administration and management.</SUBJECT> <P>(a) <E T="03">General requirements.</E> Each HMO must have administrative and managerial arrangements satisfactory to CMS, <PRTPAGE P="98"/>as demonstrated by at least the following:</P> <P>(1) A policymaking body that exercises oversight and control over the HMO's policies and personnel to ensure that management actions are in the best interest of the HMO and its enrollees.</P> <P>(2) Personnel and systems sufficient for the HMO to organize, plan, control and evaluate the financial, marketing, health services, quality assurance program, administrative and management aspects of the HMO.</P> <P>(3) At a minimum, management by an executive whose appointment and removal are under the control of the HMO's policymaking body.</P> <P>(b) <E T="03">Full and fair disclosure</E>—(1) <E T="03">Basic rule.</E> Each HMO must prepare a written description of the following:</P> <P>(i) Benefits (including limitations and exclusions).</P> <P>(ii) Coverage (including a statement of conditions on eligibility for benefits).</P> <P>(iii) Procedures to be followed in obtaining benefits and a description of circumstances under which benefits may be denied.</P> <P>(iv) Rates.</P> <P>(v) Grievance procedures.</P> <P>(vi) Service area.</P> <P>(vii) Participating providers.</P> <P>(viii) Financial condition including at least the following most recently audited information: Current assets, other assets, total assets; current liabilities, long term liabilities; and net worth.</P> <P>(2) <E T="03">Requirements for the description.</E> (i) The description must be written in a way that can be easily understood by the average person who might enroll in the HMO.</P> <P>(ii) The description of benefits and coverage may be in general terms if reference is made to a detailed statement of benefits and coverage that is available without cost to any person who enrolls in the HMO or to whom the opportunity for enrollment is offered.</P> <P>(iii) The HMO must provide the description to any enrollee or person who is eligible to elect the HMO option and who requests the material from the HMO or the administrator of a health benefits plan. For purposes of this requirement, “administrator” (of a health benefits plan) has the meaning it is given in the Employment Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. 1002(16)(A).</P> <P>(iv) If the HMO provides health services through individual practice associations (IPAs), the HMO must specify the number of member physicians by specialty, and a listing of the hospitals where HMO enrollees will receive basic and supplemental health services.</P> <P>(v) If the HMO provides health services other than through IPAs, the HMO must specify, for each ambulatory care facility, the facility's address, days and hours of operation, and the number of physicians by specialty, and a listing of the hospitals where HMO enrollees will receive basic and supplemental health services.</P> <P>(c) <E T="03">Broadly representative enrollment.</E> (1) Each HMO must offer enrollment to persons who are broadly representative of the various age, social, and income groups within its service area.</P> <P>(2) If an HMO has a medically underserved population located in its service area, not more than 75 percent of its enrollees may be from the medically underserved population unless the area in which that population resides is a rural area.</P> <P>(d) <E T="03">Health status and enrollment.</E> (1) The HMO may not, on the basis of health status, health care needs, or age of the individual—</P> <P>(i) Expel or refuse to reenroll any enrollee; or</P> <P>(ii) Refuse to enroll individual members of a group.</P> <P>(2) For purposes of this paragraph, a “group” is composed of individuals who enroll in the HMO under a contract or other arrangement that covers two or more subscribers. Examples of groups are employees who enroll under a contract between their employer and the HMO, or members of an organization that arranges coverage for its membership.</P> <P>(3) Nothing in this subpart prohibits an HMO from requiring that, as a condition for continued eligibility for enrollment, enrolled dependent children, upon reaching a specified age, convert to individual enrollment, consistent with paragraph (e) of this section.<PRTPAGE P="99"/> </P> <P>(e) <E T="03">Conversion of enrollment.</E> (1) Each HMO must offer individual enrollment to the following:</P> <P>(i) Each enrollee (and his or her enrolled dependents) leaving a group.</P> <P>(ii) Each enrollee who would otherwise cease to be eligible for HMO enrollment because of his or her age, or the death or divorce of an enrollee.</P> <P>(2) The individual enrollment offered must meet the conditions of subpart B of this part and this subpart C.</P> <P>(3) The HMO is not required to offer individual enrollment except to the enrollees specified in this paragraph.</P> <P>(4) The HMO must offer the enrollment on the same terms and conditions that it makes available to other nongroup enrollees.</P> <P>(f) [Reserved]</P> <P>(g) <E T="03">Grievance procedures.</E> Each HMO must have and use meaningful procedures for hearing and resolving grievances between the HMO's enrollees and the HMO, including the HMO staff and medical groups and IPAs that furnish services. These procedures must ensure that:</P> <P>(1) Grievances and complaints are transmitted in a timely manner to appropriate HMO decisionmaking levels that have authority to take corrective action; and</P> <P>(2) Appropriate action is taken promptly, including a full investigation if necessary and notification of concerned parties as to the results of the HMO's investigation.</P> <P>(h) <E T="03">Certification of institutional providers.</E> Each HMO must ensure that its affiliated institutional providers meet one of the following conditions:</P> <P>(1) In the case of hospitals, are either accredited by the Joint Commission on Accreditation of Health Care Organizations, or certified by Medicare.</P> <P>(2) In the case of laboratories, are either CLIA-exempt, or have in effect a valid certificate of one of the following types, issued by CMS in accordance with section 353 of the PHS Act and part 493 of this chapter:</P> <P>(i) Registration certificate.</P> <P>(ii) Certificate.</P> <P>(iii) Certificate of waiver.</P> <P>(iv) Certificate of accreditation.</P> <P>(3) In the case of other affiliated institutional providers, are certified for participation in Medicare and Medicaid in accordance with part 405, 416, 418, 488, or 491 of this chapter, as appropriate.</P> <CITA>[58 FR 38068, July 15, 1993, as amended at 59 FR 49843, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.126</SECTNO> <SUBJECT>Recordkeeping and reporting requirements.</SUBJECT> <P>(a) <E T="03">General reporting and disclosure requirements.</E> Each HMO must have an effective procedure to develop, compile, evaluate, and report to CMS, to its enrollees, and to the general public, at the times and in the manner that CMS requires, and while safeguarding the confidentiality of the doctor-patient relationship, statistics and other information with respect to the following:</P> <P>(1) The cost of its operations.</P> <P>(2) The patterns of utilization of its services.</P> <P>(3) The availability, accessibility, and acceptability of its services.</P> <P>(4) To the extent practical, developments in the health status of its enrollees.</P> <P>(5) Information demonstrating that the HMO has a fiscally sound operation.</P> <P>(6) Other matters that CMS may require.</P> <P>(b) <E T="03">Significant business transactions.</E> Each HMO must report to CMS annually, within 120 days of the end of its fiscal year (unless for good cause shown, CMS authorizes an extension of time), the following:</P> <P>(1) A description of significant business transactions (as defined in paragraph (c) of this section) between the HMO and a party in interest.</P> <P>(2) With respect to those transactions—</P> <P>(i) A showing that the costs of the transactions listed in paragraph (c) of this section do not exceed the costs that would be incurred if these transactions were with someone who is not a party in interest; or</P> <P>(ii) If they do exceed, a justification that the higher costs are consistent with prudent management and fiscal soundness requirements.</P> <P>(3) A combined financial statement for the HMO and a party in interest if either of the following conditions is met:<PRTPAGE P="100"/> </P> <P>(i) Thirty-five percent or more of the costs of operation of the HMO go to a party in interest.</P> <P>(ii) Thirty-five percent or more of the revenue of a party in interest is from the HMO.</P> <P>(c) <E T="03">“Significant business transaction” defined.</E> As used in paragraph (b) of this section—</P> <P>(1) Business transaction means any of the following kinds of transactions:</P> <P>(i) Sale, exchange or lease of property.</P> <P>(ii) Loan of money or extension of credit.</P> <P>(iii) Goods, services, or facilities furnished for a monetary consideration, including management services, but not including—</P> <P>(A) Salaries paid to employees for services performed in the normal course of their employment; or</P> <P>(B) Health services furnished to the HMO's enrollees by hospitals and other providers, and by HMO staff, medical groups, or IPAs, or by any combination of those entities.</P> <P>(2) <E T="03">Significant business transaction</E> means any business transaction or series of transactions of the kind specified in paragraph (c)(1) of this section that, during any fiscal year of the HMO, have a total value that exceeds $25,000 or 5 percent of the HMO's total operating expenses, whichever is less.</P> <P>(d) <E T="03">Requirements for combined financial statements.</E> (1) The combined financial statements required by paragraph (b)(3) of this section must display in separate columns the financial information for the HMO and each of these parties in interest.</P> <P>(2) Inter-entity transactions must be eliminated in the consolidated column.</P> <P>(3) These statements must have been examined by an independent auditor in accordance with generally accepted accounting principles, and must include appropriate opinions and notes.</P> <P>(4) Upon written request from an HMO showing good cause, CMS may waive the requirement that its combined financial statement include the financial information required in this paragraph (d) with respect to a particular entity.</P> <P>(e) <E T="03">Reporting and disclosure under ERISA.</E> (1) For any employees' health benefits plan that includes an HMO in its offerings, the HMO must furnish, upon request, the information the plan needs to fulfill its reporting and disclosure obligations (with respect to the particular HMO) under the Employee Retirement Income Security Act of 1974 (ERISA).</P> <P>(i) The HMO must furnish the information to the employer or the employer's designee, or to the plan administrator, as the term “administrator” is defined in ERISA.</P> <P>(ii) Loan of money or extension of credit.</P> <P>(iii) Goods, services, or facilities furnished for a monetary consideration, including management services, but not including—</P> <P>(A) Salaries paid to employees for services performed in the normal course of their employment; or</P> <P>(B) Health services furnished to the HMO's enrollees by hospitals and other providers, and by HMO staff, medical groups, or IPAs, or by any combination of those entities.</P> <P>(2) <E T="03">Significant business transaction</E> means any business transaction or series of transactions of the kind specified in paragraph (c)(1) of this section that, during any fiscal year of the HMO, have a total value that exceeds $25,000 or 5 percent of the HMO's total operating expenses, whichever is less.</P> <P>(d) <E T="03">Requirements for combined financial statements.</E> (1) The combined financial statements required by paragraph (b)(3) of this section must display in separate columns the financial information for the HMO and each of these parties in interest.</P> <P>(2) Inter-entity transactions must be eliminated in the consolidated column.</P> <P>(3) These statements must have been examined by an independent auditor in accordance with generally accepted accounting principles, and must include appropriate opinions and notes.</P> <P>(4) Upon written request from an HMO showing good cause, CMS may waive the requirement that its combined financial statement include the financial information required in this paragraph (d) with respect to a particular entity.</P> <P>(e) <E T="03">Reporting and disclosure under ERISA.</E> (1) For any employees' health benefits plan that includes an HMO in its offerings, the HMO must furnish, <PRTPAGE P="101"/>upon request, the information the plan needs to fulfill its reporting and disclosure obligations (with respect to the particular HMO) under the Employee Retirement Income Security Act of 1974 (ERISA).</P> <P>(2) The HMO must furnish the information to the employer or the employer's designee, or to the plan administrator, as the term “administrator” is defined in ERISA.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Application for Federal Qualification</HD> <SECTION> <SECTNO>§ 417.140</SECTNO> <SUBJECT>Scope.</SUBJECT> <P>This subpart sets forth—</P> <P>(a) The requirements for—</P> <P>(1) Entities that seek qualification as HMOs under title XIII of the PHS Act; and</P> <P>(2) HMOs that seek—</P> <P>(i) Qualification for their regional components; or</P> <P>(ii) Expansion of their service areas;</P> <P>(b) The procedures that CMS follows to make determinations; and</P> <P>(c) Other related provisions, including application fees.</P> <CITA>[59 FR 49836, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.142</SECTNO> <SUBJECT>Requirements for qualification.</SUBJECT> <P>(a) <E T="03">General rules.</E> (1) An entity seeking qualification as an HMO must meet the requirements and provide the assurances specified in paragraphs (b) through (f) of this section, as appropriate.</P> <P>(2) CMS determines whether the entity is an HMO on the basis of the entity's application and any additional information and investigation (including site visits) that CMS may require.</P> <P>(3) CMS may determine that an entity is any of the following:</P> <P>(i) An operational qualified HMO.</P> <P>(ii) A preoperational qualified HMO.</P> <P>(iii) A transitional qualified HMO.</P> <P>(b) <E T="03">Operational qualified HMO.</E> CMS determines that an entity is an operational qualified HMO if—</P> <P>(1) CMS finds that the entity meets the requirements of subparts B and C of this part.</P> <P>(2) The entity, within 30 days of CMS's determination, provides written assurances, satisfactory to CMS, that it—</P> <P>(i) Provides and will provide basic health services (and any supplemental health services included in any contract) to its enrollees;</P> <P>(ii) Provides and will provide these services in the manner prescribed in sections 1301(b) and 1301(c) of the PHS Act and subpart B of this part;</P> <P>(iii) Is organized and operated and will continue to be organized and operated in the manner prescribed in section 1301(c) of the PHS Act and subpart C of this part;</P> <P>(iv) Under arrangements that safeguard the confidentiality of patient information and records, will provide access to CMS and the Comptroller General or any of their duly authorized representatives for the purpose of audit, examination or evaluation to any books, documents, papers, and records of the entity relating to its operation as an HMO, and to any facilities that it operates; and</P> <P>(v) Will continue to comply with any other assurances that it has given to CMS.</P> <P>(c) <E T="03">Preoperational qualified HMO.</E> (1) CMS may determine that an entity is a preoperational qualified HMO if it provides, within 30 days of CMS's determination, satisfactory assurances that it will become operational within 60 days following that determination and will, when it becomes operational, meet the requirements of subparts B and C of this part.</P> <P>(2) Within 30 days after receiving notice that the entity has begun operation, CMS determines whether it is an operational qualified HMO. In the absence of this determination, the entity is not an operational qualified HMO even though it becomes operational.</P> <P>(d) <E T="03">Transitional qualified HMO: General rules</E>—(1) <E T="03">Basic requirements.</E> CMS may determine that an entity is a transitional qualified HMO if the entity—</P> <P>(i) Meets the requirements of paragraph (d)(2) through (d)(4) of this section; and</P> <P>(ii) Provides the assurances specified in paragraphs (d)(5) through (d)(7) of this section within 30 days of CMS's determination.<PRTPAGE P="102"/> </P> <P>(2) <E T="03">Organization and operation.</E> The entity is organized and operated in accordance with subpart C of this part, except that it need not—</P> <P>(i) Assume full financial risk for the provision of basic health services as required by § 417.120(b); or</P> <P>(ii) Comply with the limitations that are imposed on insurance by § 417.120(b)(1).</P> <P>(3) <E T="03">Range of services.</E> The entity is currently providing the following services on a prepaid basis:</P> <P>(i) Physician services.</P> <P>(ii) Outpatient services and inpatient hospital services. (The entity need not provide or pay for hospital inpatient or outpatient services that it can show are being provided directly, through insurance, or under arrangements, by other entities.)</P> <P>(iii) Medically necessary emergency services.</P> <P>(iv) Diagnostic laboratory services and diagnostic and therapeutic radiologic services.</P> <FP>These services must meet the requirement of § 417.101, but may be limited in time and cost without regard to the constraints imposed by § 417.101(a).</FP> <P>(4) <E T="03">Payment for services</E>—(i) <E T="03">General rule.</E> The entity pays for basic health services in accordance with § 417.104, except that it need not comply with the copayments limitations imposed by § 417.104(a)(4).</P> <P>(ii) <E T="03">Determination of payment rates.</E> In determining payment rates, the entity need not comply with the community rating requirements of §§ 417.104(b) and 417.105(b).</P> <P>(5) <E T="03">Contracts in effect on the date of CMS's determination.</E> The entity gives assurances that it will meet the following conditions with respect to its group and individual contracts that are in effect on the date of CMS's determination, and which are renewed or renegotiated during the period approved by CMS under paragraph (d)(6) of this section:</P> <P>(i) Continue to provide services in accordance with paragraph (d)(3) of this section.</P> <P>(ii) Continue to be organized and operated and to pay for basic health services in accordance with paragraphs (d)(2) and (d)(4) of this section, respectively.</P> <P>(6) <E T="03">Time-phased plan.</E> The entity gives assurances as follows:</P> <P>(i) It will implement a time-phased plan acceptable to CMS that—</P> <P>(A) May not extend for more than 3 years from the date of CMS's determination; and</P> <P>(B) Specifies definite steps for meeting, at the time of renewal of each group or individual contract, all the requirements of subparts B and C of this part.</P> <P>(ii) Upon completion of this time-phased plan, it will—</P> <P>(A) Provide basic and supplemental services to all of its enrollees; and</P> <P>(B) Be organized and operated, and provide services, in accordance with subparts B and C of this part.</P> <P>(7) <E T="03">Contracts entered into after the date of CMS's determination.</E> The entity gives assurances that, with respect to any group or individual contract entered into after the date of CMS's determination, it will—</P> <P>(i) Be organized and operated in accordance with subpart C of this part; and</P> <P>(ii) Provide basic health services and any supplemental health services included in the contract, in accordance with subpart B of this part.</P> <P>(e) <E T="03">Failure to sign assurances timely.</E> If CMS determines that an entity meets the requirements for qualification and the entity fails to sign its assurances within 30 days following the date of the determination, CMS gives the entity written notice that its application is considered withdrawn and that it is not a qualified HMO.</P> <P>(f) <E T="03">Qualification of regional components.</E> An HMO that has more than one regional component is considered qualified for those regional components for which assurances have been signed in accordance with this section.</P> <P>(g) <E T="03">Special rules: Enrollees entitled to Medicare or Medicaid.</E> For an HMO that accepts enrollees entitled to Medicare or Medicaid, the following rules apply:</P> <P>(1) The requirements of titles XVIII and XIX of the Act, as appropriate, take precedence over conflicting requirements of sections 1301(b) and 1301(c) of the PHS Act.<PRTPAGE P="103"/> </P> <P>(2) The HMO must, with respect to its enrollees entitled to Medicare or Medicaid, comply with the applicable requirement of title XVIII or XIX, including those that pertain to—</P> <P>(i) Deductibles and coinsurance;</P> <P>(ii) Enrollment mix and enrollment practices;</P> <P>(iii) State plan rules on copayment options; and</P> <P>(iv) Grievance procedures.</P> <P>(3) An HMO that complies with paragraph (g)(2) of this section may obtain and retain Federal qualification if, for its other enrollees, the HMO meets the requirements of sections 1301(b) and 1301(c) of the PHS Act and implementing regulations in this subpart D and in subparts B and C of this part.</P> <P>(h) <E T="03">Special rules: Enrollees under the Federal employee health benefits program (FEHBP).</E> An HMO that accepts enrollees under the FEHBP (Chapter 89 of title 5 of the U.S.C.) may obtain and retain Federal qualification if, for its other enrollees, it complies with the requirements of section 1301(b) and 1301(c) of the PHS Act and implementing regulations in this subpart D and subparts B and C of this part.</P> <CITA>[59 FR 49836, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.143</SECTNO> <SUBJECT>Application requirements.</SUBJECT> <P>(a) <E T="03">General requirements.</E> This section sets forth application requirements for entities that seek qualification as HMOs; HMOs that seek expansion of their service areas; and HMOs that seek qualification of their regional components as HMOs.</P> <P>(b) <E T="03">Completion of an application form.</E> (1) In order to receive a determination concerning whether an entity is a qualified HMO, an individual authorized to act for the entity (the applicant) must complete an application form provided by CMS.</P> <P>(2) The authorized individual must describe thoroughly how the entity meets, or will meet, the requirements for qualified HMOs described in the PHS Act and in subparts B and C of this part, this subpart D, and 417.168 and 417.169 of subpart F.</P> <P>(c) <E T="03">Collection of an application fee.</E> In accordance with the requirements of 31 U.S.C. 9701, Fees and charges for Government services and things of value, CMS determines the amount of the application fee that must be submitted with each type of application.</P> <P>(1) The fee is reasonably related to the Federal government's cost of qualifying an entity and may vary based on the type of application.</P> <P>(2) Each type of application has one set fee rather than a charge based on the specific cost of each determination. (For example, each Federally qualified HMO applicant seeking Federal qualification of one of its regional components as an HMO is charged the same amount, unless the amount of the fee has been changed under paragraph (f) of this section.)</P> <P>(d) <E T="03">Application fee amounts.</E> The application fee amounts for applications completed on or after July 13, 1987 are as follows:</P> <P>(1) $18,400 for an entity seeking qualification as an HMO or qualification of a regional component of an HMO.</P> <FP>If, in the case of an HMO seeking qualification of a regional component, CMS determines that there is no need for a site visit, $8,000 will be returned to the applicant.</FP> <P>(2) $6,900 for an HMO seeking expansion of its service area.</P> <P>(3) $3,100 for a CMP seeking qualification as an HMO.</P> <P>(e) <E T="03">Refund of an application fee.</E> CMS refunds an application fee only if the entity withdraws its application within 10 working days after receipt by CMS. Application fees are not returned in any other circumstance, even if qualification or certification is denied.</P> <P>(f) <E T="03">Procedure for changing the amount of an application fee.</E> If CMS determines that a change in the amount of a fee is appropriate, CMS issues a notice of proposed rulemaking in the <E T="04">Federal Register</E> to announce the proposed new amount.</P> <P>(g) <E T="03">New application after denial.</E> An entity may not submit another application under this subpart for the same type of determination for four full months after the date of the notice in which CMS denied the application.</P> <P>(h) <E T="03">Disclosure of application information under the Freedom of Information Act.</E> An applicant submitting material that he or she believes is protected from disclosure under 5 U.S.C. 552, the Freedom of Information Act, or because of exceptions provided in 45 CFR <PRTPAGE P="104"/>part 5, the Department's regulations providing exceptions to disclosure, should label the material “privileged” and include an explanation of the applicability of an exception described in 45 CFR part 5.</P> <CITA>[52 FR 22321, June 11, 1987. Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38077, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.144</SECTNO> <SUBJECT>Evaluation and determination procedures.</SUBJECT> <P>(a) <E T="03">Basis for evaluation and determination.</E> (1) CMS evaluates an application for Federal qualification on the basis of information contained in the application itself and any additional information that CMS obtains through on-site visits, public hearings, and any other appropriate procedures.</P> <P>(2) If the application is incomplete, CMS notifies the entity and allows 60 days from the date of the notice for the entity to furnish the missing information.</P> <P>(3) After evaluating all relevant information, CMS determines whether the entity meets the applicable requirements of §§ 417.142 and 417.143.</P> <P>(b) <E T="03">Notice of determination.</E> CMS notifies each entity that applies for qualification under this subpart of its determination and the basis for the determination. The determination may be granting of qualification, intent to deny, or denial.</P> <P>(c) <E T="03">Intent to deny.</E> (1) If CMS finds that the entity does not appear to meet the requirements for qualification and appears to be able to meet those requirements within 60 days, CMS gives the entity notice of intent to deny qualification and a summary of the basis for this preliminary finding.</P> <P>(2) Within 60 days from the date of the notice, the entity may respond in writing to the issues or other matters that were the basis for CMS's preliminary finding, and may revise its application to remedy any defects identified by CMS.</P> <P>(d) <E T="03">Denial and reconsideration of denial.</E> (1) If CMS denies an application for qualification under this subpart, CMS gives the entity written notice of the denial and an opportunity to request reconsideration of that determination.</P> <P>(2) A request for reconsideration must—</P> <P>(i) Be submitted in writing, within 60 days following the date of the notice of denial;</P> <P>(ii) Be addressed to the CMS officer or employee who denied the application; and</P> <P>(iii) Set forth the grounds upon which the entity requests reconsideration, specifying the material issues of fact and of law upon which the entity relies.</P> <P>(3) CMS bases its reconsideration upon the record compiled during the qualification review proceedings, materials submitted in support of the request for reconsideration, and other relevant materials available to CMS.</P> <P>(4) CMS gives the entity written notice of the reconsidered determination and the basis for the determination.</P> <P>(e) <E T="03">Information on qualified HMOs</E>—(1) <E T="04">Federal Register</E> <E T="03">notices.</E> In quarterly <E T="04">Federal Register</E> notices, CMS gives the names, addresses, and service areas of newly qualified HMOs and describes the expanded service areas of other qualified HMOs.</P> <P>(2) <E T="03">Listings.</E> A cumulative list of qualified HMOs is available from the following office, which is open from 8:30 a.m. to 5 p.m., Monday through Friday: Office of Managed Care, room 4360, Cohen Building, 400 Independence Avenue SW., Washington, DC 20201.</P> <CITA>[59 FR 49837, Sept. 30, 1994]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Inclusion of Qualified Health Maintenance Organizations in Employee Health Benefits Plans</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>45 FR 72517, Oct. 31, 1980, unless otherwise noted. Redesignated at 52 FR 36746, Sept. 30, 1987.</P> </SOURCE> <SECTION> <SECTNO>§ 417.150</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart, unless the context indicates otherwise—</P> <P> <E T="03">Agreement</E> means a collective bargaining agreement.</P> <P> <E T="03">Bargaining representative</E> means an individual or entity designated or selected, under any applicable Federal, State, or local law, or public entity collective bargaining agreement, to <PRTPAGE P="105"/>represent employees in collective bargaining, or any other employee representative designated or selected under any law.</P> <P> <E T="03">Carrier</E> means a voluntary association, corporation, partnership, or other organization that is engaged in providing, paying for, or reimbursing all or part of the cost of health benefits under group insurance policies or contracts, medical or hospital service agreements, enrollment or subscription contracts, or similar group arrangements, in consideration of premiums or other periodic charges payable to the carrier.</P> <P> <E T="03">Collective bargaining agreement</E> means an agreement entered into between an employing entity and the bargaining representative of its employees.</P> <P> <E T="03">Contract</E> means an employer-employee or public entity-employee contract, or a contract for health benefits.</P> <P> <E T="03">Designee</E> means any person or entity authorized to act on behalf of an employing entity or a group of employing entities to offer the option of enrollment in a qualified health maintenance organization to their eligible employees.</P> <P> <E T="03">Eligible employee</E> means an employee who meets the employer's requirements for participation in the health benefits plan.</P> <P> <E T="03">Employee</E> means any individual employed by an employer or public entity on a full-time or part-time basis.</P> <P> <E T="03">Employer</E> has the meaning given that term in section 3(d) of the Fair Labor Standards Act of 1938, except that it—</P> <P>(1) Includes non-appropriated fund instrumentalities of the United States Government; and</P> <P>(2) Excludes the following:</P> <P>(i) The governments of the United States, the District of Columbia and the territories and possessions of the United States, the 50 States and their political subdivisions, and any agencies or instrumentalities of any of the foregoing, including the United States Postal Service and Postal Rate Commission.</P> <P>(ii) Any church, or convention or association of churches, and any organization operated, supervised, or controlled by a church, or convention or association of churches that meets the following conditions:</P> <P>(A) Is an organization that is described in section 501(c)(3) of the Internal Revenue Code of 1954.</P> <P>(B) Does not discriminate, in the employment, compensation, promotion or termination of employment of any personnel, or in the granting of staff and other privileges to physicians or other health personnel, on the grounds that the individuals obtain health care through HMOs, or participate in furnishing health care through HMOs.</P> <P> <E T="03">Employing entity</E> means an employer or public entity.</P> <P> <E T="03">Employing entity-employee contract</E> means a legally enforceable agreement (other than a collective bargaining agreement) between an employing entity and its employees for the provision of, or payment for, health benefits for its employees, or for its employees and their eligible dependents.</P> <P> <E T="03">Group enrollment period</E> means the period of at least 10 working days each calendar year during which each eligible employee is given the opportunity to select among the alternatives included in a health benefits plan.</P> <P> <E T="03">Health benefits</E> means health benefits and services.</P> <P> <E T="03">Health benefits contract</E> means a contract or other agreement between an employing entity or a designee and a carrier for the provision of, or payment for, health benefits to eligible employees or to eligible employees and their eligible dependents.</P> <P> <E T="03">Health benefits plan</E> means any arrangement, to provide or pay for health services, that is offered to eligible employees, or to eligible employees and their eligible dependents, by or on behalf of an employing entity.</P> <P> <E T="03">Public entity</E> means the 50 states, Puerto Rico, Guam, the Virgin Islands, the Northern Mariana Islands and American Samoa and their political subdivisions, the District of Columbia, and any agency or instrumentality of the foregoing, and <E T="03">political subdivisions</E> include counties, parishes, townships, cities, municipalities, towns, villages, and incorporated villages.</P> <P> <E T="03">Qualified HMO</E> means an HMO that has in effect a determination, made under subpart D of this part, that the HMO is an operational, preoperational, or transitional qualified HMO.<PRTPAGE P="106"/> </P> <P> <E T="03">To offer a health benefits plan</E> means to make participation in a health benefits plan available to eligible employees, or to eligible employees and their eligible dependents regardless of whether the employing entity makes a financial contribution to the plan on behalf of these employees, directly or indirectly, for example, through payments on any basis into a health and welfare trust fund.</P> <CITA>[45 FR 72517, Oct. 31, 1980, as amended at 47 FR 19341, May 5, 1982. Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38077, July 15, 1993; 59 FR 49837, 49843, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.151</SECTNO> <SUBJECT>Applicability.</SUBJECT> <P>(a) <E T="03">Basic rule.</E> Effective October 24, 1995, <SU>1</SU> <FTREF/> this subpart applies to any employing entity that offers a health benefits plan to its employees, meets the conditions specified in paragraphs (b) through (e) of this section, and elects to include one or more qualified HMOs in the health plan alternatives it offers its employees.</P> <FTNT> <P> <SU>1</SU> Before October 24, 1995, an employing entity that met the conditions specified in § 417.151 was required to include one or more qualified HMOs, if it received from at least one qualified HMO a written request for inclusion and that request met the timing, content, and procedural requirements specified in § 417.152.</P> </FTNT> <P>(b) <E T="03">Number of employees.</E> During any calendar quarter of the preceding calendar year, the employer or public entity employed an average of not less than 25 employees.</P> <P>(c) <E T="03">Minimum wage.</E> During any calendar quarter of the preceding calendar year, the employer was required to pay the minimum wage specified in section 6 of the Fair Labor Standards Act of 1938, or would have been required to pay that wage but for section 13(a) of that Act.</P> <P>(d) <E T="03">Federal assistance under section 317 of the PHS Act.</E> The public entity has a pending application for, or is receiving, assistance under section 317 of the PHS Act.</P> <P>(e) <E T="03">Employees in HMO's service area.</E> At least 25 of the employing entity's employees reside within the HMO's service area.</P> <CITA>[59 FR 49838, Sept. 30, 1994, as amended at 61 FR 27287, May 31, 1996]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.153</SECTNO> <SUBJECT>Offer of HMO alternative.</SUBJECT> <P>(a) <E T="03">Basic rule.</E> An employing entity that is subject to this subpart and that elects to include one or more qualified HMOs must offer the HMO alternative in accordance with this section.</P> <P>(b) <E T="03">Employees to whom the HMO option must be offered.</E> Each employing entity must offer the option of enrollment in a qualified HMO to each eligible employee and his or her eligible dependents who reside in the HMO's service area.</P> <P>(c) <E T="03">Manner of offering the HMO option.</E> (1) For employees who are represented by a bargaining representative, the option of enrollment in a qualified HMO—</P> <P>(i) Must first be presented to the bargaining representative; and</P> <P>(ii) If the representative accepts the option, must then be offered to each represented employee.</P> <P>(2) For employees not represented by a bargaining representative, the option must be offered directly to those employees.</P> <CITA>[59 FR 49839, Sept. 30, 1994, as amended at 61 FR 27287, May 31, 1996]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.155</SECTNO> <SUBJECT>How the HMO option must be included in the health benefits plan.</SUBJECT> <P>(a) <E T="03">HMO access to employees</E>—(1) <E T="03">Purpose and timing</E>—(i) <E T="03">Purpose.</E> The employing entity must provide each HMO included in its health benefits plan fair and reasonable access to all employees specified in § 417.153(b), so that the HMO can explain its program in accordance with § 417.124(b).</P> <P>(ii) <E T="03">Timing.</E> The employing entity must provide access beginning at least 30 days before, and continuing during, the group enrollment period.</P> <P>(2) <E T="03">Nature of access.</E> (i) Access must include, at a minimum, opportunity to distribute educational literature, brochures, announcements of meetings, and other relevant printed materials that meet the requirements of § 417.124(b).</P> <P>(ii) Access may not be more restrictive or less favorable than the access the employing entity provides to other <PRTPAGE P="107"/>offerors of options included in the health benefits plan, whether or not those offerors elect to avail themselves of that access.</P> <P>(b) <E T="03">Review of HMO offering materials.</E> (1) The HMO must give the employing entity or designee opportunity to review, revise, and approve HMO educational and offering materials before distribution.</P> <P>(2) Revisions must be limited to correcting factual errors and misleading or ambiguous statements, unless—</P> <P>(i) The HMO and the employing entity agree otherwise; or</P> <P>(ii) Other revisions are required by law.</P> <P>(3) The employing entity or designee must complete revision of the materials promptly so as not to delay or otherwise interfere with their use during the group enrollment period.</P> <P>(c) <E T="03">Group enrollment period; prohibition of restrictions; effective date of HMO coverage</E>—(1) <E T="03">Prohibition of restrictions.</E> If an employing entity or designee includes the option of enrollment in a qualified HMO in the health benefits plan offered to its eligible employees, it must provide a group enrollment period before the effective date of HMO coverage. The employing entity may not impose waiting periods as a condition of enrollment in the HMO or of transfer from HMO to non-HMO coverage, or exclusions, or limitations based on health status.</P> <P>(2) <E T="03">Effective date of coverage.</E> Unless otherwise agreed to by the employing entity, or designee, and the HMO, coverage under the HMO contract for employees selecting the HMO option begins on the day the non-HMO contract expires or is renewed without lapse.</P> <P>(3) <E T="03">Coordination of benefits.</E> Nothing in this subpart precludes the uniform application of coordination of benefits agreements between the HMOs and the other carriers that are included in the health benefits plan.</P> <P>(d) <E T="03">Continued eligibility for “free-standing” health benefits</E>—(1) <E T="03">Basic requirement.</E> At the request of a qualified HMO, the employing entity or its designee must provide that employees selecting the option of HMO membership will not, because of this selection, lose their eligibility for free-standing dental, optical, or prescription drug benefits for which they were previously eligible or would be eligible if selecting a non-HMO option and that are not included in the services provided by the HMO to its enrollees as part of the HMO prepaid benefit package.</P> <P>(2) <E T="03">“Free-standing” defined.</E> For purposes of this paragraph, the term “free-standing” refers to a benefit that—</P> <P>(i) Is not integrated or incorporated into a basic health benefits package or major medical plan, and</P> <P>(ii) Is—</P> <P>(A) Offered by a carrier other than the one offering the basic health benefits package or major medical plan; or</P> <P>(B) Subject to a premium separate from the premium for the basic health benefits package or major medical plan.</P> <P>(3) <E T="03">Examples of the employing entity's obligation with respect to the continued eligibility.</E> (i) The health benefits plan includes a free-standing dental benefit. The HMO does not offer any dental coverage as part of its health services provided to members on a prepaid basis. The employing entity must provide that employees who select the HMO option continue to be eligible for dental coverage. (If the dental coverage is not optional for employees selecting the non-HMO option, nothing in this regulation requires that the coverage be made optional for employees selecting the HMO option. Conversely, if this coverage is optional for employees selecting the non-HMO option, nothing in this regulation requires that the coverage be mandatory for employees selecting the non-HMO option.) -</P> <P>(ii) The non-HMO option provides free-standing coverage for optical services (such as refraction and the provision of eyeglasses), and the HMO does not. The employing entity must provide that employees who select the HMO option continue to be eligible for optical coverage.</P> <P>(iii) The non-HMO option includes dental coverage in its major medical package, with a common deductible applied to dental as well as non-dental benefits. The HMO provides no dental coverage as part of its pre-paid health services. Because the dental coverage is not free-standing, the employing entity is not required to provide that employees who select the HMO option <PRTPAGE P="108"/>continue to be eligible for dental coverage, but is free to do so.</P> <P>(e) <E T="03">Opportunity to select among coverage options: Requirement for affirmative written selection</E>—(1) <E T="03">Opportunity other than during a group enrollment period.</E> The employing entity or designee must provide opportunity (in addition to the group enrollment period) for selection among coverage options, by eligible employees who meet any of the following conditions:</P> <P>(i) Are new employees.</P> <P>(ii) Have been transferred or have changed their place of residence, resulting in—</P> <P>(A) Eligibility for enrollment in a qualified HMO for which they were not previously eligible by place of residence; or</P> <P>(B) Residence outside the service area of a qualified HMO in which they were previously enrolled.</P> <P>(iii) Are covered by any coverage option that ceases operation.</P> <P>(2) <E T="03">Prohibition of restrictions.</E> When the employees specified in paragraph (e)(1) of this section are eligible to participate in the health benefits plan, the employing entity or designee must make available, without waiting periods or exclusions based on health status as a condition, the opportunity to enroll in an HMO, or transfer from HMO coverage to non-HMO coverage.</P> <P>(3) <E T="03">Affirmative written selection.</E> The employing entity or designee must require that the eligible employee make an affirmative written selection in any of the following circumstances:</P> <P>(i) Enrollment in a particular qualified HMO is offered for the first time.</P> <P>(ii) The eligible employee elects to change from one option to another.</P> <P>(iii) The eligible employee is one of those specified in paragraph (e)(1) of this section.</P> <P>(f) <E T="03">Determination of copayment levels and supplemental health services.</E> The selection of a copayment level and of supplemental health services to be contracted for must be made as follows:</P> <P>(1) For employees represented by a collective bargaining representative, the selection of copayment levels and supplemental health services is subject to the collective bargaining process.</P> <P>(2) For employees not represented by a bargaining representative, the selection of copayment levels and supplemental health services is subject to the same decisionmaking process used by the employing entity with respect to the non-HMO option in its health benefits plan.</P> <P>(3) In all cases, the HMO has the right to include, with the basic benefits package it provides to its enrollees for a basic health services payment, on a non-negotiable basis, those supplemental health services that meet the following conditions:</P> <P>(i) Are required to be offered under State law.</P> <P>(ii) Are included uniformly by the HMO in its prepaid benefit package.</P> <P>(iii) Are available to employees who select the non-HMO option but not available to those who select the HMO option.</P> <CITA>[59 FR 49840, Sept. 30, 1994, as amended at 61 FR 27288, May 31, 1996]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.156</SECTNO> <SUBJECT>When the HMO must be offered to employees.</SUBJECT> <P>(a) <E T="03">General rules.</E> (1) The employing entity or designee must offer eligible employees the option of enrollment in a qualified HMO at the earliest date permitted under the terms of existing agreements or contracts.</P> <P>(2) If the HMO's request for inclusion in a health benefits plan is received at a time when existing contracts or agreements do not provide for inclusion, the employing entity must include the HMO option in the health benefits plan at the time that new agreements or contracts are offered or negotiated.</P> <P>(b) <E T="03">Specific requirements.</E> Unless mutually agreed otherwise, the following rules apply:</P> <P>(1) <E T="03">Collective bargaining agreement.</E> The employing entity or designee must raise the HMO's request during the collective bargaining process—</P> <P>(i) When a new agreement is negotiated;</P> <P>(ii) At the time prescribed, in an agreement with a fixed term of more than 1 year, for discussion of change in health benefits; or</P> <P>(iii) In accordance with a specific process for review of HMO offers.</P> <P>(2) <E T="03">Contracts.</E> For employees not covered by a collective bargaining agreement, the employing entity or designee <PRTPAGE P="109"/>must include the HMO option in any health benefits plan offered to eligible employees when the existing contract is renewed or when a new health benefits contract or other arrangement is negotiated.</P> <P>(i) If a contract has no fixed term or has a term in excess of 1 year, the contract must be treated as renewable on its earliest anniversary date.</P> <P>(ii) If the employing entity or designee is self-insured, the budget year must be treated as the term of the existing contract.</P> <P>(3) <E T="03">Multiple arrangements.</E> In the case of a health benefits plan that includes multiple contracts or other arrangements with varying expiration or renewal dates, the employing entity must include the HMO option, in accordance with paragraphs (b)(1) and (b)(2) of this section,—</P> <P>(i) At the time each contract or arrangement is renewed or reissued; or</P> <P>(ii) The benefits provided under the contract or arrangement are offered to employees.</P> <CITA>[59 FR 49841, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.157</SECTNO> <SUBJECT>Contributions for the HMO alternative.</SUBJECT> <P>(a) <E T="03">General principles</E>—(1) <E T="03">Nondiscrimination.</E> The employer contribution to an HMO must be in an amount that does not discriminate financially against an employee who enrolls in an HMO. A contribution does not discriminate financially if the method of determining the contribution is reasonable and is designed to ensure that employees have a fair choice among health benefits plan alternatives.</P> <P>(2) <E T="03">Effect of agreements or contracts.</E> The employing entity or designee is not required to pay more for health benefits as a result of offering the HMO alternative than it would otherwise be required to pay under a collective bargaining agreement or contract that provides for health benefits and is in effect at the time the HMO alternative is included.</P> <P>(3) <E T="03">Examples of acceptable employer contributions.</E> The following are methods that are considered nondiscriminatory:</P> <P>(i) The employer contribution to the HMO is the same, per employee, as the contribution to non-HMO alternatives.</P> <P>(ii) The employer contribution reflects the composition of the HMO's enrollment in terms of enrollee attributes that can reasonably be used to predict utilization, experience, costs, or risk. For each enrollee in a given class established on the basis of those attributes, the employer contributes an equal amount, regardless of the health benefits plan chosen by the employee.</P> <P>(iii) The employer contribution is a fixed percentage of the premium for each of the alternatives offered.</P> <P>(iv) The employer contribution is determined under a mutually acceptable arrangement negotiated by the HMO and the employer. In negotiating the arrangement, the employer may not insist on terms that would cause the HMO to violate any of the requirements of this part.</P> <P>(4) <E T="03">Adjustment of employer contribution.</E> An employer contribution determined by an acceptable method may in some cases be adjusted if it would result in a nominal payment or no payment at all by HMO enrollees (because the HMO premium is lower than the premiums for the other alternatives offered). If, for example the employer has a policy of requiring all employees to contribute to their health benefits plan, the employer may require HMO enrollees who would otherwise pay little or nothing at all, to make a payment that does not exceed 50 percent of the employee contribution to the principal non-HMO alternative. The principal non-HMO alternative is the one that covers the largest number of enrollees from the particular employer.</P> <P>(b) <E T="03">Administrative expenses.</E> (1) In determining the amount of its contribution to the HMO, the employing entity or designee may not consider administrative expenses incurred in connection with offering any alternative in the health benefits plan.</P> <P>(2) However, if the employing entity or designee has special requirements for other than standard solicitation brochures and enrollment literature, it must, in the case of the HMO alternative, determine and distribute any administrative costs attributable to those requirements in a manner consistent with its method of determining <PRTPAGE P="110"/>and distributing those costs for the non-HMO alternatives.</P> <P>(c) <E T="03">Exclusion for contribution for certain benefits.</E> In determining the amount of the employing entity's contribution or the designee's cost for the HMO alternative, the employing entity or designee may exclude those portions of the contribution allocable to benefits (such as life insurance or insurance for supplemental health benefits)—</P> <P>(1) For which eligible employees and their eligible dependents are covered notwithstanding selection of the HMO alternative; and</P> <P>(2) That are not offered on a prepayment basis by the HMO to the employing entity's employees.</P> <P>(d) <E T="03">Contributions determined by agreements or contracts or by law.</E> If the specific amount of the employing entity's contribution for health benefits is fixed by an agreement or contract, or by law, that amount constitutes the employing entity's obligation for contribution toward the HMO premiums.</P> <P>(e) <E T="03">Allocation of portion of a contribution determined by an agreement.</E> In some cases, the employing entity's contribution for health benefits is determined by an agreement that also provides for benefits other than health benefits. In that case, the employing entity must determine, or instruct its designee to determine, what portion of its contribution is applicable to health benefits.</P> <P>(f) <E T="03">Retention and availability of data.</E> Each employing entity or designee must retain the following data for three years and make it available to CMS upon request:</P> <P>(1) The data used to compute the level of contribution for each of the plans offered to employees.</P> <P>(2) Related data about the employees who are eligible to enroll in a plan.</P> <P>(3) A description of the methodology for computation.</P> <P>(g) <E T="03">CMS review of data.</E> (1) CMS may request and review the data specified in paragraph (f) of this section on its own initiative or in response to requests from HMOs or employees.</P> <P>(2) The purpose of CMS's review is to determine whether the methodology and the level of contribution comply with the requirements of this subpart.</P> <P>(3) HMOs and employees that request CMS to review must set forth reasonable grounds for making the request.</P> <CITA>[61 FR 27287, May 31, 1996]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.158</SECTNO> <SUBJECT>Payroll deductions.</SUBJECT> <P>Each employing entity that provides payroll deductions as a means of paying employees' contributions for health benefits or provides a health benefits plan that does not require an employee contribution must, with the consent of an employee who selects the HMO option, arrange for the employee's contribution, if any, to be paid through payroll deductions.</P> <CITA>[59 FR 49841, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.159</SECTNO> <SUBJECT>Relationship of section 1310 of the Public Health Service Act to the National Labor Relations Act and the Railway Labor Act.</SUBJECT> <P>The decision of an employing entity subject to this subpart to include the HMO alternative in any health benefits plan offered to its eligible employees must be carried out consistently with the obligations imposed on that employing entity under the National Labor Relations Act, the Railway Labor Act, and other laws of similar effect.</P> <CITA>[59 FR 49841, Sept. 30, 1994, as amended at 61 FR 27288, May 31, 1996]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Continued Regulation of Federally Qualified Health Maintenance Organizations</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>43 FR 32255, July 25, 1978, unless otherwise noted. Redesignated at 52 FR 36746, Sept. 30, 1987.</P> </SOURCE> <SECTION> <SECTNO>§ 417.160</SECTNO> <SUBJECT>Applicability.</SUBJECT> <P>This subpart applies to any entity that has been determined to be a qualified HMO under subpart D of this part.</P> <CITA>[59 FR 49841, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.161</SECTNO> <SUBJECT>Compliance with assurances.</SUBJECT> <P>Any entity subject to this subpart must comply with the assurances that it provided to CMS, unless compliance is waived under § 417.166.</P> <CITA>[58 FR 38071, July 15, 1993]</CITA> </SECTION> <SECTION> <PRTPAGE P="111"/> <SECTNO>§ 417.162</SECTNO> <SUBJECT>Reporting requirements.</SUBJECT> <P>Entities subject to this subpart must submit:</P> <P>(a) The reports that may be required by CMS under § 417.126, and</P> <P>(b) Any additional reports CMS may reasonably require.</P> <CITA>[58 FR 38071, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.163</SECTNO> <SUBJECT>Enforcement procedures.</SUBJECT> <P>(a) <E T="03">Complaints.</E> Any person, group, association, corporation, or other entity may file with CMS a written complaint with respect to an HMO's compliance with assurances it gave under subpart D of this part. A complaint must—</P> <P>(1) State the grounds and underlying facts of the complaint;</P> <P>(2) Give the names of all persons involved; and</P> <P>(3) Assure that all appropriate grievance and appeals procedures established by the HMO and available to the complainant have been exhausted.</P> <P>(b) <E T="03">Investigations.</E> (1) CMS may initiate investigations when, based on a report, a complaint, or any other information, CMS has reason to believe that a Federally qualified HMO is not in compliance with any of the assurances it gave under subpart D of this part.</P> <P>(2) When CMS initiates an investigation, it gives the HMO written notice that includes a full statement of the pertinent facts and of the matters being investigated and indicates that the HMO may submit, within 30 days of the date of the notice, a written report concerning these matters.</P> <P>(3) CMS obtains any information it considers necessary to resolve issues related to the assurances, and may use site visits, public hearings, or any other procedures that CMS considers appropriate in seeking this information.</P> <P>(c) <E T="03">Determination and notice by CMS</E>—(1) <E T="03">Determination.</E> (i) On the basis of the investigation, CMS determines whether the HMO has failed to comply with any of the assurances it gave under subpart D of this part.</P> <P>(ii) CMS publishes in the <E T="04">Federal Register</E> a notice of each determination of non-compliance.</P> <P>(2) <E T="03">Notice of determination: Corrective action.</E> (i) CMS gives the HMO written notice of the determination.</P> <P>(ii) The notice specifies the manner in which the HMO has not complied with its assurances and directs the HMO to initiate the corrective action that CMS considers necessary to bring the HMO into compliance.</P> <P>(iii) The HMO must initiate this corrective action within 30 days of the date of the notice from CMS, or within any longer period that CMS determines to be reasonable and specifies in the notice. The HMO must carry out the corrective action within the time period specified by CMS in the notice.</P> <P>(iv) The notice may provide the HMO an opportunity to submit, for CMS's approval, proposed methods for achieving compliance.</P> <P>(d) <E T="03">Remedy: Revocation of qualification.</E> If CMS determines that a qualified HMO has failed to initiate or to carry out corrective action in accordance with paragraph (c)(2) of this section—(1) CMS revokes the HMO's qualification and notifies the HMO of this action.</P> <P>(2) In the notice, CMS provides the HMO with an opportunity for reconsideration of the revocation, including, at the HMO's election, a fair hearing.</P> <P>(3) The revocation of qualification is effective on the tenth calendar day after the day of the notice unless CMS receives a request for reconsideration by that date.</P> <P>(4) If after reconsideration CMS again determines to revoke the HMO's qualification, this revocation is effective on the tenth calendar day after the date of the notice of reconsidered determination.</P> <P>(5) CMS publishes in the <E T="04">Federal Register</E> each determination it makes under this paragraph (d).</P> <P>(6) A revocation under this paragraph (d) has the effect described in § 417.164.</P> <P>(e) <E T="03">Notice by the HMO.</E> Within 15 days after the date CMS issues a notice of revocation, the HMO must prepare a notice that explains, in readily understandable language, the reasons for the determination that it is not a qualified HMO, and send the notice to the following:</P> <P>(1) The HMO's enrollees.</P> <P>(2) Each employer or public entity that has offered enrollment in the HMO in accordance with subpart E of this part.<PRTPAGE P="112"/> </P> <P>(3) Each lawfully recognized collective bargaining representative or other representative of the employees of the employer or public entity.</P> <P>(f) <E T="03">Reimbursement of enrollees for services improperly denied, or for charges improperly imposed.</E> (1) If CMS determines, under paragraph (c)(1) of this section, that an HMO is out of compliance, CMS may require the HMO to reimburse its enrollees for the following—</P> <P>(i) Expenses for basic or supplemental health services that the enrollee obtained from other sources because the HMO failed to provide or arrange for them in accordance with its assurances.</P> <P>(ii) Any amounts the HMO charged the enrollee that are inconsistent with its assurances. (Rules applicable to charges for all enrollees are set forth in §§ 417.104 and 417.105. The additional rules applicable to Medicare enrollees are in § 415.454.)</P> <P>(2) This paragraph applies regardless of when the HMO failed to comply with the appropriate assurances.</P> <P>(g) <E T="03">Remedy: Civil suit</E>—(1) <E T="03">Applicability.</E> This paragraph applies to any HMO or other entity to which a grant, loan, or loan guarantee was awarded, as set forth in subpart V of this part, on the basis of its assurances regarding the furnishing of basic and supplemental services or its operation and organization, as the case may be.</P> <P>(2) <E T="03">Basis for action.</E> If CMS determines that the HMO or other entity has failed to initiate or refuses to carry out corrective action in accordance with paragraph (c)(2) of this section, CMS may bring civil action in the U.S. district court for the district in which the HMO or other entity is located, to enforce compliance with the assurances it gave in applying for the grant, loan, or loan guarantee.</P> <CITA>[59 FR 49841, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.164</SECTNO> <SUBJECT>Effect of revocation of qualification on inclusion in employee's health benefit plans.</SUBJECT> <P>When an HMO's qualification is revoked under § 417.163(d), the following rules apply:</P> <P>(a) The HMO may not seek inclusion in employees health benefits plans under subpart E of this part.</P> <P>(b) Inclusion of the HMO in an employer's health benefits plan—</P> <P>(1) Is disregarded in determining whether the employer is subject to the requirements of subpart E of this part; and</P> <P>(2) Does not constitute compliance with subpart E of this part by the employer.</P> <CITA>[59 FR 49842, Sept. 30, 1994, as amended at 61 FR 27288, May 31, 1996]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.165</SECTNO> <SUBJECT>Reapplication for qualification.</SUBJECT> <P>An entity whose qualification as an HMO has been revoked by CMS for purposes of section 1310 of the PHS Act may, after completing the corrective action required under § 417.163(c)(2), reapply for a determination of qualification in accordance with the procedures specified in subpart D of this part.</P> <CITA>[43 FR 32255, July 25, 1978. Redesignated at 52 FR 36746, Sept. 30, 1987, and amended at 58 FR 38078, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.166</SECTNO> <SUBJECT>Waiver of assurances.</SUBJECT> <P>(a) <E T="03">General rule.</E> CMS may release an HMO from compliance with any assurances the HMO gives under subpart D of this part if—</P> <P>(1) The qualification requirements are changed by Federal law; or</P> <P>(2) The HMO shows good cause, consistent with the purposes of title XIII of the PHS Act.</P> <P>(b) <E T="03">Basis for finding of good cause.</E> (1) Grounds upon which CMS may find good cause include but are not limited to the following:</P> <P>(i) The HMO has filed for reorganization under Federal bankruptcy provisions and the reorganization can only be approved with the waiver of the assurances.</P> <P>(ii) State laws governing the entity have been changed after it signed the assurances so as to prohibit the HMO from being organized and operated in a manner consistent with the signed assurances.</P> <P>(2) Changes in State laws do not constitute good cause to the extent that the changes are preempted by Federal law under section 1311 of the PHS Act.</P> <P>(c) <E T="03">Consequences of waiver.</E> If CMS waives any assurances regarding compliance with section 1301 of the PHS Act, CMS concurrently revokes the <PRTPAGE P="113"/>HMO's qualification unless the waiver is based on paragraph (a)(1) of this section.</P> <CITA>[59 FR 49842, Sept. 30, 1994, as amended at 61 FR 27288, May 31, 1996]</CITA> </SECTION> </SUBPART> <SUBPART> <RESERVED>Subparts G-I [Reserved]</RESERVED> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart J—Qualifying Conditions for Medicare Contracts</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>50 FR 1346, Jan. 10, 1985, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 417.400</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) <E T="03">Statutory basis.</E> The regulations in this subpart implement section 1876 of the Act, which authorizes Medicare payment to HMOs and CMPs that contract with CMS to furnish covered services to Medicare beneficiaries.</P> <P>(b) <E T="03">Scope.</E> (1) This subpart sets forth the requirements an HMO or CMP must meet in order to enter into a contract with CMS under section 1876 of the Act. It also specifies the procedures that CMS follows to evaluate applications and make determinations.</P> <P>(2) The rules for payment to HMOs and CMPs are set forth in subparts N, O, and P of this part.</P> <P>(3) The rules for HCPP participation in Medicare under section 1833(a)(1)(A) of the Act are set forth in subpart U of this part.</P> <CITA>[60 FR 45675, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.401</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart and subparts K through R of this part, unless the context indicates otherwise—</P> <P> <E T="03">Adjusted average per capita cost</E> (AAPCC) means an actuarial estimate made by CMS in advance of an HMO's or CMP's contract period that represents what the average per capita cost to the Medicare program would be for each class of the HMO's or CMP's Medicare enrollees if they had received covered services other than through the HMO or CMP in the same geographic area or in a similar area.</P> <P> <E T="03">Adjusted community rate (ACR)</E> is the equivalent of the premium that a risk HMO or CMP would charge Medicare enrollees independently of Medicare payments if the HMO or CMP used the same rates it charges non-Medicare enrollees for a benefit package limited to covered Medicare services.</P> <P> <E T="03">Arrangement</E> means a written agreement between an HMO or CMP and another entity, under which—</P> <P>(1) The other entity agrees to furnish specified services to the HMO's or CMP's Medicare enrollees;</P> <P>(2) The HMO or CMP retains responsibility for the services; and</P> <P>(3) Medicare payment to the HMO or CMP discharges the beneficiary's obligation to pay for the services.</P> <P> <E T="03">Benefit stabilization fund</E> means a fund established by CMS, at the request of a risk HMO or CMP, to withhold a portion of the per capita payments available to the HMO or CMP and pay that portion in a subsequent contract period for the purpose of stabilizing fluctuations in the availability of the additional benefits the HMO or CMP provides to its Medicare enrollees.</P> <P> <E T="03">Cost contract</E> means a Medicare contract under which CMS pays the HMO or CMP on a reasonable cost basis.</P> <P> <E T="03">Cost HMO or CMP</E> means an HMO or CMP that has in effect a cost contract with CMS under section 1876 of the Act and subpart L of this part.</P> <P> <E T="03">Demonstration project</E> means a demonstration project under section 402 of the Social Security Amendments of 1967 (42 U.S.C. 1395b-1) or section 222(a) of the Social Security Amendments of 1972 (42 U.S.C. 1395b-1 (note)), relating to the provision of services for which payment is made under Medicare on a prospectively determined basis.</P> <P> <E T="03">Emergency services</E> means covered inpatient or outpatient services that are furnished by an appropriate source other than the HMO or CMP and that meet the following conditions:</P> <P>(1) Are needed immediately because of an injury or sudden illness.</P> <P>(2) Are such that the time required to reach the HMO's or CMP's providers or suppliers (or alternatives authorized by the HMO or CMP) would mean risk of permanent damage to the enrollee's health.</P> <FP>Once initiated, the services continue to be considered emergency services as long as transfer of the enrollee to the HMO's or CMP's source of health care or authorized alternative is precluded because of risk to the enrollee's health <PRTPAGE P="114"/>or because transfer would be unreasonable, given the distance and the nature of the medical condition.</FP> <P> <E T="03">Geographic area</E> means the area found by CMS to be the area within which the HMO or CMP furnishes, or arranges for furnishing, the full range of services that it offers to its Medicare enrollees.</P> <P> <E T="03">Medicare enrollee</E> means a Medicare beneficiary who has been identified on CMS records as an enrollee of an HMO or CMP that has a contract with CMS under section 1876 of the Act and subpart L of this part.</P> <P> <E T="03">New Medicare enrollee</E> means a Medicare beneficiary who—</P> <P>(1) Enrolls with an HMO or CMP after the date on which the HMO or CMP first enters into a risk contract under subpart L of this part; and</P> <P>(2) Was not enrolled with the HMO or CMP at the time he or she became entitled to benefits under Part A or eligible to enroll in Part B of Medicare.</P> <P> <E T="03">Risk contract</E> means a Medicare contract under which CMS pays the HMO or CMP on a risk basis for Medicare covered services.</P> <P> <E T="03">Risk HMO or CMP</E> means an HMO or CMP that has in effect a risk contract with CMS under section 1876 of the Act and subpart L of this part.</P> <P> <E T="03">Urgently needed services</E> means covered services that are needed by an enrollee who is temporarily absent from the HMO's or CMP's geographic area and that—</P> <P>(1) Are required in order to prevent serious deterioration of the enrollee's health as a result of unforeseen injury or illness; and</P> <P>(2) Cannot be delayed until the enrollee returns to the HMO's or CMP's geographic area.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 51986, Oct. 17, 1991; 58 FR 38072, July 15, 1993; 60 FR 45675, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.402</SECTNO> <SUBJECT>Effective date of initial regulations.</SUBJECT> <P>(a) The changes made to section 1876 of the Act by section 114 of the Tax Equity and Fiscal Responsibility Act of 1982 became effective on February 1, 1985, the effective date of the initial implementing regulations.</P> <P>(b) No new cost plan contracts are accepted by CMS. CMS will, however, accept and approve applications to modify cost plan contracts in order to expand service areas, provided they are submitted on or before September 1, 2006, and CMS determines that the organization continues to meet regulatory requirements and the requirements in its cost plan contract. Section 1876 cost plan contracts will not be extended or renewed beyond December 31, 2007, where conditions in paragraph (c) of this section are present.</P> <P>(c) <E T="03">Mandatory HMO or CMP and contract non-renewal or service area reduction.</E> CMS will non-renew all or a portion of an HMO's or CMP's contracted service area using procedures in § 417.492(b) and § 417.494(a) for any period beginning on or after January 1, 2008, where-</P> <P>(1) There were two or more coordinated care plan-model MA regional plans in the same service area or portion of a service area for the entire previous calendar year meeting the conditions in paragraph (c)(3) of this section; or</P> <P>(2) There were two or more coordinated care plan-model MA local plans in the same service area or portion of a service area for the entire previous calendar year meeting the conditions in paragraph (c)(3) of this section.</P> <P>(3) <E T="03">Minimum enrollment requirements.</E> (i) With respect to any service area or portion of a service area that is within a Metropolitan Statistical Area with a population of more than 250,000 and counties contiguous to the Metropolitan Statistical Area, 5,000 enrolled individuals.</P> <P>(ii) With respect to any service area or portion of a service area that is not within a Metropolitan Statistical Area described in paragraph (c)(3)(i) of this section, 1,500 individuals.</P> <CITA>[63 FR 35066, June 26, 1998, as amended at 65 FR 40314, June 29, 2000; 67 FR 13288, Mar. 22, 2002; 70 FR 4713, Jan. 28, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.404</SECTNO> <SUBJECT>General requirements.</SUBJECT> <P>(a) In order to contract with CMS under the Medicare program, an entity must—</P> <P>(1) Be determined by CMS to be an HMO or CMP (in accordance with §§ 117.142 and 417.407, respectively); and<PRTPAGE P="115"/> </P> <P>(2) Comply with the contract requirements set forth in subpart L of this part.</P> <P>(b) CMS enters into or renews a contract only if it determines that action would be consistent with the effective and efficient implementation of section 1876 of the Act.</P> <CITA>[60 FR 45675, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.406</SECTNO> <SUBJECT>Application and determination.</SUBJECT> <P>(a) <E T="03">Responsibility for making determinations.</E> CMS is responsible for determining whether an entity meets the requirements to be an HMO or CMP.</P> <P>(b) <E T="03">Application requirements.</E> (1) The application requirements for HMOs are set forth in § 417.143.</P> <P>(2) The requirements of § 417.143 also apply to CMPs except that there are no application fees.</P> <P>(c) <E T="03">Determination.</E> CMS uses the procedures set forth in § 417.144(a) through (d) to determine whether an entity is an HMO or CMP.</P> <P>(d) <E T="03">Oversight of continuing compliance.</E> (1) CMS oversees an entity's continued compliance with the requirements for an HMO as defined in § 417.1 or for a CMP as set forth in § 417.407.</P> <P>(2) If an entity no longer meets those requirements, CMS terminates the contract of that entity in accordance with § 417.494.</P> <CITA>[60 FR 45675, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.407</SECTNO> <SUBJECT>Requirements for a Competitive Medical Plan (CMP).</SUBJECT> <P>(a) <E T="03">General rule.</E> To qualify as a CMP, an entity must be organized under the laws of a State and must meet the requirements of paragraphs (b) through (f) of this section.</P> <P>(b) <E T="03">Required services</E>—(1) <E T="03">Basic rule.</E> Except as provided in paragraph (b)(2) of this section, the entity furnishes to its enrollees at least the following services:</P> <P>(i) Physicians' services performed by physicians.</P> <P>(ii) Laboratory, x-ray, emergency, and preventive services.</P> <P>(iii) Out-of-area coverage.</P> <P>(iv) Inpatient hospital services.</P> <P>(2) Exception for Medicaid prepayment risk contracts. An entity that had, before 1970, a Medicaid prepayment risk contract that did not include provision of inpatient hospital services is not required to provide those services.</P> <P>(c) <E T="03">Compensation for services.</E> The entity receives compensation (except for deductibles, coinsurance, and copayments) for the health care services it provides to enrollees on a periodic, prepaid capitation basis regardless of the frequency, extent, or kind of services provided to any enrollee.</P> <P>(d) <E T="03">Source of physicians' services.</E> The entity provides physicians' services primarily through—</P> <P>(1) Physicians who are employees or partners of the entity; or</P> <P>(2) Physicians or groups of physicians (organized on a group or individual practice basis) under contract with the entity to provide physicians' services.</P> <P>(e) <E T="03">Assumption of financial risk.</E> The rules set forth in § 417.120(b) for HMOs apply also to CMPs except that reference to “basic services” must be read as reference to the required services listed in paragraph (b) of this section.</P> <P>(f) <E T="03">Protection of enrollees.</E> The entity provides adequately against the risk of insolvency by meeting the requirements of §§ 417.120(a) and 417.122 for protection of enrollees against loss of benefits and liability for payment of any fees that are the legal responsibility of the entity.</P> <CITA>[60 FR 45675, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.408</SECTNO> <SUBJECT>Contract application process.</SUBJECT> <P>(a) <E T="03">Contents of application.</E> (1) The application for a contract must include supporting information in the form and detail required by CMS. (2) Whenever feasible, CMS exempts the HMO or CMP from resubmittal of information it has already submitted to CMS in connection with a determination made under the provisions of § 417.406.</P> <P>(b) <E T="03">Approval of application.</E> (1) If CMS approves the application, it gives written notice to the HMO or CMP, indicating that it meets the requirements for either a risk or reasonable cost contract or only for a reasonable cost contract.</P> <P>(2) If the HMO or CMP is dissatisfied with a determination that it meets the requirements only for a reasonable cost <PRTPAGE P="116"/>contract, it may request reconsideration in accordance with the procedures specified in subpart R of this part.</P> <P>(c) <E T="03">Denial of application.</E> If CMS denies the application, it gives written notice to the HMO or CMP indicating—</P> <P>(1) That it does not meet the contract requirements under section 1876 of the Act;</P> <P>(2) The reasons why the HMO or CMP does not meet the contract requirements; and</P> <P>(3) The HMO's or CMP's right to request reconsideration in accordance with the procedures specified in subpart R of this part.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 8853, Mar. 1, 1991; 58 FR 38078, July 15, 1993; 60 FR 45676, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.410</SECTNO> <SUBJECT>Qualifying conditions: General rules.</SUBJECT> <P>(a) <E T="03">Basic requirement.</E> In order to qualify for a contract with CMS under this subpart, an HMO or CMP must demonstrate its ability to enroll Medicare beneficiaries and other individuals and groups and to deliver a specified comprehensive range of high quality services efficiently, effectively, and economically to its Medicare enrollees.</P> <P>(b) <E T="03">Other qualifying conditions.</E> An HMO or CMP must meet qualifying conditions that pertain to operating experience, enrollment, range of services, furnishing of services, and a quality assurance program.</P> <P>(c) <E T="03">Standards.</E> Generally, each qualifying condition is interpreted by a series of standards that are used in surveying an HMO or CMP to determine its qualifications for a Medicare contract.</P> <P>(d) <E T="03">Application of standards.</E> Application of the standards enables the surveyor to determine—</P> <P>(1) The HMO's or CMP's activities;</P> <P>(2) The extent to which the HMO or CMP complies with each condition;</P> <P>(3) The nature and extent of any deficiencies; and</P> <P>(4) The need for improvement if CMS should enter into a contract with the HMO or CMP.</P> <P>(e) <E T="03">Requirements for a risk contract.</E> An HMO or CMP may enter into a risk contract with CMS if it—</P> <P>(1) Meets all the applicable requirements in the statute and regulations;</P> <P>(2) Has at least 5,000 enrollees or 1,500 enrollees if it serves a primarily rural area as defined in § 417.413(b)(3);</P> <P>(3) Has at least 75 Medicare enrollees or has an acceptable plan to achieve this Medicare membership within 2 years;</P> <P>(4) Satisfies CMS that it can bear the potential losses of a risk contract; and</P> <P>(5) Has not previously terminated or failed to renew a risk contract within the preceding 5 years, unless CMS determines that circumstances warrant special consideration.</P> <P>(f) <E T="03">Requirements for a reasonable cost sontract.</E> An HMO or CMP may enter into a reasonable cost contract if it meets one of the following:</P> <P>(1) The HMO or CMP qualifies for a risk contract, but chooses a reasonable cost contract.</P> <P>(2) The HMO or CMP meets the conditions for entering into a risk contract specified in paragraph (e) of this section except that CMS does not judge the HMO or CMP capable of bearing the potential losses of a risk contract.</P> <P>(g) Regulations on reasonable cost and risk reimbursement are set forth in subparts O and P of this part.</P> <CITA>[50 FR 20570, May 17, 1985, as amended at 58 FR 38078, July 15, 1993; 60 FR 45676, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.412</SECTNO> <SUBJECT>Qualifying condition: Administration and management.</SUBJECT> <P>The HMO or CMP must demonstrate that it—</P> <P>(a) Has sufficient administrative capability to carry out the requirements of the contract; and</P> <P>(b) Does not have any agents or management staff or persons with ownership or control interests who have been convicted of criminal offenses related to their involvement in Medicaid, Medicare, or social service programs under title XX of the Act.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 45676, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.413</SECTNO> <SUBJECT>Qualifying condition: Operating experience and enrollment.</SUBJECT> <P>(a) <E T="03">Condition.</E> The HMO or CMP must demonstrate that it has operating experience and an enrolled population <PRTPAGE P="117"/>sufficient to provide a reasonable basis for establishing a prospective per capita reimbursement rate or a reasonable cost reimbursement rate, as appropriate.</P> <P>(b) <E T="03">Standard: Enrollment and operating experience for HMOs or CMPs to contract on a risk basis.</E> To be eligible to contract on a risk basis—</P> <P>(1) A nonrural HMO or CMP must currently have the following:</P> <P>(i) At least 5,000 enrollees; and</P> <P>(ii) At least 75 Medicare enrollees or a plan acceptable to CMS for achieving a Medicare enrollment of 75 within 2 years from the beginning of its initial contract period.</P> <P>(2) A rural HMO or CMP must currently have—</P> <P>(i) At least 1,500 enrollees; and</P> <P>(ii) At least 75 Medicare enrollees or a plan acceptable to CMS for achieving a Medicare enrollment of 75 within 2 years from the beginning of its initial contract period.</P> <P>(3) For purposes of this paragraph, an HMO or CMP is considered rural if at least 50 percent of its enrollees reside in nonmetropolitan areas. A nonmetropolitan area is an area—</P> <P>(i) No part of which is within a metropolitan statistical area (MSA) as designated by the Executive Office of Management and Budget; and</P> <P>(ii) That does not contain a city whose population exceeds 50,000 individuals.</P> <P>(4) A subdivision or subsidiary of an HMO or CMP that meets the requirements of paragraph (b)(1) or (b)(2) of this section need not demonstrate that it meets those requirements as an independent unit if the HMO or CMP assumes responsibility for the financial risk, and adequate management and supervision of health care services furnished by its subdivision or subsidiary.</P> <P>(c) <E T="03">Standard: Enrollment and operating experience for HMOs or CMPs to contract on a cost basis.</E> To be eligible to contract on a reasonable cost basis, an HMO or CMP must currently have enrollees sufficient in number to provide a reasonable basis for entering into a contract, as follows:</P> <P>(1) At least 1,500 enrollees.</P> <P>(2) At least 75 Medicare enrollees, or a plan acceptable to CMS for achieving—</P> <P>(i) A Medicare enrollment of 75 within 2 years from the beginning of its initial contract period; and</P> <P>(ii) At least 250 Medicare enrollees by the beginning of its fourth contract period.</P> <P>(d) <E T="03">Standard: Composition of enrollment</E>—(1) <E T="03">Requirement.</E> Except as specified in paragraphs (d)(2) and (e) of this section, not more than 50 percent of an HMO's or CMP's enrollment may be Medicare beneficiaries.</P> <P>(2) <E T="03">Waiver of composition of enrollment standard.</E> CMS may waive compliance with the requirements of paragraph (d)(1) of this section if the HMO or CMP has made and is making reasonable efforts to enroll individuals who are not Medicare beneficiaries and it meets one of the following requirements:</P> <P>(i) The HMO or CMP serves a geographic area in which Medicare beneficiaries and Medicaid recipients constitute more than 50 percent of the population. (CMS does not grant a waiver that would permit the percentage of Medicare and Medicaid enrollees to exceed the percentage of Medicare beneficiaries and Medicaid recipients in the population of the geographic area.)</P> <P>(ii) The HMO or CMP is owned and operated by a government entity. The waiver may be for a period up to three years after the date the HMO or CMP first enters into a contract under this subpart, and may not be extended.</P> <P>(iii) The HMO or CMP requests waiver of the composition rule because it is in the public interest. The organization provides documentation that supports one of the following:</P> <P>(A) The organization serves a medically underserved rural or urban area.</P> <P>(B) The organization demonstrates a long-term business and community service commitment to the area.</P> <P>(C) The organization believes that a waiver is necessary to promote managed care choices in an area with limited or no managed care choices.</P> <P>(3) <E T="03">Waiver granted on or before October 21, 1986.</E> An HMO or CMP (or a successor HMO or CMP) that as of October 21, 1986, had been granted an exception, waiver, or modification of the requirements of paragraph (d)(1) of this section, but that does not meet the requirements of paragraph (d)(2) of this <PRTPAGE P="118"/>section, must make (and throughout the period of the exception, waiver, or modification continue to make) reasonable efforts to meet scheduled enrollment goals, consistent with a schedule of compliance approved by CMS.</P> <P>(i) If CMS determines that the HMO or CMP has complied, or made significant progress toward compliance, with the approved schedule, and that an extension is in the best interest of the Medicare program, CMS may extend the waiver of modification.</P> <P>(ii) If CMS determines that the HMO or CMP has not complied with the approved schedule, CMS may apply the sanctions described in paragraphs (d)(6) and (d)(7) of this section.</P> <P>(4) <E T="03">Basis for application of sanctions.</E> CMS may, as an alternative to contract termination, apply the sanctions specified in paragraph (d)(6) of this section if CMS determines that the HMO or CMP is not complying with the requirements in paragraphs (d)(1), (d)(2), or (d)(3) of this section, as applicable.</P> <P>(5) <E T="03">Notice of sanction.</E> Before applying the sanctions specified in paragraph (d)(6) of this section, CMS sends a written notice to the HMO or CMP stating the proposed action and its basis. CMS gives the HMO or CMP 15 days after the date of the notice to provide evidence establishing the HMO's or CMP's compliance with the requirements in paragraph (d)(1), (d)(2), or (d)(3) of this section, as applicable.</P> <P>(6) <E T="03">Sanctions.</E> If, following review of the HMO's or CMP's timely response to CMS's notice, CMS determines that an HMO or CMP does not comply with the requirements of paragraphs (d)(1), (d)(2), or (d)(3) of this section, CMS may apply either of the following sanctions:</P> <P>(i) Require the HMO or CMP to stop accepting new enrollment applications after a date specified by CMS.</P> <P>(ii) Deny payment for individuals who are formally added or “accreted” to CMS's records as Medicare enrollees after a date specified by CMS.</P> <P>(7) <E T="03">Termination by CMS.</E> In addition to the sanctions described in paragraph (d)(6) of this section. CMS may decline to renew an HMO's or CMP's contract in accordance with § 417.492(b), or terminate its contract in accordance with § 417.494(b) if CMS determines that the HMO or CMP no longer substantially meets the requirements of paragraphs (d)(1), (d)(2), or (d)(3) of this section.</P> <P>(8) <E T="03">Termination of composition standard.</E> The 50 percent composition of Medicare beneficiaries terminates for all managed care plans on December 31, 1998.</P> <P>(e) <E T="03">Standard: Open enrollment.</E> (1) Except as specified in paragraph (e)(2) of this section, an HMO or CMP must enroll Medicare beneficiaries on a first-come, first-served basis to the limit of its capacity and provide annual open enrollment periods of at least 30 days duration for Medicare beneficiaries.</P> <P>(2) CMS may waive the requirement of paragraph (e)(1) of this section if compliance would prevent compliance with the limitation on enrollment of Medicare beneficiaries and Medicaid recipients (paragraph (d) of this section) or result in an enrollment substantially nonrepresentative of the population of the HMO's or CMP's geographic area. The enrollment would be “substantially nonrepresentative” if the proportion of a subgroup to the total enrollment exceeded, by 10 percent or more, its proportion of the population in the HMO's or CMP's geographic area, as shown by census data or other data acceptable to CMS. For purposes of this paragraph, a subgroup means a class of Medicare enrollees as defined in § 417.582.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 46570, Sept. 13, 1991; 58 FR 38082, July 15, 1993; 60 FR 45676, Sept. 1, 1995; 63 FR 35066, June 26, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.414</SECTNO> <SUBJECT>Qualifying condition: Range of services.</SUBJECT> <P>(a) <E T="03">Condition.</E> The HMO or CMP must demonstrate that it is capable of delivering to Medicare enrollees the range of services required in accordance with this section.</P> <P>(b) <E T="03">Standard: Range of services furnished by eligible HMOs or CMPs</E>—(1) <E T="03">Basic requirement.</E> Except as specified in paragraph (b)(3) of this section, an HMO or CMP must furnish to its Medicare enrollees (directly or through arrangements with others) all the Medicare services to which those enrollees are entitled to the extent that they are available to Medicare beneficiaries who <PRTPAGE P="119"/>reside in the HMO's or CMP's geographic area but are not enrolled in the HMO or CMP.</P> <P>(2) <E T="03">Criteria for availability.</E> The services are considered available if—</P> <P>(i) The sources are located within the HMO's or CMP's geographic area; or</P> <P>(ii) It is common practice to refer patients to sources outside that geographic area.</P> <P>(3) <E T="03">Exception for hospice care.</E> An HMO or CMP is not required to furnish hospice care as described in part 418 of this chapter. However, HMOs or CMPs must inform their Medicare enrollees about the availability of hospice care if—</P> <P>(i) A hospice participating in Medicare is located within the HMO's or CMP's geographic area; or</P> <P>(ii) It is common practice to refer patients to hospices outside the geographic area.</P> <P>(c) <E T="03">Standard: Financial responsibility for services furnished outside the HMO or CMP.</E> (1) An HMO or CMP must assume financial responsibility and provide reasonable reimbursement for emergency services and urgently needed services (as defined in § 417.401) that are obtained by its Medicare enrollees from providers and suppliers outside the HMO or CMP even in the absence of the HMO's or CMP's prior approval.</P> <P>(2) An HMO or CMP must assume financial responsibility for services that the Medicare enrollee attempted to obtain from the HMO or CMP, but that the HMO or CMP failed to furnish or unreasonably denied, and that are found, upon appeal by the enrollee under subpart Q of this part, to be services that the enrollee was entitled to have furnished to him or her by the HMO or CMP.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38078, July 15, 1993; 60 FR 45677, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.416</SECTNO> <SUBJECT>Qualifying condition: Furnishing of services.</SUBJECT> <P>(a) <E T="03">Condition.</E> The HMO or CMP must furnish the required services to its Medicare enrollees through providers and suppliers that meet applicable Medicare statutory definitions and implementing regulations. The HMO or CMP must also ensure that the required services, additional services, and any other supplemental services for which the Medicare enrollee has contracted are available and accessible and are furnished in a manner that ensures continuity.</P> <P>(b) <E T="03">Standard: Conformance with conditions of participation, conditions for coverage, and conditions for certification.</E> (1) Hospitals, SNFs, HHAs, CORFs, and providers of outpatient physical therapy or speech-language pathology services must meet the applicable conditions of participation in Medicare, as set forth elsewhere in this chapter.</P> <P>(2) Suppliers must meet the conditions for coverage or conditions for certification of their services, as set forth elsewhere in this chapter.</P> <P>(3) If more than one type of practitioner is qualified to furnish a particular service, the HMO or CMP may select the type of practitioner to be used.</P> <P>(c) <E T="03">Standard: Physician supervision.</E> The HMO or CMP must provide for supervision by a physician of other health care professionals who are directly involved in the provision of health care as generally authorized under section 1861 of the Act. Except as specified in paragraph (d) of this section, with respect to medical services furnished in an HMO's or CMP's clinic or the office of a physician with whom the HMO or CMP has a service agreement, the HMO or CMP must ensure that—</P> <P>(1) Services furnished by paramedical, ancillary, and other nonphysician personnel are furnished under the direct supervision of a physician;</P> <P>(2) A physician is present to perform medical (as opposed to administrative) services whenever the clinics or offices are open; and</P> <P>(3) Each patient is under the care of a physician.</P> <P>(d) <E T="03">Exceptions to physician supervision requirement.</E> The following services may be furnished without the direct personal supervision of a physician:</P> <P>(1) Services of physician assistants and nurse practitioners (as defined in § 491.2 of this chapter), and the services and supplies incident to their services. The conditions for payment, as set forth in §§ 405.2414 and 405.2415 of this chapter for services furnished by rural health clinics and Federally qualified health centers, respectively, also apply <PRTPAGE P="120"/>when those services are furnished by an HMO or CMP.</P> <P>(2) When furnished by an HMO or CMP, services of clinical psychologists who meet the qualifications specified in § 410.71(d) of this chapter, and the services and supplies incident to their professional services.</P> <P>(3) When an HMO or CMP contracts on—</P> <P>(i) A risk basis, the services of a clinical social worker (as defined at § 410.73 of this chapter) and the services and supplies incident to their professional services; or</P> <P>(ii) A cost basis, the services of a clinical social worker (as defined in § 410.73 of this chapter). Services incident to the professional services of a clinical social worker furnished by an HMO or CMP contracting on a cost basis are not covered by Medicare and payment will not be made for these services.</P> <P>(e) <E T="03">Standard: Accessibility and continuity.</E> (1) The HMO or CMP must ensure that the required services and any other services for which Medicare enrollees have contracted are accessible, with reasonable promptness, to the enrollees with respect to geographic location, hours of operation, and provision of after hours service. Medically necessary emergency services must be available twenty-four hours a day, seven days a week.</P> <P>(2) The HMO or CMP must maintain a health (including medical) recordkeeping system through which pertinent information relating to the health care of its Medicare enrollees is accumulated and is readily available to appropriate professionals.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 45677, Sept. 1, 1995; 63 FR 20130, Apr. 23, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.418</SECTNO> <SUBJECT>Qualifying condition: Quality assurance program.</SUBJECT> <P>(a) <E T="03">Condition.</E> The HMO or CMP must make arrangements for a quality assurance program that meets the requirements of this section.</P> <P>(b) <E T="03">Standard.</E> An HMO or CMP must have an ongoing quality assurance program that meets the requirements set forth in § 417.106(a).</P> <CITA>[58 FR 38072, July 15, 1993]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart K—Enrollment, Entitlement, and Disenrollment under Medicare Contract</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>50 FR 1346, Jan. 10, 1985, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 417.420</SECTNO> <SUBJECT>Basic rules on enrollment and entitlement.</SUBJECT> <P>(a) <E T="03">Enrollment.</E> Individuals who are entitled to benefits under both Part A and Part B of Medicare or only Part B may elect to receive those benefits through an HMO or CMP that has in effect a contract with CMS under subpart L of this part.</P> <P>(b) <E T="03">Entitlement.</E> If a Medicare beneficiary enrolls with an HMO or CMP, CMS pays the HMO or CMP on his or her behalf for the services to which he or she is entitled.</P> <P>(c) <E T="03">Beneficiary liability.</E> (1) The HMO or CMP may require payment, in the form of premiums or otherwise, from individuals for services not covered under Medicare, as well as deductible and coinsurance amounts attributable to Medicare covered services.</P> <P>(2) As described in § 417.448, Medicare enrollees of risk HMOs or CMPs are liable for services that they obtain from sources other than the HMO or CMP, unless the services are—</P> <P>(i) Emergency or urgently needed; or</P> <P>(ii) Determined, on appeal under subpart Q of this part, to be services that should have been furnished by the HMO or CMP.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38078, July 15, 1993; 60 FR 45677, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.422</SECTNO> <SUBJECT>Eligibility to enroll in an HMO or CMP.</SUBJECT> <P>Except as specified in §§ 417.423 and 417.424, an HMO or CMP must enroll, either for an indefinite period or for a specified period of at least 12 months, any individual who—</P> <P>(a) Is entitled to Medicare benefits under Parts A and B or under Part B only;</P> <P>(b) Lives within the geographic area served by the HMO or CMP;</P> <P>(c) Is not enrolled in any other HMO or CMP that has entered into a contract under subpart L of this part;</P> <P>(d) During an enrollment period of the HMO or CMP, completes and signs <PRTPAGE P="121"/>the HMO's or CMP's application form and gives whatever information is required for enrollment;</P> <P>(e) Agrees to abide by the HMO's or CMP's rules after they are disclosed to him or her in connection with the enrollment process;</P> <P>(f) Is not denied enrollment by the HMO or CMP under a selection policy, if any, that has been approved by CMS under § 417.424(b); and</P> <P>(g) Is not denied enrollment by the HMO or CMP on the basis of any of the administrative criteria concerning denial of enrollment in § 417.424(a).</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38078, July 15, 1993; 60 FR 45677, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.423</SECTNO> <SUBJECT>Special rules: ESRD and hospice patients.</SUBJECT> <P>(a) <E T="03">ESRD patients.</E> (1) A Medicare beneficiary who has been medically determined to have end-stage renal disease is not eligible to enroll in an HMO or CMP.</P> <P>(2) However, if a beneficiary is already enrolled in an HMO or CMP when he or she is determined to have end-stage renal disease, the HMO or CMP—</P> <P>(i) Must reenroll the beneficiary as required by § 417.434; and</P> <P>(ii) May not disenroll the beneficiary except as provided in § 417.460.</P> <P>(b) <E T="03">Hospice patients.</E> A Medicare beneficiary who elects hospice care under § 418.24 of this chapter is not eligible to enroll in an HMO or CMP as long as the hospice election remains in effect.</P> <CITA>[60 FR 45677, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.424</SECTNO> <SUBJECT>Denial of enrollment.</SUBJECT> <P>(a) <E T="03">Basis for denial.</E> An HMO or CMP may deny enrollment to an individual who meets the criteria of § 417.422 if acceptance would—</P> <P>(1) Cause the number of enrollees who are Medicare or Medicaid beneficiaries to exceed 50 percent of the HMO's or CMP's total enrollment;</P> <P>(2) Prevent the HMO or CMP from complying with any of the other contract qualifying conditions set forth in subpart J of this part;</P> <P>(3) Require the HMO or CMP to exceed its enrollment capacity; or</P> <P>(4) Cause the enrollment to become substantially nonrepresentative of the general population in the HMO's or CMP's geographic area.</P> <P>(b) <E T="03">Selection policies.</E> (1) Denial under paragraph (a)(4) of this section must be in accordance with written selection policies approved by CMS. (2) Enrollment of individuals will not be considered to make the enrollment of the HMO or CMP substantially nonrepresentative of the general population in the HMO's or CMP's geographic area unless, as a result of the enrollment, the proportion of the subgroup of enrollees to which the enrollee belongs as compared to the HMO's or CMP's total enrollment exceeds by at least ten percent the subgroup's proportion of the general population in the geographic area of the HMO or CMP. (A subgroup is a class of Medicare enrollees of an HMO or CMP that CMS constructs on the basis of actuarial factors.)</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 58 FR 38078, July 15, 1993; 60 FR 45677, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.426</SECTNO> <SUBJECT>Open enrollment requirements.</SUBJECT> <P>(a) <E T="03">Basic requirements.</E> (1) HMOs or CMPs must provide open enrollment for Medicare beneficiaries for at least 30 consecutive days during each contract year.</P> <P>(2) During open enrollment, the HMO or CMP must enroll eligible Medicare beneficiaries in the order in which their applications are received and until its enrollment capacity is reached.</P> <P>(3) The HMO or CMP may accept applications from Medicare beneficiaries after it has reached capacity if it places those individuals on a waiting list and enrolls them in chronological order as vacancies occur.</P> <P>(4) An HMO or CMP with a risk contract must accept applications from eligible Medicare beneficiaries during the month of November 1998.</P> <P>(b) <E T="03">Capacity to accept new enrollees.</E> (1) If an HMO or CMP chooses to limit enrollments because of its capacity, it must notify CMS at least 90 days before the beginning of its open enrollment period and, at that time, provide CMS with its reasons for limiting enrollment.<PRTPAGE P="122"/> </P> <P>(2) CMS evaluates the HMO's or CMP's submittal under paragraph (b)(1) of this section.</P> <P>(3) The HMO or CMP must promptly notify CMS if there is any change in its enrollment capacity.</P> <P>(c) <E T="03">Reserved vacancies.</E> (1) Subject to CMS's approval, an HMO or CMP may set aside a reasonable number of vacancies for an anticipated new group contract or for anticipated new enrollees under an existing group contract that will have its enrollment period after the Medicare open enrollment period during the contract year.</P> <P>(2) Any set aside vacancies that are not filled within a reasonable time after the beginning of the group contract enrollment period must be made available to Medicare beneficiaries and other nongroup applicants under the requirements of this subpart.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38079, July 15, 1993; 60 FR 45677, Sept. 1, 1995; 63 FR 35066, June 26, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.428</SECTNO> <SUBJECT>Marketing activities.</SUBJECT> <P>(a) <E T="03">Required marketing activities.</E> An HMO or CMP must meet the following requirements:</P> <P>(1) Offer its plan to Medicare beneficiaries and provide to those interested in enrolling, adequate written descriptions of the HMO's or CMP's rules, procedures, benefits, fees and other charges, services, and other information necessary for beneficiaries to make an informed decision about enrollment.</P> <P>(2) Notify the general public of its enrollment period (whether time limited or continuous) in an appropriate manner through appropriate media, throughout its enrollment area.</P> <P>(3) Submit all marketing materials to CMS at least 45 days before their planned distribution.</P> <P>(4) Include in the HMO's or CMP's written materials provided to prospective enrollees prior to enrollment, notice that the HMO or CMP is authorized by law to terminate or refuse to renew its contract with CMS, that CMS may also choose to terminate or refuse to renew its contact with the HMO or CMP and that termination or nonrenewal may result in termination of the individual's enrollment in the HMO or CMP.</P> <P>(b) <E T="03">Prohibited marketing activities—general.</E> In offering its plan to Medicare beneficiaries, an HMO or CMP may not engage in any of the following practices or activities:</P> <P>(1) Practices that are discriminatory. For example, the HMO or CMP may not engage in any activity intended to recruit Medicare beneficiaries from higher income areas (usually an indicator of better health) without making a comparable effort to enroll Medicare beneficiaries from lower income areas.</P> <P>(2) Activities that could mislead or confuse Medicare beneficiaries, or misrepresent the HMO or CMP its marketing representatives, or CMS. For example, the HMO or CMP may not claim that it is recommended or endorsed by CMS or that CMS recommends that the beneficiary enroll in the HMO or CMP. It may, however, explain that the entity is approved as an HMO or CMP for purposes of participation in Medicare.</P> <P>(3) Offers of gifts or payment as an inducement to enroll in the HMO or CMP. This does not prohibit the explanation of any legitimate benefits the beneficiary might obtain as an enrollee of the HMO or CMP such as eligibility to enroll in a supplemental benefit plan that covers deductibles and coinsurance or preventive services.</P> <P>(4) Door-to-door solicitation of Medicare beneficiaries.</P> <P>(5) Distribution of marketing materials if, before the expiration of the 45-day period described in paragraph (a)(3) of this section, the HMO or CMP receives written notice from CMS that CMS has disapproved the material because it is inaccurate or misleading or it misrepresents the HMO or CMP, its marketing representatives or CMS.</P> <P>(c) <E T="03">Marketing activities of risk HMOs or CMPs</E> In addition to the generally permitted or prohibited marketing activities described in paragraphs (a) and (b) of this section, a risk HMO or CMP must provide potential Medicare enrollees with adequate written descriptions of the additional benefits or services, or reductions in premiums, deductible or copayments that may pertain under payment on a risk basis.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 52 FR 8901, Mar. 20, 1987; 56 FR 46570, Sept. 13, 1991; 58 FR 38082, July 15, 1993; 60 FR 45677, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <PRTPAGE P="123"/> <SECTNO>§ 417.430</SECTNO> <SUBJECT>Application procedures.</SUBJECT> <P>(a) <E T="03">Application forms.</E> (1) The application form must comply with CMS instructions regarding format and content and must include the beneficiary's signature and authorization for disclosure and exchange of necessary information between CMS and the HMO or CMP.</P> <P>(2) The HMO or CMP must file and retain application forms for the period specified in CMS instructions.</P> <P>(b) <E T="03">Handling of applications.</E> An HMO or CMP must have an effective system for receiving, controlling, and processing applications from Medicare beneficiaries. The system must meet the following conditions and requirements:</P> <P>(1) Each application is dated as of the day it is received.</P> <P>(2) Applications are processed in chronological order by date of receipt.</P> <P>(3) The HMO or CMP gives the beneficiary prompt written notice of acceptance or rejection of the application.</P> <P>(4) The notice of acceptance—</P> <P>(i) Specifies the date on which the HMO or CMP will request CMS to make the enrollment effective; or</P> <P>(ii) If the HMO or CMP is currently enrolled to capacity, explains the procedures that will be followed when vacancies occur.</P> <P>(5) The notice of denial explains the reason for denial.</P> <P>(6) The HMO or CMP transmits the information necessary for CMS to add the beneficiary to its records of the HMO's or CMP's Medicare enrollees—</P> <P>(i) Within 30 days from the date of application or from the date a vacancy occurs for an applicant who was accepted (for future enrollment) while there were no vacancies; or</P> <P>(ii) Within an additional period of time approved by CMS on a showing by the HMO or CMP that it needs more time.</P> <P>(7) The HMO or CMP promptly notifies the beneficiary of the effective month of his or her enrollment as a Medicare enrollee, when it receives that information from CMS.</P> <P>(8) If the HMO or CMP accepts applications while it is enrolled to capacity, its procedures ensure that vacancies are filled in chronological order by date of application of beneficiaries who are still eligible to enroll, unless that would result in failure to comply with any of the qualifying conditions set forth in § 417.413.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 45677, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.432</SECTNO> <SUBJECT>Conversion of enrollment.</SUBJECT> <P>(a) <E T="03">Basic rule.</E> An HMO or CMP must accept as a Medicare enrollee any individual who is enrolled in the HMO or CMP for the month immediately before the month in which he or she is entitled to both Medicare Parts A and B or Part B only.</P> <P>(b) <E T="03">Effective date of conversion.</E> Unless the individual chooses to disenroll from the HMO or CMP the individual's conversion to a Medicare enrollee is effective the month in which he or she is entitled to both Medicare Parts A and B or Part B only.</P> <P>(c) <E T="03">Prohibition against disenrollment.</E> An HMO or CMP may not disenroll an individual who is converting under the provisions of paragraph (a) of this section unless one of the conditions specified in § 417.460 is met.</P> <P>(d) <E T="03">Application form.</E> The individual who is converting must sign an application form as described in § 417.430(a).</P> <P>(e) <E T="03">Expedited submittal of information to CMS.</E> The HMO or CMP must notify CMS, within the following time frames, of the enrollee's authorization for disclosure and exchange of information and the information necessary for CMS to include the enrollee in its records as a Medicare enrollee of the HMO or CMP:</P> <P>(1) At least 30, but no earlier than 90, days before the enrollee—</P> <P>(i) Attains age 65; or</P> <P>(ii) Reaches his or her 25th month of entitlement to social security disability benefits under title II of the Act or railroad retirement disability benefits under section 7(d) of the Railroad Retirement Act of 1974.</P> <P>(2) Within 30 days after the enrollee initiates a course of renal dialysis, or on or before the day he or she enters a hospital in anticipation of a kidney transplant.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 46570, Sept. 13, 1991; 58 FR 38082, July 15, 1993; 60 FR 45677, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <PRTPAGE P="124"/> <SECTNO>§ 417.434</SECTNO> <SUBJECT>Reenrollment.</SUBJECT> <P>If an HMO or CMP requires periodic reenrollment, it must reenroll Medicare enrollees unless there is a basis for disenrollment as set forth in § 417.460.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.436</SECTNO> <SUBJECT>Rules for enrollees.</SUBJECT> <P>(a) <E T="03">Maintaining rules.</E> An HMO or CMP must maintain written rules that deal with, but need not be limited to the following:</P> <P>(1) All benefits provided under the contract, as described in § 417.440.</P> <P>(2) How and where to obtain services from or through the HMO or CMP.</P> <P>(3) The restrictions on coverage for services furnished from sources outside a risk HMO or CMP, other than emergency services and urgently needed services (as defined in § 417.401).</P> <P>(4) The obligation of the HMO or CMP to assume financial responsibility and provide reasonable reimbursement for emergency services and urgently needed services as required by § 417.414(c).</P> <P>(5) Any services other than the emergency or urgently needed services that the HMO or CMP chooses to provide as permitted by this part, from sources outside the HMO or CMP. A cost HMO or CMP must disclose that the enrollee may receive services through any Medicare providers and suppliers.</P> <P>(6) Premium information, including the amount (or if the amount cannot be included, the telephone number of the source from which this information may be obtained) and the procedures for paying premiums and other charges for which enrollees may be liable.</P> <P>(7) Grievance and appeal procedures.</P> <P>(8) Disenrollment rights.</P> <P>(9) The obligation of an enrollee who is leaving the HMO's or CMP's geographic area for more than 90 days to notify the HMO or CMP of the move or extended absence and the HMO's or CMP's policies concerning retention of enrollees who leave the geographic area for more than 90 days, as described in § 417.460(a)(2).</P> <P>(10) The expiration date of the Medicare contract with CMS and notice that both CMS and the HMO or CMP are authorized by law to terminate or refuse to renew the contract, and that termination or nonrenewal of the contract may result in termination of the individual's enrollment in the HMO or CMP.</P> <P>(11) Advance directives as specified in paragraph (d) of this section.</P> <P>(12) Any other matters that CMS may prescribe.</P> <P>(b) <E T="03">Availability of rules.</E> The HMO or CMP must furnish a copy of the rules to each Medicare enrollee at the time of enrollment and at least annually thereafter.</P> <P>(c) <E T="03">Changes in rules.</E> If an HMO or CMP changes its rules, it must submit the changes to CMS in accordance with § 417.428(a)(3), and notify its Medicare enrollees of the changes at least 30 days before the effective date of the changes.</P> <P>(d) <E T="03">Advance directives.</E> (1) An HMO or CMP must maintain written policies and procedures concerning advance directives, as defined in § 489.100 of this chapter, with respect to all adult individuals receiving medical care by or through the HMO or CMP and are required to:</P> <P>(i) Provide written information to those individuals concerning—</P> <P>(A) Their rights under the law of the State in which the organization furnishes services (whether statutory or recognized by the courts of the State) to make decisions concerning such medical care, including the right to accept or refuse medical or surgical treatment and the right to formulate, at the individual's option, advance directives. Providers are permitted to contract with other entities to furnish this information but are still legally responsible for ensuring that the requirements of this section are met. Such information must reflect changes in State law as soon as possible, but no later than 90 days after the effective date of the State law; and</P> <P>(B) The HMO's or CMP's written policies respecting the implementation of those rights, including a clear and precise statement of limitation if the HMO or CMP cannot implement an advance directive as a matter of conscience. At a minimum, this statement should:<PRTPAGE P="125"/> </P> <P>(<E T="03">1</E>) Clarify any differences between institution-wide conscience objections and those that may be raised by individual physicians;</P> <P>(<E T="03">2</E>) Identify the state legal authority permitting such objection; and</P> <P>(<E T="03">3</E>) Describe the range of medical conditions or procedures affected by the conscience objection.</P> <P>(ii) Provide the information specified in paragraphs (d)(1)(i) of this section to each enrollee at the time of initial enrollment. If an enrollee is incapacitated at the time of initial enrollment and is unable to receive information (due to the incapacitating condition or a mental disorder) or articulate whether or not he or she has executed an advance directive, the HMO or CMP may give advance directive information to the enrollee's family or surrogate in the same manner that it issues other materials about policies and procedures to the family of the incapacitated enrollee or to a surrogate or other concerned persons in accordance with State law. The HMO or CMP is not relieved of its obligation to provide this information to the enrollee once he or she is no longer incapacitated or unable to receive such information. Follow-up procedures must be in place to ensure that the information is given to the individual directly at the appropriate time.</P> <P>(iii) Document in the individual's medical record whether or not the individual has executed an advance directive;</P> <P>(iv) Not condition the provision of care or otherwise discriminate against an individual based on whether or not the individual has executed an advance directive;</P> <P>(v) Ensure compliance with requirements of State law (whether statutory or recognized by the courts of the State) regarding advance directives;</P> <P>(vi) Provide for education of staff concerning its policies and procedures on advance directives; and</P> <P>(vii) Provide for community education regarding advance directives that may include material required in paragraph (d)(1)(i)(A) of this section, either directly or in concert with other providers or entities. Separate community education materials may be developed and used, at the discretion of the HMO or CMP. The same written materials are not required for all settings, but the material should define what constitutes an advance directive, emphasizing that an advance directive is designed to enhance an incapacitated individual's control over medical treatment, and describe applicable State law concerning advance directives. An HMO or CMP must be able to document its community education efforts.</P> <P>(2) The HMO or CMP—(i) Is not required to provide care that conflicts with an advance directive.</P> <P>(ii) Is not required to implement an advance directive if, as a matter of conscience, the HMO or CMP cannot implement an advance directive and State law allows any health care provider or any agent of such provider to conscientiously object.</P> <P>(3) The HMO or CMP must inform individuals that complaints concerning non-compliance with the advance directive requirements may be filed with the State survey and certification agency.</P> <CITA>[58 FR 38072, July 15, 1993, as amended at 59 FR 49843, Sept. 30, 1994; 60 FR 33292, June 27, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.440</SECTNO> <SUBJECT>Entitlement to health care services from an HMO or CMP.</SUBJECT> <P>(a) <E T="03">Basic rules.</E> (1) Subject to the conditions and limitations set forth in this subpart, a Medicare enrollee of an HMO or CMP is entitled to receive health care services and supplies directly from, or through arrangements made by, the HMO or CMP as specified in this section and §§ 417.442-417.446.</P> <P>(2) A Medicare enrollee is also entitled to receive timely and reasonable payment directly (or have payment made on his or her behalf) for services he or she obtained from a provider or supplier outside the HMO or CMP if those services are—</P> <P>(i) Emergency services or urgently needed services as defined § 417.401;</P> <P>(ii) Services denied by the HMO or CMP and found (upon appeal under subpart Q of this part) to be services the enrollee was entitled to have furnished by the HMO or CMP.</P> <P>(b) <E T="03">Scope of services</E>—(1) <E T="03">Part A and Part B services.</E> Except as specified in paragraphs (c), (d), and (e) of this section, a Medicare enrollee is entitled to <PRTPAGE P="126"/>receive from an HMO or CMP all the Medicare-covered services that are available to individuals residing in the HMO's or CMP's geographic area, as follows:</P> <P>(i) Medicare Part A and Part B services if the enrollee is entitled to benefits under both programs.</P> <P>(ii) Medicare Part B services if the enrollee is entitled only under that program.</P> <P>(2) <E T="03">Supplemental services elected by an enrollee.</E> (i) Except as provided under paragraph (b)(2)(ii) of this section, a Medicare enrollee of an HMO or CMP may elect to pay for optional services that are offered by the HMO or CMP in addition to the covered Part A and Part B services.</P> <P>(ii) An HMO or CMP may elect to provide qualified prescription drug coverage (as defined at § 423.104 of this chapter) as an optional supplemental service in accordance with the applicable requirements under part 423 of this chapter, including § 423.104(f)(4) of this chapter.</P> <P>(iii) The HMO or CMP may not set health status standards for those enrollees whom it accepts for these optional supplemental services.</P> <P>(3) <E T="03">Supplemental services imposed by a risk HMO or CMP.</E> (i) Subject to CMS's approval, a risk HMO or CMP may require Medicare enrollees to accept and pay for services in addition to those covered by Medicare. (ii) If the HMO or CMP elects this option, it must impose the requirement on all Medicare enrollees, without regard to health status. (iii) CMS approves supplemental benefits of this type if CMS determines that imposition of the requirements will not discourage other Medicare beneficiaries from enrolling in the risk HMO or CMP.</P> <P>(4) <E T="03">Additional benefits from risk HMOs or CMPs required by statute.</E> Subject to the conditions stated in § 417.442, a new Medicare enrollee or a current nonrisk Medicare enrollee who converts to risk reimbursement under § 417.444 is eligible to receive, in addition to the covered Part A and Part B benefits for which he or she is eligible, benefits consisting of one or both of the following:</P> <P>(i) A reduction in the HMO's or CMP's premium rate or in other charges for services furnished to Medicare enrollees.</P> <P>(ii) Provision of health benefits or services beyond the required Part A and Part B coverage.</P> <P>(5) <E T="03">Special supplemental benefits.</E> Under conditions described in § 417.444(c), current nonrisk Medicare enrollees who are not converted to the risk portion of the contract, may enroll in a special supplemental plan, if offered by the HMO or CMP, for some or all of the additional benefits described in paragraph (b)(4) of this section.</P> <P>(c) <E T="03">Limitation on hospice care</E>—(1) <E T="03">Extent of limitation.</E> (i) <E T="03">Basic rule.</E> Except as provided in paragraph (c)(1)(ii) of this section, a Medicare enrollee who elects to receive hospice care under § 418.24 of this chapter waives the right to receive from the HMO or CMP any Medicare services (including services equivalent to hospice care) that are related to the terminal condition for which the enrollee elected hospice care, or to a related condition.</P> <P>(ii) <E T="03">Exception.</E> An enrollee who elects hospice care retains the right to services furnished by his or her attending physician if that physician—</P> <P>(A) Is an employee or contractor of the HMO or CMP; and</P> <P>(B) Is not an employee of the designated hospice and does not receive compensation from the hospice for those services.</P> <P>(2) <E T="03">Effective date of limitation.</E> The limitation in paragraph (c)(1) of this section begins on the effective date of the beneficiary's election of hospice care and remains in effect until the earlier of the following:</P> <P>(i) The effective date of the enrollee's revocation of the election of hospice care as described in § 418.28 of this chapter.</P> <P>(ii) The date the enrollee exhausts his or her hospice benefits.</P> <P>(3) <E T="03">Payment to HMO or CMP.</E> For the period that the Medicare enrollee's election of hospice care is in effect, CMS pays a cost HMO or CMP only as described in § 417.585.</P> <P>(d) <E T="03">Limitation on provision of inpatient hospital services.</E> If a beneficiary's effective date of coverage, as specified in § 417.450, in a risk HMO or CMP occurs during an inpatient stay in a hospital <PRTPAGE P="127"/>paid for under part 412 of this chapter, the HMO or CMP—</P> <P>(1) Is not responsible for the provision of any of the inpatient hospital services under Part A during the stay and is not required to pay for those services;</P> <P>(2) Must assume responsibility for payment for or provision of inpatient hospital services under Part A on the day after the day of discharge from the inpatient stay; and</P> <P>(3) Is responsible for the full scope of services under paragraph (b) of this section, other than inpatient hospital services under Part A, beginning on the effective date of enrollment.</P> <P>(e) <E T="03">Extension of provision of inpatient hospital services.</E> If an enrollee's effective date of disenrollment, as defined by § 417.460, occurs during an inpatient stay in a hospital paid for under part 412 of this chapter and the stay is provided or arranged for by the HMO or CMP, or the HMO or CMP is financially responsible for the hospitalization under paragraph (a)(2) of this section, the HMO or CMP—</P> <P>(1) Is financially responsible for payment of the inpatient services under Part A through the date the beneficiary is discharged from the inpatient stay; and</P> <P>(2) Is not responsible for the provision of services, furnished on or after the effective date of disenrollment, other than inpatient hospital services under Part A.</P> <P>(f) <E T="03">Notice of noncoverage of inpatient hospital care.</E> (1) If an enrollee is an inpatient of a hospital, entitlement to inpatient hospital care continues until he or she receives notice of noncoverage of that care.</P> <P>(2) Before giving notice of noncoverage, the HMO or CMP must obtain the concurrence of its affiliated physician responsible for the hospital care of the enrollee, or other physician as authorized by the HMO or CMP.</P> <P>(3) The HMO or CMP must give the enrollee written notice that includes the following:</P> <P>(i) The reason why inpatient hospital care is no longer needed.</P> <P>(ii) The effective date of the enrollee's liability for continued inpatient care.</P> <P>(iii) The enrollee's appeal rights.</P> <P>(4) If the HMO or CMP delegates to the hospital the determination of noncoverage of inpatient care, the hospital obtains the concurrence of the HMO- or CMP-affiliated physician responsible for the hospital care of the enrollee, or other physician as authorized by the HMO or CMP, and sends notice, following the procedures set forth in § 412.42(c)(3) of this chapter.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 52 FR 8901, Mar. 20, 1987; 58 FR 38079, July 15, 1993; 59 FR 59941, Nov. 21, 1994; 60 FR 45678, Sept. 1, 1995; 70 FR 4525, Jan. 28, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.442</SECTNO> <SUBJECT>Risk HMO's and CMP's: Conditions for provision of additional benefits.</SUBJECT> <P>(a) <E T="03">General rule.</E> Except as provided in paragraph (b) of this section, a risk HMO or CMP must, during any contract period, provide to its Medicare enrollees the additional benefits described in § 417.440(b)(4) if its ACRs (calculated in accordance with § 417.594) are less than the average per capita rates that CMS pays for the Medicare enrollees during the contract period.</P> <P>(b) <E T="03">Exceptions</E>—(1) <E T="03">Reduced payment election.</E> An HMO or CMP is not obligated to furnish additional services under paragraph (a) of this section if it has requested a reduction in its monthly payment from CMS under § 417.592(e), and it—</P> <P>(i) Elects to receive reduced payment so that there is no difference between the average of its per capita rates of payment and its ACR; or</P> <P>(ii) Elects to receive partially reduced payment and furnish Medicare enrollees with additional benefits described in § 417.440 (b)(4) so that the combined value of benefits and reduced payment is equivalent to the difference between the average of its per capita rates of payment and its ACR.</P> <P>(2) <E T="03">Benefit stabilization fund.</E> An HMO or CMP may elect to have a part of the value of the additional benefits it must provide under paragraph (a) of this section withheld in a benefit stabilization fund as described in § 417.596.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985; 58 FR 38082, July 15, 1993; 60 FR 45678, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <PRTPAGE P="128"/> <SECTNO>§ 417.444</SECTNO> <SUBJECT>Special rules for certain enrollees of risk HMOs and CMPs.</SUBJECT> <P>(a) <E T="03">Applicability.</E> This section applies to any Medicare enrollee of a risk HMO or CMP who meets the following conditions:</P> <P>(1) On February 1, 1985, was enrolled—</P> <P>(i) In an HMO or CMP that had in effect a cost contract entered into under section 1876 of the Act in accordance with regulations in effect before February 1, 1985; or</P> <P>(ii) In an HCPP that was being reimbursed on a reasonable cost basis under section 1833(a)(1)(A) of the Act.</P> <P>(2) Has continued enrollment in the same entity without interruption or disenrolled after February 1, 1985, and later reenrolled in the same entity.</P> <P>(b) <E T="03">Retention of nonrisk status</E>—(1) A “nonrisk” enrollee is a Medicare beneficiary who meets the conditions of paragraph (a) of this section and is enrolled in an entity that enters into a risk contract as an HMO or CMP. A “nonrisk” enrollee may retain nonrisk status indefinitely unless CMS determines under paragraph (c)(1) of this section, that the enrollee's status must be changed, or the enrollee requests the change, as provided in paragraph (c)(2) of this section.</P> <P>(2) A nonrisk enrollee of a risk HMO or CMP is not entitled to additional benefits under § 417.442.</P> <P>(c) <E T="03">Conversion to risk status</E>—(1) <E T="03">Conversion based on CMS determination.</E> If CMS determines that, for administrative reasons or because there are fewer than 75 current nonrisk Medicare enrollees remaining in the HMO or CMP, all of its nonrisk Medicare enrollees must be covered under the risk provisions of the contract, the conversion process is as follows:</P> <P>(i) CMS notifies each affected enrollee of the decision at least 90 days prior to the effective date.</P> <P>(ii) The nonrisk Medicare enrollees complete and sign forms stating that they understand and accept the new rules and benefits that will be applicable to them.</P> <P>(iii) The HMO or CMP notifies each affected enrollee, in writing, at least 30 days in advance, of the date upon which his or her coverage under the risk portion of the contract takes effect.</P> <P>(2) <E T="03">Conversion based on enrollee's request.</E> A nonrisk Medicare enrollee requests, using a form identical or similar to the form described in paragraph (c)(1) of this section, that he or she be covered under the risk portion of the contract.</P> <P>(d) <E T="03">Notification.</E> An HMO or CMP converting from a cost contract to a risk contract must, within 60 days of signing the risk contract, inform nonrisk enrollees of their right to remain nonrisk Medicare enrollees or to convert to risk enrollment at any time in accordance with paragraph (c)(2) of this section.</P> <CITA>[58 FR 38073, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.446</SECTNO> <RESERVED>[Reserved]</RESERVED> </SECTION> <SECTION> <SECTNO>§ 417.448</SECTNO> <SUBJECT>Restriction on payments for services received by Medicare enrollees of risk HMOs or CMPs.</SUBJECT> <P>(a) <E T="03">Basic rule.</E> Except for emergency and urgently needed services as defined in § 417.401, risk HMOs or CMPs are not required to make payments to or on behalf of certain Medicare enrollees, for any services received by the enrollees that are not provided—</P> <P>(1) Directly by the HMO or CMP; or</P> <P>(2) Through arrangements made by the HMO or CMP.</P> <P>(b) <E T="03">Application.</E> The restriction on payments for services imposed by paragraph (a) of this section applies to services received by—</P> <P>(1) New Medicare enrollees;</P> <P>(2) Nonrisk Medicare enrollees who convert to risk reimbursement; and</P> <P>(3) Nonrisk Medicare enrollees who elect special supplemental benefit plans.</P> <P>(c) <E T="03">End of restriction.</E> The restriction of payments imposed by paragraph (a) of this section ends when a Medicare enrollee leaves the HMO's or CMP's geographic area for an extended period as defined in § 471.460(a)(2) and the HMO or CMP and the enrollee make arrangements for enrollment to continue as provided in § 417.460(a)(2)(iv).</P> <P>(d) <E T="03">Timing.</E> The effective date for the end of the restriction on payments, as discussed in paragraph (c) of this section is the first day of the first month <PRTPAGE P="129"/>following the month in which the enrollee notifies the HMO or CMP as required in § 417.436(a)(9), that he or she has left the HMO's or CMP's geographic area for an extended period.</P> <CITA>[51 FR 28573, Aug. 8, 1986, as amended at 56 FR 46571, Sept. 13, 1991; 58 FR 38079, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.450</SECTNO> <SUBJECT>Effective date of coverage.</SUBJECT> <P>(a) <E T="03">Basic rules.</E> Except as specified in paragraph (b) of this section, and notwithstanding the provisions of § 417.440(d).</P> <P>(1) CMS's liability for payments to an HMO or CMP on behalf of a Medicare beneficiary begins on the first day of the month in which he or she is—</P> <P>(i) Entitled to Medicare benefits; and</P> <P>(ii) Enrolled in an HMO or CMP; and</P> <P>(2) The effective month of coverage may not be earlier than the first month after, nor later than the third month after the month in which CMS receives the information necessary to include the beneficiary as a Medicare enrollee of the HMO or CMP in CMS records.</P> <P>(b) <E T="03">Exceptions.</E> (1) CMS may approve a later month if it is requested by the HMO or CMP and the beneficiary.</P> <P>(2) If an individual becomes an HMO or CMP enrollee before becoming entitled to Medicare Part B benefits, the effective month of coverage is the first month for which he or she becomes entitled to Medicare Part B benefits.</P> <P>(c) <E T="03">Notice of effective date of coverage.</E> For each beneficiary added to CMS's records as an enrollee of an HMO or CMP, CMS gives the HMO or CMP prompt written notice of the month with which CMS's liability begins.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 52 FR 8901, Mar. 20, 1987; 58 FR 38079, July 15, 1993; 60 FR 45678, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.452</SECTNO> <SUBJECT>Liability of Medicare enrollees.</SUBJECT> <P>(a) <E T="03">Deductibles and coinsurance.</E> (1) A Medicare enrollee of an HMO or CMP is responsible for applicable Medicare deductible and coinsurance amounts, unless the HMO's or CMP's charges for these amounts are reduced under the additional benefits provision of § 417.442.</P> <P>(2) The deductible and coinsurance amounts may be paid by or on behalf of the enrollee in the form of a premium, membership fee, charge per unit, or other similar charge.</P> <P>(3) The sum of the amounts the HMO or CMP charges its Medicare enrollees for Medicare deductibles and coinsurance may not exceed, on the average, the actuarial value of the deductible and coinsurance the Medicare enrollees otherwise would have been liable for had they not enrolled in the HMO or CMP or in another HMO or CMP.</P> <P>(b) <E T="03">Services not covered under Medicare.</E> Unless the services are provided as additional benefits under § 417.442, a Medicare enrollee of an HMO or CMP is liable for payment for—</P> <P>(1) All services that are not covered under Medicare Part A or Part B; or</P> <P>(2) If entitled only to Medicare Part B benefits, all services that are not covered under Medicare Part B.</P> <P>(c) <E T="03">Services for which Medicare is not primary payer.</E> A Medicare enrollee of an HMO or CMP is liable for payments made to the enrollee for all covered services for which Medicare is not the primary payer as provided in § 417.528.</P> <P>(d) <E T="03">Optional supplemental benefits plan.</E> (1) The HMO or CMP may offer its Medicare enrollees a supplemental benefit plan to cover deductible and coinsurance amounts, or services not covered under Medicare, or both.</P> <P>(2) If a supplemental benefit plan premium includes charges for both noncovered services and the deductible and coinsurance amounts applicable to covered services, the portion of the premium that is for deductibles and coinsurance must be computed separately and must be disclosed to the beneficiary during the enrollment process and before he or she elects coverage options.</P> <P>(3) The sum of the amounts an HMO or CMP charges its Medicare enrollees for services that are not covered under Part A or Part B may not exceed the ACR for these services.</P> <P>(e) <E T="03">Coverage of Part A services for Part B-only Medicare enrollees.</E> If an HMO or CMP furnishes coverage of Medicare Part A services to a Medicare enrollee entitled to Part B only, the HMO's or CMP's premium (or other payment method) for these services may not exceed the ACR for these services. In addition, if a risk HMO or CMP furnishes <PRTPAGE P="130"/>these services and supplemental services, which are the same as the additional benefits furnished Medicare enrollees of the HMO or CMP who are entitled to benefits under both Parts A and B, the HMO's or CMP's combined premium for both these groups of services that the Part B enrollee must pay may not exceed 95 percent of the weighted average AAPCC for Part A services (or the Medicare payment for Part A services, if it is less) for the Medicare enrollee of the HMO or CMP.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38079, July 15, 1993; 60 FR 45678, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.454</SECTNO> <SUBJECT>Charges to Medicare enrollees.</SUBJECT> <P>(a) <E T="03">Limits on charges.</E> The HMO or CMP must agree to charge its Medicare enrollees only for the—</P> <P>(1) Deductible and coinsurance amounts applicable to furnished covered services;</P> <P>(2) Charges for noncovered services or services for which the enrollee is liable as described in § 417.452; and</P> <P>(3) Services for which Medicare is not the primary payor as provided in § 417.528.</P> <P>(b) <E T="03">Limit on charges for inpatient hospital care.</E> If a Medicare enrollee who is an inpatient of a hospital requests immediate QIO review (as provided in § 417.605) of any determination by the hospital furnishing services or the HMO or CMP that the inpatient hospital services will no longer be covered, the HMO or CMP may not charge the enrollee for any inpatient care costs incured before noon of the first working day after the QIO issues its review decision.</P> <P>(c) <E T="03">Reporting requirements.</E> A risk HMO or CMP must report, within 90 days after the end of the contract period, all premiums, enrollment fees, and other charges collected from its Medicare enrollees during that period.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 59 FR 59941, Nov. 21, 1994; 60 FR 45678, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.456</SECTNO> <SUBJECT>Refunds to Medicare enrollees.</SUBJECT> <P>(a) <E T="03">Definitions.</E> As used in this section—</P> <P> <E T="03">Amounts incorrectly collected</E> means amounts collected that are in excess of those specified in § 417.452. It includes amounts collected when the enrollee was believed not entitled to Medicare benefits if the enrollee is later determined to have been entitled to Medicare benefits and CMS is liable for payments as specified in § 417.450.</P> <P> <E T="03">Other amounts due</E> means amounts due a Medicare enrollee for services obtained outside the HMO or CMP if they were—</P> <P>(1) Emergency services;</P> <P>(2) Urgently needed services for which the HMO or CMP has assumed financial responsibility; or</P> <P>(3) On appeal under subpart Q of this part, found to be services the enrollee was entitled to have furnished by the HMO or CMP.</P> <P>(b) <E T="03">Basic commitment.</E> An HMO or CMP must agree to refund all amounts incorrectly collected from its Medicare enrollees, or from others on behalf of the enrollees, and any other amounts due the enrollees or others on their behalf.</P> <P>(c) <E T="03">Refund by lump sum payment.</E> An HMO or CMP must make refunds to its current and former Medicare enrollees, or to others who have made payments on behalf of enrollees, by lump sum payment for the following:</P> <P>(1) Incorrectly collected amounts that were not collected as premiums.</P> <P>(2) Other amounts due.</P> <P>(3) All amounts due, if the HMO or CMP is going out of business.</P> <P>(d) <E T="03">Refund by premium adjustment or lump sum payment or both.</E> An HMO or CMP may make refund by adjustment of future premiums, by lump sum payment, or by a combination of both methods, for amounts that were incorrectly collected in the form of premiums or through a combination of premium payments and other charges.</P> <P>(e) <E T="03">Refund when enrollee has died or cannot be located.</E> If an enrollee has died or cannot be located after reasonable effort by the HMO or CMP, the HMO or CMP must make the refund in accordance with State law.</P> <P>(f) <E T="03">Reduction by CMS.</E> If the HMO or CMP does not make refund in accordance with paragraphs (b) through (d) of this section by the end of the contract period following the contract period <PRTPAGE P="131"/>during which an amount was determined to be due an enrollee, CMS reduces its payment to the HMO or CMP by the amounts incorrectly collected or otherwise due, and arranges for those amounts to be paid to the Medicare enrollee.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38079, July 15, 1993; 60 FR 45678, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.458</SECTNO> <SUBJECT>Recoupment of uncollected deductible and coinsurance amounts.</SUBJECT> <P>An HMO or CMP agrees not to recoup deductible and coinsurance amounts for which Medicare enrollees were liable in a previous contract period except in the following circumstances:</P> <P>(a) The HMO or CMP failed to collect the deductible and coinsurance amounts during the contract period in which they were due because of—</P> <P>(1) Underestimation of the actuarial value of the deductible and coinsurance amounts; or</P> <P>(2) A billing error.</P> <P>(b) The HMO or CMP has identified the amounts and obtained advance CMS approval of the recoupment and the method and timing of recoupment.</P> <P>(c) The HMO or CMP collects these amounts no later than the end of the contract period following the contract period during which they were found to be due.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 45678, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.460</SECTNO> <SUBJECT>Disenrollment of beneficiaries by an HMO or CMP.</SUBJECT> <P>(a) <E T="03">General rule.</E> Except as provided in paragraphs (b) through (i) of this section, an HMO or CMP may not—</P> <P>(1) Disenroll a Medicare beneficiary; or</P> <P>(2) Orally or in writing, or by any action or inaction, request or encourage a Medicare enrollee to disenroll.</P> <P>(b) <E T="03">Bases for disenrollment: Overview</E>—(1) <E T="03">Optional disenrollment.</E> Generally, an HMO or CMP may disenroll a Medicare enrollee if he or she—</P> <P>(i) Fails to pay the required premiums or other charges;</P> <P>(ii) Commits fraud or permits abuse of his or her enrollment card; or</P> <P>(iii) Behaves in a manner that seriously impairs the HMO's or CMP's ability to furnish health care services to the particular enrollee or to other enrollees.</P> <P>(2) <E T="03">Required disenrollment.</E> Generally, an HMO or CMP must disenroll a Medicare enrollee if he or she—</P> <P>(i) Moves out of the HMO's or CMP's geographic area;</P> <P>(ii) Fails to convert to the risk provisions of the HMO's or CMP's Medicare contract;</P> <P>(iii) Loses entitlement to Medicare Part B benefits; or</P> <P>(iv) Dies.</P> <P>(3) <E T="03">Related provisions.</E> Specific requirements, limitations, and exceptions are set forth in paragraphs (c) through (i) of this section.</P> <P>(c) <E T="03">Failure to pay premiums or other charges</E>—(1) <E T="03">Basic rule.</E> Except as specified in paragraph (c)(2) of this section, an HMO or CMP may disenroll a Medicare enrollee who fails to pay premiums or other charges imposed by the HMO or CMP for deductible and coinsurance amounts for which the enrollee is liable, if the HMO or CMP—</P> <P>(i) Can demonstrate to CMS that it made reasonable efforts to collect the unpaid amount;</P> <P>(ii) Gives the enrollee written notice of disenrollment, including an explanation of the enrollee's right to a hearing under the HMO's or CMP's grievance procedures; and</P> <P>(iii) Sends the notice of disenrollment to the enrollee before it notifies CMS.</P> <P>(2) <E T="03">Exception.</E> If the enrollee fails to pay the premium for optional supplemental benefits (that is, a package of benefits that an enrollee is not required to accept), but pays the basic premium and other charges, the HMO or CMP may discontinue the optional benefits but may not disenroll the beneficiary.</P> <P>(d) <E T="03">Enrollee commits fraud or permits abuse of the enrollment card</E>—(1) <E T="03">Basis for disenrollment.</E> An HMO or CMP may disenroll a Medicare beneficiary if the beneficiary—</P> <P>(i) Knowingly provides, on the application form, fraudulent information that materially affects the beneficiary's eligibility to enroll in the HMO or CMP; or<PRTPAGE P="132"/> </P> <P>(ii) Intentionally permits others to use his or her enrollment card to obtain services from the HMO or CMP.</P> <P>(2) <E T="03">Notice requirement.</E> If disenrollment is for either of the reasons specified in paragraph (d)(1) of this section, the HMO or CMP must give the beneficiary a written notice of termination of enrollment.</P> <P>(i) The notice must be mailed to the enrollee before submission of the disenrollment notice to CMS.</P> <P>(ii) The notice must include an explanation of the enrollee's right to have the disenrollment heard under the grievance procedures established in accordance with § 417.436.</P> <P>(3) <E T="03">Report to the Inspector General.</E> The HMO or CMP must report to the Office of the Inspector General of the Department any disenrollment based on fraud or abuse by the enrollee.</P> <P>(e) <E T="03">Disenrollment for cause</E>—(1) <E T="03">Basis for disenrollment.</E> An HMO or CMP may disenroll a Medicare enrollee for cause if the enrollee's behavior is disruptive, unruly, abusive, or uncooperative to the extent that his or her continuing enrollment in the HMO or CMP seriously impairs the HMO's or CMP's ability to furnish services to either the particular enrollee or other enrollees.</P> <P>(2) <E T="03">Effort to resolve the problem.</E> The HMO or CMP must make a serious effort to resolve the problem presented by the enrollee, including the use (or attempted use) of internal grievance procedures.</P> <P>(3) <E T="03">Consideration of extenuating circumstances.</E> The HMO or CMP must ascertain that the enrollee's behavior is not related to the use of medical services or to mental illness.</P> <P>(4) <E T="03">Documentation.</E> The HMO or CMP must document the problems, efforts, and medical conditions as described in paragraphs (e)(1) through (e)(3) of this section.</P> <P>(5) <E T="03">CMS review of an HMO's or CMP's proposed disenrollment for cause.</E> (i) CMS decides on the basis of review of the documentation submitted by the HMO or CMP, whether disenrollment requirements have been met.</P> <P>(ii) CMS makes this decision within 20 working days after receipt of the documentation material, and notifies the HMO or CMP within 5 working days after making its decision.</P> <P>(6) <E T="03">Effective date of disenrollment.</E> If CMS permits an HMO or CMP to disenroll an enrollee for cause, the disenrollment takes effect on the first day of the calendar month after the month in which the HMO or CMP gives the enrollee a written notice of disenrollment that meets the requirements set forth in paragraphs (d)(2)(i) and (d)(2)(ii) of this section.</P> <P>(f) <E T="03">Enrollee moves out of the HMO's or CMP's geographic area</E>—(1) <E T="03">Basic rules.</E> (i) <E T="03">Disenrollment.</E> Except as provided in paragraph (f)(2) of this section, an HMO or CMP must disenroll a Medicare enrollee who moves out of its geographic area if the HMO or CMP establishes, on the basis of a written statement from the enrollee, or other evidence acceptable to CMS, that the enrollee has permanently moved out of its geographic area.</P> <P>(ii) <E T="03">Notice requirement.</E> The HMO or CMP must comply with the notice requirements set forth in paragraph (d)(2) of this section.</P> <P>(iii) <E T="03">Effect on geographic area.</E> Failure to disenroll an enrollee who has moved out of the HMO's or CMP's geographic area does not expand that area to encompass the location of the enrollee's new residence.</P> <P>(2) <E T="03">Exception.</E> An HMO or CMP may retain a Medicare enrollee who is absent from its geographic area for an extended period, but who remains within the United States as defined in § 400.200 of this chapter if the enrollee agrees. For purposes of this exception, the following provisions apply:</P> <P>(i) An absence for an extended period means an uninterrupted absence from the HMO's or CMP's geographic area for more than 90 days but less than 1 year.</P> <P>(ii) The HMO or CMP and the enrollee may mutually agree upon restrictions for obtaining services while the enrollee is absent for an extended period from the HMO's or CMP's geographic area. However, restrictions may not be imposed on the scope of services described in § 417.440.</P> <P>(iii) HMOs and CMPs that choose to exercise this exception must make the option available to all Medicare enrollees who are absent for an extended period from their geographic areas. However, HMOs and CMPs may limit this <PRTPAGE P="133"/>option to enrollees who go to a geographic area served by an affiliated HMO or CMP.</P> <P>(iv) As used in this paragraph, “affiliated HMO or CMP” means an HMO or CMP that—</P> <P>(A) Is under common ownership or control of the HMO or CMP that seeks to retain the absent enrollees; or</P> <P>(B) Has in effect an agreement to furnish services to enrollees who are on an extended absence from the geographic area of the HMO or CMP that seeks to retain them.</P> <P>(v) When the enrollee returns to the HMO's or CMP's geographic area (even temporarily), the restrictions of § 417.448(a) (which limit payment for services not provided or arranged for by the HMO or CMP) apply again immediately.</P> <P>(vi) If the enrollee fails to return to the HMO's or CMP's geographic area within 1 year from the date he or she left that area, the HMO or CMP must disenroll the beneficiary on the first day of the month following the anniversary of the date the enrollee left that area in accordance with paragraph (f)(1) of this section.</P> <P>(g) <E T="03">Failure to convert to risk provisions of Medicare contract</E>—(1) <E T="03">Basis for disenrollment.</E> A risk HMO or CMP must disenroll a nonrisk Medicare enrollee who refuses to convert to the risk provisions of the Medicare contract after CMS determines that all of the HMO's or CMP's nonrisk Medicare enrollees must convert.</P> <P>(2) <E T="03">Advance notice requirement.</E> At least 30 days before it gives CMS notice of disenrollment, the HMO or CMP must give the enrollee written notice of the fact that failure to convert will result in disenrollment.</P> <P>(h) <E T="03">Loss of entitlement to Medicare benefits</E>—(1) <E T="03">Loss of entitlement to Part A benefits.</E> If an enrollee loses entitlement to benefits under Part A of Medicare but remains entitled to benefits under Part B, the enrollee automatically continues as a Medicare enrollee of the HMO or CMP and is entitled to receive and have payment made for Part B services, beginning with the month immediately following the last month of his or her entitlement to Part A benefits.</P> <P>(2) <E T="03">Loss of entitlement to Part B benefits.</E> If a Medicare enrollee loses entitlement to Part B benefits, the HMO or CMP must disenroll him or her as a Medicare enrollee effective with the month following the last month of entitlement to Part B benefits. However, the HMO or CMP may continue to enroll the individual under its regular plan if the individual so chooses.</P> <P>(i) <E T="03">Death of the enrollee.</E> Disenrollment is effective with the month following the month of death.</P> <CITA>[60 FR 45678, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.461</SECTNO> <SUBJECT>Disenrollment by the enrollee.</SUBJECT> <P>(a) <E T="03">Request for disenrollment.</E> (1) A Medicare enrollee who wishes to disenroll may at any time give the HMO or CMP a signed, dated request in the form and manner prescribed by CMS.</P> <P>(2) The enrollee may request a certain disenrollment date but it may be no earlier than the first day of the month following the month in which the HMO or CMP receives the request.</P> <P>(b) <E T="03">Responsibilities of the HMO or CMP.</E> The HMO or CMP must—</P> <P>(1) Submit a disenrollment notice to CMS promptly;</P> <P>(2) Provide the enrollee with a copy of the request for disenrollment; and</P> <P>(3) In the case of a risk HMO or CMP, also provide the enrollee with a statement explaining that he or she—</P> <P>(i) Remains enrolled until the effective date of disenrollment; and</P> <P>(ii) Until that date, is subject to the restrictions of § 417.448(a) under which neither the HMO or CMP nor CMS pays for services not provided or arranged for by the HMO or CMP.</P> <P>(c) <E T="03">Effect of failure to submit disenrollment notice to CMS promptly.</E> If the HMO or CMP fails to submit timely the correct and complete notice required in paragraph (b)(1) of this section, the HMO or CMP must reimburse CMS for any capitation payments received after the month in which payments would have ceased if the requirement had been met timely.</P> <CITA>[60 FR 45679, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <PRTPAGE P="134"/> <SECTNO>§ 417.464</SECTNO> <SUBJECT>End of CMS's liability for payment: Disenrollment of beneficiaries and termination or default of contract.</SUBJECT> <P>(a) <E T="03">Effect of disenrollment: General rule.</E> (1) CMS's liability for monthly capitation payments to the HMO or CMP generally ends as of the first day of the month following the month in which disenrollment is effective, as shown on CMS's records.</P> <P>(2) Disenrollment is effective no earlier than the month immediately after, and no later than the third month after, the month in which CMS receives the disenrollment notice in acceptable form.</P> <P>(b) <E T="03">Effect of disenrollment: Special rules</E>—(1) <E T="03">Fraud or abuse by the enrollee.</E> If disenrollment is on the basis of fraud committed or abuse permitted by the enrollee, CMS's liability ends as of the first day of the month in which disenrollment is effective.</P> <P>(2) <E T="03">Loss of entitlement to Part B benefits.</E> If disenrollment is on the basis of loss of entitlement to Part B benefits, CMS's liability ends as of the first day of the month following the last month of Part B entitlement.</P> <P>(3) <E T="03">Death of enrollee.</E> If the enrollee dies, CMS's liability ends as of the first day of the month following the month of death.</P> <P>(4) <E T="03">Disenrollment at enrollee's request.</E> If disenrollment is in response to the enrollee's request, CMS's liability ends as of the first day of the month following the month of termination requested by the enrollee.</P> <P>(c) <E T="03">Effect of termination or default of contract</E>—(1) <E T="03">Termination of contract.</E> If the contract between CMS and the HMO or CMP is terminated by mutual consent or by unilateral action of either party, CMS's liability for payments ends as of the first day of the month after the last month for which the contract is in effect.</P> <P>(2) <E T="03">Default of contract.</E> If the HMO or CMP defaults on the contract before the end of the contract year because of bankruptcy or other reasons, CMS—</P> <P>(i) Determines the month in which its liability for payments ends; and</P> <P>(ii) Notifies the HMO or CMP and all affected Medicare enrollees as soon as practicable.</P> <CITA>[60 FR 45680, Sept. 1, 1995]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart L—Medicare Contract Requirements</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>50 FR 1346, Jan. 10, 1985, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 417.470</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) <E T="03">Basis.</E> This subpart implements those portions of section 1857(e)(2) of the Act pertaining to cost sharing in enrollment-related costs and section 1876(c), (g), (h), and (i) of the Act that pertain to the contract between CMS and an HMO or CMP for participation in the Medicare program.</P> <P>(b) <E T="03">Scope.</E> This subpart sets forth—</P> <P>(1) Specific contract requirements; and</P> <P>(2) Procedures for renewal, nonrenewal, or termination of a contract.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38079, July 15, 1993; 62 FR 63673, Dec. 2, 1997]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.472</SECTNO> <SUBJECT>Basic contract requirements.</SUBJECT> <P>(a) <E T="03">Submittal of contract.</E> An HMO or CMP that wishes to contract with CMS to furnish services to Medicare beneficiaries must submit a signed contract that meets the requirements of this subpart and any other requirements established by CMS.</P> <P>(b) <E T="03">Agreement to comply with regulations and instructions.</E> The contract must provide that the HMO or CMP agrees to comply with all the applicable requirements and conditions set forth in this subpart and in general instructions issued by CMS.</P> <P>(c) <E T="03">Other contract provisions.</E> In addition to the requirements set forth in §§ 417.474 through 417.488, the contract must contain any other terms and conditions that CMS requires to implement section 1876 of the Act.</P> <P>(d) <E T="03">Exemption from Federal procurement regulations.</E> The Federal Acquisition Regulations and HHS Acquisition Regulations contained in title 48 of the Code of Federal Regulations do not apply to Medicare contracts under section 1876 of the Act.</P> <P>(e) <E T="03">Compliance with civil rights laws.</E> The HMO or CMP must comply with title VI of the Civil Rights Act of 1964 (regulations at 45 CFR part 80), section 504 of the Rehabilitation Act of 1973 (regulations at 45 CFR part 84), and the <PRTPAGE P="135"/>Age Discrimination Act of 1975 (regulations at 45 CFR part 91).</P> <P>(f) <E T="03">Requirements for advance directives.</E> The HMO or CMP must meet all the requirements for advance directives at § 417.436(d).</P> <P>(g) <E T="03">Authority to waive conflicting contract requirements.</E> Under section 1876(i)(5) of the Act, CMS is authorized to administer the terms of this subpart without regard to provisions of law or other regulations relating to the making, performance, amendment, or modification of contracts of the United States if it determines that those provisions are inconsistent with the efficient and effective administration of the Medicare program.</P> <P>(h) <E T="03">Collection of fees from risk HMOs and CMPs.</E> (1) The rules set forth in § 422.10 of this chapter for M+C plans also apply to collection of fees from risk HMOs and CMPs.</P> <P>(2) In applying the part 422 rules, references to “M+C organizations” or “M+C plans” must be read as references to “risk HMOs and CMPs”.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 57 FR 8202, Mar. 6, 1992; 58 FR 38079, July 15, 1993; 60 FR 45680, Sept. 1, 1995; 63 FR 35067, June 26, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.474</SECTNO> <SUBJECT>Effective date and term of contract.</SUBJECT> <P>(a) <E T="03">Effective date.</E> The contract must specify its effective date, which may not be earlier than the date it is signed by both CMS and the HMO or CMP.</P> <P>(b) <E T="03">Term.</E> The contract must specify the duration of its term as follows:</P> <P>(1) For the initial term, at least 12 months, but no more than 23 months.</P> <P>(2) For any subsequent term, 12 months.</P> <CITA>[60 FR 45680, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.476</SECTNO> <SUBJECT>Waived conditions.</SUBJECT> <P>If CMS waives any of the qualifying conditions required under subpart J of this part, the contract must specify the following information for each waived condition:</P> <P>(a) The specific terms of the waiver.</P> <P>(b) The expiration date of the waiver.</P> <P>(c) Any other information required by CMS.</P> <CITA>[60 FR 45680, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.478</SECTNO> <SUBJECT>Requirements of other laws and regulations.</SUBJECT> <P>The contract must provide that the HMO or CMP agrees to comply with—</P> <P>(a) The requirements for QIO review of services furnished to Medicare enrollees as set forth in subchapter D of this chapter;</P> <P>(b) Sections 1318(a) and (c) of the PHS Act, which pertain to disclosure of certain financial information;</P> <P>(c) Section 1301(c)(8) of the PHS Act, which relates to liability arrangements to protect enrollees of the HMO or CMP; and</P> <P>(d) The reporting requirements in § 417.126(a), which pertain to the monitoring of an HMO's or CMP's continued compliance.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 56 FR 8853, Mar. 1, 1991; 58 FR 38079, 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.479</SECTNO> <SUBJECT>Requirements for physician incentive plans.</SUBJECT> <P>(a) The contract must specify that an HMO or CMP may operate a physician incentive plan only if—</P> <P>(1) No specific payment is made directly or indirectly under the plan to a physician or physician group as an inducement to reduce or limit medically necessary services furnished to an individual enrollee; and</P> <P>(2) The stop-loss protection, enrollee survey, and disclosure requirements of this section are met.</P> <P>(b) <E T="03">Applicability.</E> The requirements in this section apply to physician incentive plans between HMOs and CMP and individual physicians or physician groups with which they contract to provide medical services to enrollees. The requirements in this section also apply to subcontracting arrangements as specified in § 417.479(i). These requirements apply only to physician incentive plans that base compensation (in whole or in part) on the use or cost of services furnished to Medicare beneficiaries or Medicaid recipients.</P> <P>(c) <E T="03">Definitions.</E> For purposes of this section:</P> <P> <E T="03">Bonus</E> means a payment an HMO or CMP makes to a physician or physician group beyond any salary, fee-for-service payments, capitation, or returned withhold.<PRTPAGE P="136"/> </P> <P> <E T="03">Capitation</E> means a set dollar payment per patient per unit of time (usually per month) that an organization pays a physician or physician group to cover a specified set of services and administrative costs without regard to the actual number of services provided. The services covered may include the physician's own services, referral services, or all medical services.</P> <P> <E T="03">Payments</E> means any amounts the HMO or CMP pays physicians or physician groups for services they furnish directly, plus amounts paid for administration and amounts paid (in whole or in part) based on use and costs of referral services (such as withhold amounts, bonuses based on referral levels, and any other compensation to the physician or physician group to influence the use of referral services). Bonuses and other compensation that are not based on referral levels (such as bonuses based solely on quality of care furnished, patient satisfaction, and participation on committees) are not considered payments for purposes of this section.</P> <P> <E T="03">Physician group</E> means a partnership, association, corporation, individual practice association, or other group that distributes income from the practice among members. An individual practice association is a physician group only if it is composed of individual physicians and has no subcontracts with physician groups.</P> <P> <E T="03">Physician incentive plan</E> means any compensation arrangement between an HMO or CMP and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services furnished to Medicare beneficiaries or Medicaid recipients enrolled in the HMO or CMP.</P> <P> <E T="03">Referral services</E> means any specialty, inpatient, outpatient, or laboratory services that a physician or physician group orders or arranges, but does not furnish directly.</P> <P> <E T="03">Risk threshold</E> means the maximum risk, if the risk is based on referral services, to which a physician or physician group may be exposed under a physician incentive plan without being at substantial financial risk.</P> <P> <E T="03">Withhold</E> means a percentage of payments or set dollar amounts that an HMO or CMP deducts from a physician's service fee, capitation, or salary payment, and that may or may not be returned to the physician, depending on specific predetermined factors.</P> <P>(d) <E T="03">Prohibited physician payments.</E> No specific payment of any kind may be made directly or indirectly under the incentive plan to a physician or physician group as an inducement to reduce or limit covered medically necessary services covered under the HMO's or CMP's contract furnished to an individual enrollee. Indirect payments include offerings of monetary value (such as stock options or waivers of debt) measured in the present or future.</P> <P>(e) <E T="03">General rule: Determination of substantial financial risk.</E> Substantial financial risk occurs when the incentive arrangements place the physician or physician group at risk for amounts beyond the risk threshold, if the risk is based on the use or costs of referral services. Amounts at risk based solely on factors other than a physician's or physician group's referral levels do not contribute to the determination of substantial financial risk. The risk threshold is 25 percent.</P> <P>(f) <E T="03">Arrangements that cause substantial financial risk.</E> For purposes of this paragraph, <E T="03">potential payments</E> means the maximum anticipated total payments (based on the most recent year's utilization and experience and any current or anticipated factors that may affect payment amounts) that could be received if use or costs of referral services were low enough. The following physician incentive plans cause substantial financial risk if risk is based (in whole or in part) on use or costs of referral services and the patient panel size is not greater than 25,000 patients:</P> <P>(1) Withholds greater than 25 percent of potential payments.</P> <P>(2) Withholds less than 25 percent of potential payments if the physician or physician group is potentially liable for amounts exceeding 25 percent of potential payments.</P> <P>(3) Bonuses that are greater than 33 percent of potential payments minus the bonus.</P> <P>(4) Withholds plus bonuses if the withholds plus bonuses equal more than 25 percent of potential payments. The threshold bonus percentage for a <PRTPAGE P="137"/>particular withhold percentage may be calculated using the formula—</P> <FP SOURCE="FP-1">Withhold = 0.75 (Bonus %) + 25%.</FP> <P>(5) Capitation, arrangements, if—</P> <P>(i) The difference between the maximum potential payments and the minimum potential payments is more than 25 percent of the maximum potential payments; or</P> <P>(ii) The maximum and minimum potential payments are not clearly explained in the physician's or physician group's contract.</P> <P>(6) Any other incentive arrangements that have the potential to hold a physician or physician group liable for more than 25 percent of potential payments.</P> <P>(g) <E T="03">Requirements for physician incentive plans that place physicians at substantial financial risk.</E> HMOs and CMPs that operate incentive plans that place physicians or physician groups at substantial financial risk must do the following:</P> <P>(1) Conduct enrollee surveys. These surveys must—</P> <P>(i) Include either all current Medicare/Medicaid enrollees in the HMO or CMP and those who have disenrolled (other than because of loss of eligibility in Medicaid or relocation outside the HMO's or CMP's service area) in the past 12 months, or a sample of these same enrollees and disenrollees;</P> <P>(ii) Be designed, implemented, and analyzed in accordance with commonly accepted principles of survey design and statistical analysis;</P> <P>(iii) Address enrollees/disenrollees satisfaction with the quality of the services provided and their degree of access to the services; and</P> <P>(iv) Be conducted no later than 1 year after the effective date of the Medicare contract and at least annually thereafter.</P> <P>(2) Ensure that all physicians and physician groups at substantial financial risk have either aggregate or per-patient stop-loss protection in accordance with the following requirements:</P> <P>(i) If aggregate stop-loss protection is provided, it must cover 90 percent of the costs of referral services (beyond allocated amounts) that exceed 25 percent of potential payments.</P> <P>(ii) If the stop-loss protection provided is based on a per-patient limit, the stop-loss limit per patient must be determined based on the size of the patient panel and may be a single combined limit or consist of separate limits for professional services and institutional services. In determining patient panel size, the patients may be pooled in accordance with paragraph (h)(2) of this section. Stop-loss protection must cover 90 percent of the costs of referral services that exceed the per patient limit. The per-patient stop-loss limit is as follows:</P> <GPOTABLE CDEF="s100,10,10,10" COLS="4" OPTS="L2"> <BOXHD> <CHED H="1">Panel size</CHED> <CHED H="1">Single combined limit</CHED> <CHED H="1">Separate institutional limit</CHED> <CHED H="1">Separate professional limit</CHED> </BOXHD> <ROW> <ENT I="01">1-1000</ENT> <ENT>$6,000</ENT> <ENT>$10,000</ENT> <ENT>$3,000</ENT> </ROW> <ROW> <ENT I="01">1,001-5000</ENT> <ENT>30,000</ENT> <ENT>40,000</ENT> <ENT>10,000</ENT> </ROW> <ROW> <ENT I="01">5,001-8,000</ENT> <ENT>40,000</ENT> <ENT>60,000</ENT> <ENT>15,000</ENT> </ROW> <ROW> <ENT I="01">8,001-10,000</ENT> <ENT>75,000</ENT> <ENT>100,000</ENT> <ENT>20,000</ENT> </ROW> <ROW> <ENT I="01">10,001-25,000</ENT> <ENT>150,000</ENT> <ENT>200,000</ENT> <ENT>25,000</ENT> </ROW> <ROW> <ENT I="01">>25,000</ENT> <ENT>none</ENT> <ENT>none</ENT> <ENT>none</ENT> </ROW> </GPOTABLE> <P>(h) <E T="03">Disclosure and other requirements for organizations with physician incentive plans.</E>—(1) Disclosure to CMS. Each health maintenance organization or competitive medical plan must provide to CMS information concerning its physician incentive plans as requested.</P> <P>(2) <E T="03">Pooling of patients.</E> Pooling of patients is permitted only if—(i) It is otherwise consistent with the relevant contracts governing the compensation arrangements for the physician or physician group;</P> <P>(ii) The physician or physician group is at risk for referral services with respect to each of the categories of patients being pooled;</P> <P>(iii) The terms of the compensation arrangements permit the physician or physician group to spread the risk across the categories of patients being pooled;<PRTPAGE P="138"/> </P> <P>(iv) The distribution of payments to physicians from the risk pool is not calculated separately by patient category; and</P> <P>(v) The terms of the risk borne by the physicians or physician group are comparable for all categories of patients being pooled.</P> <P>(3) <E T="03">Disclosure to Medicare beneficiaries.</E> Each health maintenance organization or competitive medical plan must provide the following information to any Medicare beneficiary who requests it:</P> <P>(i) Whether the prepaid plan uses a physician incentive plan that affects the use of referral services.</P> <P>(ii) The type of incentive arrangement.</P> <P>(iii) Whether stop-loss protection is provided.</P> <P>(iv) If the prepaid plan was required to conduct a survey, a summary of the survey results.</P> <P>(i) <E T="03">Requirements related to subcontracting arrangements</E>—(1) <E T="03">Physician groups.</E> An HMO or CMP that contracts with a physician group that places the individual physician members at substantial financial risk for services they do not furnish must do the following:</P> <P>(i) Disclose to CMS any incentive plan between the physician group and its individual physicians that bases compensation to the physician on the use or cost of services furnished to Medicare beneficiaries or Medicaid recipients. The disclosure must include the information specified in paragraphs (h)(1)(i) through (h)(1)(vii) of this section and be made at the times specified in paragraph (h)(2) of this section.</P> <P>(ii) Provide adequate stop-loss protection to the individual physicians.</P> <P>(iii) Conduct enrollee surveys as specified in paragraph (g)(1) of this section.</P> <P>(2) <E T="03">Intermediate entities.</E> An HMO or CMP that contracts with an entity (other than a physician group) for the provision of services to Medicare beneficiaries must do the following:</P> <P>(i) Disclose to CMS any incentive plan between the entity and a physician or physician group that bases compensation to the physician or physician group on the use or cost of services furnished to Medicare beneficiaries or Medicaid recipients. The disclosure must include the information required to be disclosed under paragraphs (h)(1)(i) through (h)(1)(vii) of this section and be made at the times specified in paragraph (h)(2) of this section.</P> <P>(ii) If the physician incentive plan puts a physician or physician group at substantial financial risk for the cost of services the physician or physician group does not furnish—</P> <P>(A) Meet the stop-loss protection requirements of this subpart; and</P> <P>(B) Conduct enrollee surveys as specified in paragraph (g)(1) of this section.</P> <P>(3) For purposes of paragraph (i)(2) of this section, an entity includes, but is not limited to, an individual practice association that contracts with one or more physician groups and a physician hospital organization.</P> <P>(j) <E T="03">Sanctions against the HMO or CMP.</E> CMS may apply intermediate sanctions, or the Office of Inspector General may apply civil money penalties described at § 417.500, if CMS determines that an HMO or CMP fails to comply with the requirements of this section.</P> <CITA>[61 FR 13446, Mar. 27, 1996; 61 FR 46385, Sept. 3, 1996, as amended at 61 FR 69049, Dec. 31, 1996; 68 FR 50855, Aug. 22, 2003]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.480</SECTNO> <SUBJECT>Maintenance of records: Cost HMOs and CMPs.</SUBJECT> <P>A reasonable cost contract must provide that the HMO or CMP agrees to maintain books, records, documents, and other evidence of accounting procedures and practices that—</P> <P>(a) Are sufficient to—</P> <P>(1) Ensure an audit trail; and</P> <P>(2) Properly reflect all direct and indirect costs claimed to have been incurred under the contract; and</P> <P>(b) Include at least records of the following:</P> <P>(1) Ownership, HMO or CMP, and operation of the HMO's or CMP's financial, medical, and other recordkeeping systems.</P> <P>(2) Financial statements for the current contract period and three prior periods.</P> <P>(3) Federal income tax or information returns for the current contract period and three prior periods.</P> <P>(4) Asset acquisition, lease, sale, or other action.</P> <P>(5) Agreements, contracts, and subcontracts.<PRTPAGE P="139"/> </P> <P>(6) Franchise, marketing, and management agreements.</P> <P>(7) Schedules of charges for the HMO's or CMP's fee-for-service patients.</P> <P>(8) Matters pertaining to costs of operations.</P> <P>(9) Amounts of income received by source and payment.</P> <P>(10) Cash flow statements.</P> <P>(11) Any financial reports filed with other Federal programs or State authorities.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 45680, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.481</SECTNO> <SUBJECT>Maintenance of records: Risk HMOs and CMPs.</SUBJECT> <P>A risk contract must provide that the HMO or CMP agrees to maintain and make available to CMS upon request, books, records, documents, and other evidence of acounting procedures and practices that—</P> <P>(a) Are sufficient to—</P> <P>(1) Establish component rates of the ACR for determining additional and supplementary benefits; and</P> <P>(2) Determine the rates utilized in setting premiums for State insurance agency purposes; and</P> <P>(b) Include at least any records or financial reports filed with other Federal agencies or State authorities.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 45680, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.482</SECTNO> <SUBJECT>Access to facilities and records.</SUBJECT> <P>The contract must provide that the HMO or CMP agrees to the following:</P> <P>(a) HHS may evaluate, through inspection or other means, the quality, appropriateness, and timeliness of services furnished under the contract to its Medicare enrollees.</P> <P>(b) HHS may evaluate, through inspection or other means, the facilities of the HMO or CMP when there is reasonable evidence of some need for that inspection.</P> <P>(c) HHS, the Comptroller General, or their designees may audit or inspect any books and records of the HMO or CMP or its transferee that pertain to any aspect of services performed, reconciliation of benefit liabilities, and determination of amounts payable under the contract.</P> <P>(d) HHS may evaluate, through inspection or other means, the enrollment and disenrollment records for the current contract period and three prior periods, when there is reasonable evidence of some need for that inspection.</P> <P>(e) In the case of a reasonable cost HMO or CMP to make available for the purposes specified in paragraphs (a), (b), (c), and (d) of this section, its premises, physical facilities, and equipment, its records relating to its Medicare enrollees, the records specified in § 417.480 and any additional relevant information that CMS may require.</P> <P>(f) That the right to inspect, evaluate, and audit, will extend through three years from the date of the final settlement for any contract period unless—</P> <P>(1) CMS determines there is a special need to retain a particular record or group of records for a longer period and notifies the HMO or CMP at least 30 days before the normal disposition date;</P> <P>(2) There has been a termination, dispute, fraud, or similar fault by the HMO or CMP, in which case the retention may be extended to three years from the date of any resulting final settlement; or</P> <P>(3) CMS determines that there is a reasonable possibility of fraud, in which case it may reopen a final settlement at any time.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.484</SECTNO> <SUBJECT>Requirement applicable to related entities.</SUBJECT> <P>(a) <E T="03">Definition.</E> As used in this section, <E T="03">related entity</E> means any entity that is related to the HMO or CMP by common ownership or control and—</P> <P>(1) Performs some of the HMO's or CMP's management functions under contract or delegation;</P> <P>(2) Furnishes services to Medicare enrollees under an oral or written agreement; or</P> <P>(3) Leases real property or sells materials to the HMO or CMP at a cost of more than $2,500 during a contract period.</P> <P>(b) <E T="03">Requirement.</E> The contract must provide that the HMO or CMP agrees to <PRTPAGE P="140"/>require all related entities to agree that—</P> <P>(1) HHS, the Comptroller General, or their designees have the right to inspect, evaluate, and audit any pertinent books, documents, papers, and records of the subcontractor involving transactions related to the subcontract; and</P> <P>(2) The right under paragraph (b)(1) of this section to information for any particular contract period will exist for a period equivalent to that specified in § 417.482(f).</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.486</SECTNO> <SUBJECT>Disclosure of information and confidentiality.</SUBJECT> <P>The contract must provide that the HMO or CMP agrees to the following:</P> <P>(a) To submit to CMS—</P> <P>(1) All financial information required under subpart O of this part and for final settlement; and</P> <P>(2) Any other information necessary for the administration or evaluation of the Medicare program.</P> <P>(b) To comply with the requirements set forth in part 420, subpart C, of this chapter pertaining to the disclosure of ownership and control information.</P> <P>(c) To comply with the requirements of the Privacy Act, as implemented by 45 CFR part 5b and subpart B of part 401 of this chapter, with respect to any system of records developed in performing carrier or intermediary functions under §§ 417.532 and 417.533.</P> <P>(d) To meet the confidentiality requirements of § 482.24(b)(3) of this chapter for medical records and for all other enrollee information that is—</P> <P>(1) Contained in its records or obtained from CMS or other sources; and</P> <P>(2) Not covered under paragraph (c) of this section.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 45680, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.488</SECTNO> <SUBJECT>Notice of termination and of available alternatives: Risk contract.</SUBJECT> <P>A risk contract must provide that the HMO or CMP agrees to give notice as follows if the contract is terminated:</P> <P>(a) At least 60 days before the effective date of termination, to give its Medicare enrollees a written notice that—</P> <P>(1) Specifies the termination date; and</P> <P>(2) Describes the alternatives available for obtaining Medicare services after termination.</P> <P>(b) To pay the cost of the written notices.</P> <CITA>[60 FR 45680, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.490</SECTNO> <SUBJECT>Renewal of contract.</SUBJECT> <P>A contract with an HMO or CMP is renewed automatically for the next 12-month period unless CMS or the HMO or CMP decides not to renew, in accordance with § 417.492.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.492</SECTNO> <SUBJECT>Nonrenewal of contract.</SUBJECT> <P>(a) <E T="03">Nonrenewal by the HMO or CMP.</E> (1) If an HMO or CMP does not intend to renew its contract, it must—</P> <P>(i) Give written notice to CMS at least 90 days before the end of the current contract period;</P> <P>(ii) Notify each Medicare enrollee by mail at least 60 days before the end of the contract period; and</P> <P>(iii) Notify the general public at least 30 days before the end of the contract period, by publishing a notice in one or more newspapers of general circulation in each community or county located in the HMO's or CMP's geographic area.</P> <P>(2) CMS may accept a nonrenewal notice submitted less than 90 days before the end of a contract period if—</P> <P>(i) The HMO or CMP notifies its Medicare enrollees and the public in accordance with paragraph (a)(1) of this section; and</P> <P>(ii) Acceptance would not otherwise jeopardize the effective and efficient administration of the Medicare program.</P> <P>(b) <E T="03">Nonrenewal by CMS</E>—(1) <E T="03">Notice of nonrenewal.</E> If CMS decides not to renew a contract, it gives written notice of nonrenewal as follows:</P> <P>(i) To the HMO or CMP at least 90 days before the end of the contract period.<PRTPAGE P="141"/> </P> <P>(ii) To the HMO's or CMP's Medicare enrollees at least 60 days before the end of the contract period.</P> <P>(iii) To the general public at least 30 days before the end of the contract period.</P> <P>(2) <E T="03">Notice of appeal rights.</E> CMS gives the HMO or CMP written notice of its right to appeal the nonrenewal decision, in accordance with subpart R of this part, if CMS's decision was based on any of the reasons specified in § 417.494(b).</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38079, July 15, 1993; 60 FR 45681, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.494</SECTNO> <SUBJECT>Modification or termination of contract.</SUBJECT> <P>(a) <E T="03">Modification or termination by mutual consent.</E> (1) CMS and an HMO or CMP may modify or terminate a contract at any time by written mutual consent.</P> <P>(2) If the contract is modified, the HMO or CMP must notify its Medicare enrollees of any changes that CMS determines are appropriate for notification.</P> <P>(3) If the contract is terminated, the HMO or CMP must notify its Medicare enrollees, and CMS notifies the general public, at least 30 days before the termination date.</P> <P>(b) <E T="03">Termination by CMS.</E> (1) CMS may terminate a contract for any of the following reasons:</P> <P>(i) The HMO or CMP has failed substantially to carry out the terms of the contract.</P> <P>(ii) The HMO or CMP is carrying out the contract in a manner that is inconsistent with the effective and efficient implementation of section 1876 of the Act.</P> <P>(iii) The HMO or CMP has failed substantially to comply with the composition of enrollment requirements specified in § 417.413(d).</P> <P>(iv) CMS determines that the HMO or CMP no longer meets the requirements of section 1876 of the Act and this subpart for being an HMO or CMP.</P> <P>(2) If CMS decides to terminate a contract, it sends a written notice informing the HMO or CMP of its right to appeal the termination in accordance with subpart R of this part.</P> <P>(3) An HMO or CMP with a risk contract must notify its Medicare enrollees of the termination as described in § 417.488.</P> <P>(4) CMS notifies the HMO's or CMP's Medicare enrollees and the general public of the termination at least 30 days before the effective date of termination.</P> <P>(c) <E T="03">Termination by the HMO or CMP.</E> The HMO or CMP may terminate the contract if CMS has failed substantially to carry out the terms of the contract.</P> <P>(1) The HMO or CMP must notify CMS at least 90 days before the effective date of the termination and must include in its notice the reasons for the termination.</P> <P>(2) The HMO or CMP must notify its Medicare enrollees of the termination at least 60 days before the termination date. Risk HMOs or CMPs must also provide a written description of alternatives available for obtaining Medicare services after termination of the contract. The HMO or CMP is responsible for the cost of these notices.</P> <P>(3) The HMO or CMP must notify the general public of the termination at least 30 days before the termination date.</P> <P>(4) The contract is terminated effective 60 days after the HMO or CMP mails the notice to Medicare enrollees as required in paragraph (c)(2) of this section.</P> <P>(5) CMS's liability for payment ends as of the first day of the month after the last month for which the contract is in effect.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 52 FR 22322, June 11, 1987; 56 FR 46571, Sept. 13, 1991; 58 FR 38079, 38082, July 15, 1993; 60 FR 45681, Sept. 1, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.500</SECTNO> <SUBJECT>Sanctions against HMOs and CMPs.</SUBJECT> <P>(a) <E T="03">Basis for imposition of sanctions.</E> CMS may impose the intermediate sanctions specified in paragraph (d) of this section, as an alternative to termination of contract, if CMS determines that an HMO or CMP does one or more of the following:</P> <P>(1) Fails substantially to provide the medically necessary services required to be provided to a Medicare enrollee and the failure adversely affects (or has <PRTPAGE P="142"/>a substantial likelihood of adversely affecting) the enrollee.</P> <P>(2) Requires Medicare enrollees to pay amounts in excess of premiums permitted.</P> <P>(3) Acts, in violation of the provisions of subpart K of this part, to expel or to refuse to reenroll an individual.</P> <P>(4) Engages in any practice that could reasonably be expected to have the effect of denying or discouraging enrollment (except as permitted by subpart K of this part) by eligible individuals whose medical conditions or histories indicate a need for substantial future medical services.</P> <P>(5) Misrepresents or falsifies information that it furnishes under this part to CMS, an individual, or to any other entity.</P> <P>(6) Fails to comply with the requirements of section 1876(g)(6)(A) of the Act relating to the prompt payment of claims.</P> <P>(7) Fails to meet the requirement in section 1876(f)(1) of the Act that not more than 50 percent of the organization's enrollment be Medicare beneficiaries and Medicaid recipients.</P> <P>(8) Has a Medicare risk contract and—</P> <P>(i) Employs or contracts with individuals or entities excluded from participation in Medicare under section 1128 or section 1128A of the Act for the provision of health care, utilization review, medical social work, or administrative services; or</P> <P>(ii) Employs or contracts with any entity for the provision of those services (directly or indirectly) through an excluded individual or entity.</P> <P>(9) Fails to comply with the requirements of §§ 417.479(d) through (i) relating to physician incentive plans.</P> <P>(b) <E T="03">Notice of sanction and opportunity to respond</E>—(1) <E T="03">Notice of sanction.</E> Before imposing the intermediate sanctions specified in paragraph (d) of this section, CMS—</P> <P>(i) Sends a written notice to the HMO or CMP stating the nature and basis of the proposed sanction; and</P> <P>(ii) Sends the OIG a copy of the notice (other than a notice regarding the restriction on Medicare and Medicaid enrollees as described in paragraph (a)(7) of this section), once the sanction has been confirmed following the notice period or the reconsideration.</P> <P>(2) <E T="03">Opportunity to respond.</E> CMS allows the HMO or CMP 15 days from receipt of the notice to provide evidence that it has not committed an act or failed to comply with a requirement described in paragraph (a) of this section, as applicable. CMS may allow a 15-day addition to the original 15 days upon receipt of a written request from the HMO or CMP. To be approved, the request must provide a credible explanation of why additional time is necessary and be received by CMS before the end of the 15-day period following the date of receipt of the sanction notice. CMS does not grant an extension if it determines that the HMO's or CMP's conduct poses a threat to an enrollee's health and safety.</P> <P>(c) <E T="03">Informal reconsideration.</E> If, consistent with paragraph (b)(2) of this section, the HMO or CMP submits a timely response to CMS's notice of sanction, CMS conducts an informal reconsideration that:</P> <P>(1) Consists of a review of the evidence by a CMS official who did not participate in the initial decision to impose a sanction; and</P> <P>(2) Gives the HMO or CMP a concise written decision setting forth the factual and legal basis for the decision that affirms or rescinds the original determination.</P> <P>(d) <E T="03">Specific sanctions.</E> If CMS determines that an HMO or CMP has acted or failed to act as specified in paragraph (a) of this section and affirms this determination in accordance with paragraph (c) of this section, CMS may—</P> <P>(1) Require the HMO or CMP to suspend acceptance of applications for enrollment made by Medicare beneficiaries during the sanction period;</P> <P>(2) Suspend payments to the HMO or CMP for Medicare beneficiaries enrolled during the sanction period; and</P> <P>(3) Require the HMO or CMP to suspend all marketing activities to Medicare enrollees.</P> <P>(e) <E T="03">Effective date and duration of sanctions</E>—(1) <E T="03">Effective date.</E> Except as provided in paragraph (e)(2) of this section, a sanction is effective 15 days after the date that the organization is notified of the decision to impose the <PRTPAGE P="143"/>sanction or, if the HMO or CMP timely seeks reconsideration under paragraph (c) of this section, on the date specified in the notice of CMS's reconsidered determination.</P> <P>(2) <E T="03">Exception.</E> If CMS determines that the HMO's or CMP's conduct poses a serious threat to an enrollee's health and safety, CMS may make the sanction effective on a date before issuance of CMS's reconsidered determination.</P> <P>(3) <E T="03">Duration of sanction.</E> The sanction remains in effect until CMS notifies the HMO or CMP that CMS is satisfied that the basis for imposing the sanction has been corrected and is not likely to recur.</P> <P>(f) <E T="03">Termination by CMS.</E> In addition to or as an alternative to the sanctions described in paragraph (d) of this section, CMS may decline to renew a HMO's or CMP's contract in accordance with § 417.492(b), or terminate the contract in accordance with § 417.494(b).</P> <P>(g) <E T="03">Civil money penalties.</E> If CMS determines that a HMO or CMP has committed an act or failed to comply with a requirement described in paragraph (a) of this section (with the exception of the requirement to limit the percentage of Medicare and Medicaid enrollees described in paragraph (a)(7) of this section), CMS notifies the OIG of that determination. CMS also conveys to the OIG information when it reverses or terminates a sanction imposed under this subpart. In accordance with the provisions of 42 CFR part 1003, the OIG may impose civil money penalties on the HMO or CMP in addition to or in place of the sanctions that CMS may impose under paragraph (d) of this section.</P> <CITA>[59 FR 36083, July 15, 1994, as amended at 60 FR 45681, Sept. 1, 1995; 61 FR 13448, Mar. 27, 1996]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart M—Change of Ownership and Leasing of Facilities: Effect on Medicare Contract</HD> <SECTION> <SECTNO>§ 417.520</SECTNO> <SUBJECT>Effect on HMO and CMP contracts.</SUBJECT> <P>(a) The provisions set forth in subpart L of part 422 of this chapter also apply to Medicare contracts with HMOs and CMPs under section 1876 of the Act.</P> <P>(b) In applying these provisions, references to “M+C organizations” must be read as references to “HMOs and CMPs”.</P> <P>(c) In § 422.550, reference to “subpart K of this part” must be read as reference to “subpart L of part 417 of this chapter”.</P> <P>(d) In § 422.553, reference to “subpart K of this part” must be read as reference to “subpart J of part 417 of this chapter”.</P> <CITA>[63 FR 35067, June 26, 1998]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart N—Medicare Payment to HMOs and CMPs: General Rules</HD> <SECTION> <SECTNO>§ 417.524</SECTNO> <SUBJECT>Payment to HMOs or CMPs: General.</SUBJECT> <P>(a) <E T="03">Basic rule.</E> The payments that CMS makes to an HMO or CMP under this subpart and subparts O and P of this part for furnishing covered Medicare services are in place of any payment that CMS would otherwise make to a beneficiary or the HMO or CMP under sections 1814(b) and 1833(a) of the Act.</P> <P>(b) <E T="03">Basis of payment.</E> (1) CMS pays the HMOs or CMPs on either a reasonable cost basis or a risk basis depending on the type of contract the HMO or CMP has with CMS.</P> <P>(2) In certain cases a risk HMO or CMP also receives payments on a reasonable cost basis for certain Medicare enrollees who retain nonrisk status, as provided in § 417.444, after the HMO or CMP enters into a risk contract.</P> <CITA>[60 FR 46229, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.526</SECTNO> <SUBJECT>Payment for covered services.</SUBJECT> <P>Subpart O of this part set forth the principles that CMS follows in determining Medicare payment to an HMO or CMP that has a reasonable cost contract. Subpart P of this part describes the per capita method of Medicare payment to HMOs or CMPs that contract on a risk basis.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985; as amended at 58 FR 38080, July 15, 1993; 60 FR 46229, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <PRTPAGE P="144"/> <SECTNO>§ 417.528</SECTNO> <SUBJECT>Payment when Medicare is not primary payer.</SUBJECT> <P>(a) <E T="03">Limits on payments and charges.</E> (1) CMS may not pay for services to the extent that Medicare is not the primary payer under section 1862(b) of the Act and part 411 of this chapter.</P> <P>(2) The circumstances under which an HMO or CMP may charge, or authorize a provider to charge, for covered Medicare services for which Medicare is not the primary payer are stated in paragraphs (b) and (c) of this section.</P> <P>(b) <E T="03">Charge to other insurers or the enrollee.</E> If a Medicare enrollee receives from an HMO or CMP covered services that are also covered under State or Federal worker's compensation, automobile medical, or any no-fault insurance, or any liability insurance policy or plan, including a self-insured plan, the HMO or CMP may charge, or authorize a provider that furnished the service to charge—</P> <P>(1) The insurance carrier, employer, or other entity that is liable to pay for these services; or</P> <P>(2) The Medicare enrollee, to the extent that he or she has been paid by the carrier, employer, or other entity.</P> <P>(c) <E T="03">Charge to group health plans (GHPs) or large group health plans (LGHPs).</E> An HMO or CMP may charge a GHP or LGHP for covered services it furnished to a Medicare enrollee and may charge the Medicare enrollee to the extent that he or she has been paid by the GHP or LGHP for these covered services if—</P> <P>(1) The Medicare enrollee is covered under the plan; and</P> <P>(2) Under section 1862(b) of the Act, CMS is precluded from paying for the covered services .</P> <P>(d) <E T="03">Responsibilities of HMO or CMP.</E> An HMO or CMP must—</P> <P>(1) Identify payers that are primary to Medicare under section 1862(b) of the Act;</P> <P>(2) Determine the amounts payable by these payers; and</P> <P>(3) Coordinate the benefits of its Medicare enrollees with these payers.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38080, July 15, 1993; 60 FR 46229, Sept. 6, 1995]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart O—Medicare Payment: Cost Basis</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>50 FR 1346, Jan. 10, 1985, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 417.530</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>This subpart sets forth the principles that CMS follows to determine the amount it pays for services furnished by a cost HMO or CMP to its Medicare enrollees. These principles are based on sections 1861(v) and 1876 of the Act and are, for the most part, the same as those set forth—</P> <P>(a) In part 412 of this chapter, for paying the costs of inpatient hospital services which, for cost HMOs and CMPs, are considered “reasonable” only if they do not exceed the amounts allowed under the prospective payment system; and</P> <P>(b) In part 413 of this chapter, for the costs of all other covered services.</P> <CITA>[60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.531</SECTNO> <SUBJECT>Hospice care services.</SUBJECT> <P>(a) If a Medicare enrollee of an HMO or CMP with a reasonable cost contract makes an election under § 418.24 of this chapter to receive hospice care services, payment for these services is made to the hospice that furnishes the services in accordance with part 418 of this chapter.</P> <P>(b) While the enrollee's hospice election is in effect, CMS pays the HMO or CMP on a reasonable cost basis for only the following covered Medicare services furnished to the Medicare enrollee:</P> <P>(1) Services of the enrollee's attending physician if the physician is an employee or contractor of the HMO or CMP and is not employed by or under contract to the enrollee's hospice.</P> <P>(2) Services not related to the treatment of the terminal condition for which hospice care was elected or a condition related to the terminal condition.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.532</SECTNO> <SUBJECT>General considerations.</SUBJECT> <P>(a) <E T="03">Conditions and criteria for payment.</E> (1) The costs incurred by the HMO or <PRTPAGE P="145"/>CMP to furnish services covered by Medicare are reimbursable if they are—</P> <P>(i) Proper and necessary;</P> <P>(ii) Reasonable in amount; and</P> <P>(iii) Except as provided in § 417.550, appropriately apportioned among the HMO's or CMP's Medicare enrollees, other enrollees, and nonenrolled patients.</P> <P>(2) In determining fair and equitable payment for the HMOs or CMPs, CMS generally applies the cost payment principles set forth in § 413.5 of this chapter.</P> <P>(3) In judging whether costs are reasonable, CMS applies the weighted average of the AAPCCs of each class of the HMO's or CMP's Medicare enrollees (as defined in § 417.582) for the HMO's or CMP's geographic area as an absolute limitation on the total amount payable.</P> <P>(b) <E T="03">Method and amount of payment to the HMO or CMP.</E> (1) CMS makes interim per capita payments each month for each Medicare enrollee, equivalent to the interim per capita cost rate determined in accordance with § 417.570.</P> <P>(2) CMS adjusts the interim per capita rate as necessary during the contract period and makes final adjustments at the end of the contract period.</P> <P>(3) In determining the amount due the HMO or CMP, CMS deducts from the reasonable cost actually incurred by the HMO or CMP for covered services furnished to its Medicare enrollees, an amount equal to the actuarial value of the applicable Medicare Part A and Part B deductible and coinsurance amounts that would have applied to the covered services for which payment is being made if these enrollees had not enrolled in the HMO or CMP or another HMO or CMP.</P> <P>(c) <E T="03">Election by HMO or CMP.</E> An HMO or CMP must elect, on an individual provider basis, one of the following methods for payment for hospital and SNF services it furnishes to Medicare enrollees:</P> <P>(1) Direct payment by CMS.</P> <P>(2) Direct payment by the HMO or CMP.</P> <P>(d) <E T="03">Notice of election.</E> The election must be made in writing before the beginning of the contract period and is binding for that period.</P> <P>(e) <E T="03">Payment by HMO or CMP.</E> If the HMO or CMP elects to pay providers directly, as provided in paragraph (c) of this section, it must—</P> <P>(1) Determine the eligibility of its Medicare enrollees to receive covered services through the HMO or CMP;</P> <P>(2) Make proper coverage decisions and appropriate payments, in accordance with §§ 421.100 and 421.200 of this chapter, for the services furnished to its Medicare enrollees;</P> <P>(3) Ensure that providers maintain and furnish appropriate documentation of physician certification and recertification, to the extent required under subpart B of part 424 of this chapter; and</P> <P>(4) Carry out any other procedures required by CMS.</P> <P>(f) <E T="03">Review of HMO's or CMP's bill processing capabilities.</E> If the HMO or CMP elects to pay providers directly, CMS determines whether the HMO or CMP has the experience and capability to carry out the responsibilities specified in paragraph (e) of this section in an efficient and effective manner.</P> <P>(g) <E T="03">Direct payment by CMS.</E> (1) If the HMO or CMP elects to have CMS pay for provider services, CMS pays each provider on a reasonable cost basis or under the PPS system, whichever is appropriate for the particular provider under part 412 or part 413 of this chapter.</P> <P>(2) In computing the Medicare payment to the HMO or CMP, CMS deducts these payments and any other payments made by the Medicare intermediary or carrier on behalf of the HMO or CMP (such as payment for emergency or urgently needed services under § 417.558).</P> <P>(h) <E T="03">Payment for services furnished to Medicare beneficiaries not enrolled in the HMO or CMP.</E> CMS pays the HMO or CMP for services it furnishes to Medicare beneficiaries who are not its enrollees through the HMO's or CMP's Medicare intermediary or carrier, as appropriate.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 53 FR 6648, Mar. 2, 1988; 58 FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <PRTPAGE P="146"/> <SECTNO>§ 417.533</SECTNO> <SUBJECT>Part B carrier responsibilities.</SUBJECT> <P>In paying for Part B services furnished to its enrollees by suppliers, the HMO or CMP must—</P> <P>(a) Determine the eligibility of individuals to receive those services through the HMO or CMP;</P> <P>(b) Make proper coverage decisions and appropriate payment as authorized under § 421.200 of this chapter for the services for which its Medicare enrollees are eligible; and</P> <P>(c) Carry out any other procedures that CMS may require.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.534</SECTNO> <SUBJECT>Allowable costs.</SUBJECT> <P>(a) <E T="03">Definition—Allowable costs</E> means the direct and indirect costs, including normal standby costs incurred by the HMO or CMP, that are proper and necessary for efficient delivery of needed health care services. They include the costs of furnishing services to the HMO's or CMP's Medicare enrollees, other enrollees, and nonenrolled patients, which are typical “provider” costs, and costs (such as marketing, enrollment, membership, and operation of the HMO or CMP) that are peculiar to health care prepayment organizations.</P> <P>(b) <E T="03">Basic rules.</E> (1) The allowability of an HMO's or CMP's costs for furnishing services is generally determined in accordance with principles applicable to provider costs, as set forth in § 417.536.</P> <P>(2) The allowability of other costs is determined in accordance with principles set forth in §§ 417.538 through 417.550.</P> <P>(3) Costs for covered services for which Medicare is not the primary payor, as described in § 417.528, are not allowable.</P> <P>(c) <E T="03">Medicare Part D program costs.</E> To the extent that an HMO or CMP provides qualified prescription drug coverage to enrollees under Part D, no costs related to the offering or provision of Part D benefits are reimbursed under this part. These costs are reimbursed solely under the applicable provisions of part 423 of this chapter.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 70 FR 4525, Jan. 28, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.536</SECTNO> <SUBJECT>Cost payment principles.</SUBJECT> <P>(a) <E T="03">Applicability.</E> Unless otherwise specified in this subpart, the principles set forth in parts 412 and 413 of this chapter are applicable to the costs incurred by an HMO or CMP or by providers and other facilities owned or operated by the HMO or CMP or related to it by common ownership or control. The most common examples of these costs are set forth in this section.</P> <P>(b) <E T="03">Depreciation.</E> An appropriate allowance for depreciation on buildings and equipment is an allowable cost, in accordance with §§ 413.134, 413.144, and 413.149 of this chapter.</P> <P>(c) <E T="03">Interest expense.</E> Necessary and proper interest on both current and capital indebtedness is an allowable cost, in accordance with § 413.153 of this chapter.</P> <P>(d) <E T="03">Cost of educational activities.</E> An appropriate part of the net cost of approved educational activities of a provider or other health care facility owned or operated by an HMO or CMP is an allowable cost in accordance with § 413.85 of this chapter.</P> <P>(e) <E T="03">Compensation of owners.</E> An appropriate amount of compensation for services of owners is an allowable cost, if the services are actually performed and are necessary, as specified in § 413.102 of this chapter.</P> <P>(f) <E T="03">Bad debts.</E> (1) In accordance with § 413.80 of this chapter, bad debts are deductions from revenue and may be included as allowable costs only if—</P> <P>(i) They are attributable to Medicare deductible and coinsurance amounts for which the Medicare enrollee is liable; and</P> <P>(ii) The HMO or CMP has made a reasonable, but unsuccessful, effort to collect those amounts.</P> <P>(2) If all or part of the deductible and coinsurance amounts is payable through a monthly premium or other periodic payment, the amount allowed as a bad debt may not exceed three times the monthly rate for the actuarial value of the deductible and coinsurance amounts, or its equivalent, if <PRTPAGE P="147"/>the periodic payment is on other than a monthly basis.</P> <P>(3) Any bad debt related to a service furnished to a Medicare enrollee of the HMO or CMP, and claimed on a cost report submitted for payment by a provider or other facility reimbursed on a cost basis, may not be claimed as a bad debt by the HMO or CMP.</P> <P>(g) <E T="03">Charity and courtesy allowances.</E> As specified in § 413.80 of this chapter, charity and courtesy allowances are deductions from revenue and may not be included as allowable costs.</P> <P>(h) <E T="03">Research costs.</E> As specified in § 413.90 of this chapter, costs incurred for research purposes, over and above patient care, are not allowable costs.</P> <P>(i) <E T="03">Value of services of nonpaid workers.</E> The value of services of nonpaid workers of an organization is not an allowable cost, except as provided in § 413.94 of this chapter.</P> <P>(j) <E T="03">Purchase discounts and allowances and refund of expenses.</E> Discounts and allowances that an HMO or CMP receives on purchases of goods and services and refunds of previous expense payments must be deducted from the costs to which they relate, in accordance with § 413.98 of this chapter.</P> <P>(k) <E T="03">Cost to related entities.</E> (1) The costs of services, facilities, or supplies furnished to an HMO or CMP by a related entity are allowable at the cost to the related entity in accordance with § 413.17 of this chapter.</P> <P>(2) An entity is not considered related to the HMO or CMP merely because—</P> <P>(i) It has a risk or incentive agreement under which the HMO or CMP reimburses or compensates the entity for services it furnishes to the HMOs' or CMPs' enrollees; or</P> <P>(ii) Substantially all the services the entity furnishes are furnished to the HMO's or CMP's enrollees.</P> <P>(3) However, an entity described in paragraph (k)(2) of this section and an HMO or CMP are considered related if either of them is in a position to exercise significant management or ownership influence or control over the other.</P> <P>(l) <E T="03">Return on equity capital of proprietary providers owned by the HMO or CMP.</E> An allowance for a reasonable return on equity capital invested and used in providing services is allowable in addition to the reasonable cost of services furnished by a proprietary provider owned by the HMO or CMP. The amount of the allowance is determined in accordance with § 413.157 of this chapter.</P> <P>(m) <E T="03">Limitations on payment.</E> Medicare payment for covered services furnished by entities owned by or operated by, or related to, an HMO or CMP paid on a reasonable cost basis is subject to certain provisions of parts 412 and 413 of this chapter that pertain to reasonable cost and reasonable charge. Those provisions include, but are not necessarily limited to, the following:</P> <P>(1) For ESRD treatment, the limitations authorized under § 413.170 of this chapter.</P> <P>(2) For services of physical, occupational, and speech therapists and other therapists and nonphysician health specialists, the limitations set forth in § 413.106 of this chapter.</P> <P>(3) For drugs, the allowable cost as determined under §§ 405.517 and 410.29 of this chapter.</P> <P>(4) The overall cost limits established in accordance with § 413.30 of this chapter.</P> <P>(5) The limitation to the lesser of reasonable cost or customary charges, as set forth in § 413.13 of this chapter.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 51 FR 34832, Sept. 30, 1986; 51 FR 37398, Oct. 22, 1986; 58 FR 38080, July 15, 1993; 60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.538</SECTNO> <SUBJECT>Enrollment and marketing costs.</SUBJECT> <P>(a) <E T="03">Principle.</E> Costs incurred by an HMO or CMP in performing the enrollment and marketing activities described in subpart k of this part are allowable.</P> <P>(b) <E T="03">Included costs.</E> Allowable enrollment and marketing costs are those necessary and proper costs incurred in offering the HMO's or CMP's plan to potential enrollees in accordance with this part. Those costs include selling, advertising, promotional, and other marketing costs and may not exceed an amount that would be incurred by a prudent and cost-conscious management.<PRTPAGE P="148"/> </P> <P>(c) <E T="03">Application.</E> Enrollment and marketing costs are allowable, whether incurred directly by HMO or CMP staff or under contract with marketing specialists or other outside consultants.</P> <P>(d) <E T="03">Limitation on payment.</E> The relatively higher costs that an HMO or CMP is likely to incur in initially offering its plan to Medicare beneficiaries are taken into account in determining whether enrollment and marketing costs are reasonable in amount. However, if those costs exceed amounts that would be paid by prudent management, the excess is not allowable.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.540</SECTNO> <SUBJECT>Enrollment costs.</SUBJECT> <P>(a) <E T="03">Principle.</E> Enrollment costs are allowable if incurred in maintaining and servicing subscriber contracts for prepayment enrollees.</P> <P>(b) <E T="03">Kind of costs included.</E> Enrollment costs include, but are not limited to, reasonable costs incurred in connection with maintaining statistical, financial, and other data on enrollees.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.542</SECTNO> <SUBJECT>Reinsurance costs.</SUBJECT> <P>Reinsurance costs are not allowable.</P> </SECTION> <SECTION> <SECTNO>§ 417.544</SECTNO> <SUBJECT>Physicians' services furnished directly by the HMO or CMP.</SUBJECT> <P>(a) <E T="03">Principles.</E> (1) Compensation paid by an HMO or CMP to physicians is an allowable cost to the extent that it is commensurate with the compensation paid for similar services performed by similar physicians practicing in the same or a similar locality.</P> <P>(2) Physician compensation may take various forms, but the aggregate compensation allowable must be reasonable in relation to the services personally furnished.</P> <P>(3) If aggregate physician compensation costs exceed what is normally incurred, the excess is not a reasonable cost.</P> <P>(b) <E T="03">Application.</E> (1) In determining the allowability of the costs of physicians' services, the cost of personal services (for example, expenses attributable to salaries, wages, incentive payments, fringe benefits) must be distinguished from the cost of nonpersonal services (for example, expenses attributable to facilities, equipment, support personnel, supplies).</P> <P>(2) To be allowable, compensation must be reasonable in relation to the personal services furnished.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.546</SECTNO> <SUBJECT>Physicians' services and other Part B supplier services furnished under arrangements.</SUBJECT> <P> <E T="03">General principle.</E> The amount paid by an HMO or CMP for physicians' services and other Part B supplier services furnished under arrangements is an allowable cost to the extent it is reasonable. Costs are considered reasonable if they—</P> <P>(a) Do not exceed those that a prudent and cost-conscious buyer would incur to purchase those services; and</P> <P>(b) Are comparable to costs incurred for similar services furnished by similar physicians or other suppliers in the same or a similar geographic area.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 34887, July 5, 1995; 60 FR 45372, Aug. 31, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.548</SECTNO> <SUBJECT>Provider services through arrangements.</SUBJECT> <P>(a) <E T="03">Principle.</E> The cost incurred by an HMO or CMP for covered services furnished under arrangement with a provider is allowable to the extent that it would be allowable and payable under parts 412 and 413 of this chapter, unless the HMO or CMP petitions CMS and demonstrates to HFCA's satisfaction that payment in excess of the amount authorized under parts 412 and 413 of this chapter is justified on the basis of advantages gained by the HMO or CMP.</P> <P>(b) <E T="03">Application.</E> An advantage gained must represent a real and tangible benefit received by the HMO or CMP for the excess cost incurred, and any excess payment is subject to other applicable requirements of parts 405, 412 and 413 of this chapter, including tests of reasonableness.</P> <P>(c) <E T="03">Example.</E> In the case of an arrangement an HMO or CMP has with a provider that is located outside the <PRTPAGE P="149"/>HMO's or CMP's geographic area and that is not related to the HMO or CMP by common ownership or control, payment of the provider's charges to the HMO or CMP (rather than the payment amounts determined under part 412 or part 413 of this chapter) may be justified in exchange for the advantages of not having to incur the administrative costs of determining the provider's reasonable cost and of making a more timely final settlement with the HMO or CMP. However, repayment of the provider's charges would be acceptable only if—</P> <P>(1) The provider furnishes services to the HMO's or CMP's enrollees infrequently;</P> <P>(2) The charges represent an insignificant portion of total Medicare reimbursement to the HMO or CMP; and</P> <P>(3) The charges do not exceed the customary charges by the provider to its other patients for similar services.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 51 FR 34832, Sept. 30, 1986; 58 FR 38080, July 15, 1993; 60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.550</SECTNO> <SUBJECT>Special Medicare program requirements.</SUBJECT> <P>(a) <E T="03">Principle.</E> CMS pays the full reasonable cost incurred by an HMO or CMP for activities that are solely for Medicare purposes and unique to Medicare contracts under section 1876 of the Act.</P> <P>(b) <E T="03">Application.</E> CMS pays the full reasonable cost of the following activities:</P> <P>(1) Reporting increases and decreases in the number of Medicare enrollees.</P> <P>(2) Obtaining independent certification of the HMO's or CMP's cost report to the extent that it is for Medicare purposes.</P> <P>(3) Reporting special data that CMS requires solely for program planning and evaluation.</P> <P>(c) <E T="03">Prior approval requirement.</E> The costs specified in paragraph (b) of this section must be separately budgeted and approved by CMS before the contract period begins.</P> <P>(d) <E T="03">Limit on full payment.</E> Full payment is limited to the costs specified in paragraph (b) of this section. All other administrative costs must be apportioned in accordance with § 417.552.</P> <CITA>[60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.552</SECTNO> <SUBJECT>Cost apportionment: General provisions.</SUBJECT> <P>(a) <E T="03">Basic rule.</E> The HMO or CMP must apportion its total allowable direct and indirect costs among its Medicare enrollees, its other enrollees, and its nonenrolled patients—</P> <P>(1) In accordance with this subpart; and</P> <P>(2) Using methods approved by CMS.</P> <P>(b) <E T="03">Purpose of apportionment.</E> The purpose of apportionment is to ensure that—</P> <P>(1) The cost of services furnished to Medicare enrollees is not borne by other enrollees and nonenrolled patients; and</P> <P>(2) The cost of the services furnished to other enrollees and nonenrolled patients is not borne by Medicare.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 46230, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.554</SECTNO> <SUBJECT>Apportionment: Provider services furnished directly by the HMO or CMP.</SUBJECT> <P>The Medicare share of the cost of covered services furnished to Medicare enrollees by providers that are owned or operated by the HMO or CMP or are related to the HMO or CMP by common ownership or control must be determined in accordance with the apportionment methods set forth in part 412, §§ 413.24, 413.55, and 415.55 of this chapter.</P> <CITA>[51 FR 28574, Aug. 8, 1986, as amended at 51 FR 34832, Sept. 30, 1986; 58 FR 38082, July 15, 1993; 60 FR 46231, Sept. 6, 1995; 60 FR 63189, Dec. 8, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.556</SECTNO> <SUBJECT>Apportionment: Provider services furnished by the HMO or CMP through arrangements with others.</SUBJECT> <P>The Medicare share of the cost of covered services furnished to Medicare enrollees through arrangements with providers other than those specified in § 417.554 must be determined as follows:</P> <P>(a) The Medicare share must be based on the cost the HMO or CMP pays the provider under their arrangement, to the extent that cost is reasonable and within the limits established by §§ 417.534 through 417.548.</P> <P>(b) Except as specified in paragraph (c) of this section, apportionment must <PRTPAGE P="150"/>be on the same approved basis that is used by the provider for Medicare beneficiaries who are not Medicare enrollees of the HMO or CMP, subject to the conditions and limitations set forth in § 417.548.</P> <P>(c) If, because of the special nature or terms of the HMO's or CMP's arrangement with the provider, apportionment on the basis specified in paragraph (b) of this section would result in Medicare's bearing the costs of furnishing services to individuals other than the HMO's or CMP's Medicare enrollees, apportionment must be on another basis that is approved by CMS and that will ensure that Medicare does not pay any of the cost of furnishing services to individuals who are not Medicare enrollees of the HMO or CMP.</P> <P>(d) If the HMO or CMP elects to have providers reimbursed by the HMO's or CMP's Medicare intermediary, the Medicare share is the amount the intermediary paid the provider.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.558</SECTNO> <SUBJECT>Emergency, urgently needed, and out-of-area services for which the HMO or CMP accepts responsibility.</SUBJECT> <P>(a) <E T="03">Source of payment.</E> Either CMS or the HMO or CMP may pay a provider for emergency or urgently needed services or other covered out-of-area services for which the HMO or CMP accepts responsibility.</P> <P>(b) <E T="03">Limits on payment.</E> If the HMO or CMP pays, the payment amount may not exceed the amount that is allowable under part 412 or part 413 of this chapter.</P> <P>(c) <E T="03">Exception to limit on payment.</E> Payment in excess of the limit imposed by paragraph (b) of this section is allowable only if the HMO or CMP demonstrates to CMS's satisfaction that it is justified on the basis of advantages gained by the HMO or CMP, as set forth in § 417.548.</P> <CITA>[60 FR 46231, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.560</SECTNO> <SUBJECT>Apportionment: Part B physician and supplier services.</SUBJECT> <P>(a) <E T="03">Medical services furnished directly by the HMO or CMP.</E> The total allowable cost of Part B physician and supplier services furnished by employees or partners of the HMO or CMP or by a related entity of the HMO or CMP must be apportioned on the basis of the ratio of covered Part B services furnished to Medicare enrollees to total services furnished to all the HMO's or CMP's enrollees and nonenrolled patients. The HMO or CMP must use a method for reporting costs that is approved by CMS. CMS bases its approval on a finding that the method—</P> <P>(1) Results in an accurate and equitable allocation of allowable costs; and</P> <P>(2) Is justifiable from an administrative and cost efficiency standpoint.</P> <P>(b) <E T="03">Medical services furnished under arrangements made by the HMO or CMP.</E> When the HMO or CMP pays for Part B physician and supplier services on some basis other than fee-for-service, the reasonable cost the HMO or CMP pays under its financial arrangement with the physician or supplier must be apportioned between Medicare enrollees and others based on the ratio of covered services furnished to Medicare enrollees to the total services furnished to all enrollees and nonenrolled patients. If apportionment on this basis would result in Medicare bearing the cost of furnishing services to individuals who are not Medicare enrollees, the Medicare share must be determined on another basis (approved by CMS) to ensure that Medicare pays only for services furnished to Medicare enrollees.</P> <P>(c) <E T="03">Medical services furnished under an arrangement that provides for the HMO or CMP to pay on a fee-for-service basis.</E> The Medicare share of the cost of Part B physician and supplier services furnished to Medicare enrollees under arrangements, and paid for by the HMO or CMP on a fee-for-service basis, is determined by multiplying the total amount for all such services by the ratio of charges for covered services furnished to Medicare enrollees to the total charges for all such services.</P> <P>(d) <E T="03">Emergency services, urgently needed services, and other covered medical services for which the HMO or CMP assumes financial responsibility.</E> The Medicare share of the cost of Part B emergency or urgently needed services or other Part B services that are not furnished by a provider and for which the HMO or CMP accepts financial responsibility is <PRTPAGE P="151"/>determined in accordance with paragraphs (b) and (c) of this section.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 34888, July 5, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.564</SECTNO> <SUBJECT>Apportionment and allocation of administrative and general costs.</SUBJECT> <P>(a) <E T="03">Costs not directly associated with providing medical care.</E> Enrollment, marketing, and other administrative and general costs that benefit the total enrollment of the HMO or CMP and are not directly associated with furnishing medical care must be apportioned on the basis of a ratio of Medicare enrollees to the total HMO or CMP enrollment.</P> <P>(b) <E T="03">Costs significantly related to providing medical services.</E> (1) The following administrative and general costs, which bear a significant relationship to the services furnished, are not apportioned to Medicare directly; they must be allocated or distributed to the HMO or CMP components and then apportioned to Medicare in accordance with §§ 417.552 through 417.560:</P> <P>(i) Facility costs.</P> <P>(ii) Interest expense.</P> <P>(iii) Medical record costs.</P> <P>(iv) Centralized purchasing costs.</P> <P>(v) Accounting and data processing costs.</P> <P>(vi) Other administrative and general costs that are not included in paragraph (a) of this section.</P> <P>(2) The allocation or distribution process must be as follows:</P> <P>(i) If a separate entity or department of an HMO or CMP performs administrative functions the benefit of which can be quantitatively measured (such as centralized purchasing and data processing), the total allowable costs of this entity or department must be allocated or distributed to the components of the HMO or CMP in reasonable proportion to the benefits received by these components.</P> <P>(ii) If a separate entity or department of an HMO or CMP performs administrative functions the benefit of which cannot be quantitatively measured (such as facility costs), the total allowable costs of this entity or department must be allocated or distributed to the components of the HMO or CMP on the basis of a ratio of total incurred and distributed costs per component to the total incurred and distributed costs for all components.</P> <CITA>[60 FR 46231, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.566</SECTNO> <SUBJECT>Other methods of allocation and apportionment.</SUBJECT> <P>(a) <E T="03">Justification.</E> A method of apportionment or allocation of costs, other than the methods prescribed in this subpart may be used if it results in a more accurate and equitable apportionment of allowable costs and is justifiable from an administrative and cost standpoint.</P> <P>(b) <E T="03">Required approval.</E> (1) An HMO or CMP that desires to use an alternative method must submit a written request for CMS approval at least 90 days before the beginning of the period for which the different method is to be used.</P> <P>(2) If CMS approves use of a different method, the HMO or CMP may not revert to another method without first obtaining CMS's approval.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.568</SECTNO> <SUBJECT>Adequate financial records, statistical data, and cost finding.</SUBJECT> <P>(a) <E T="03">Maintenance of records.</E> (1) An HMO or CMP must maintain sufficient financial records and statistical data for proper determination of costs payable by CMS for covered services the HMO or CMP furnished to its Medicare enrollees either directly or under arrangements with others. These include accurate and sufficient detail of incurred costs and enrollment data.</P> <P>(2) Unless otherwise provided for in this subpart, the HMO or CMP must follow standardized definitions and accounting, statistics, and reporting practices that are widely accepted in the health care industry.</P> <P>(b) <E T="03">Provision of data.</E> (1) The HMO or CMP must provide adequate cost and statistical data, based on its financial and statistical records, that can be verified by qualified auditors.</P> <P>(2) The cost data must be based on an approved method of cost finding and, except as provided in paragraph (b)(3) of this section, on the accrual method of accounting.<PRTPAGE P="152"/> </P> <P>(3) For governmental institutions that use a cash basis of accounting, cost data developed on this basis is acceptable. However, only depreciation on capital assets, rather than the expenditure for the capital asset, is allowable.</P> <P>(c) <E T="03">Provider services furnished directly by the HMO or CMP.</E> If the HMO or CMP furnishes provider services directly, the provider is subject to the cost-finding and cost-reporting requirements set forth in parts 412 and 413 of this chapter. The provider must use an approved cost-finding method described in § 413.24 of this chapter to determine the actual cost of these covered services.</P> <P>(d) <E T="03">Supplier services furnished directly by the HMO or CMP.</E> If the HMO or CMP furnishes Part B physician and supplier services directly, it must furnish statistics that indicate the frequency and type of service provided, in the form and detail prescribed by CMS.</P> <P>(e) <E T="03">Part B physician and supplier services furnished through arrangement.</E> If the HMO or CMP furnishes Part B physician and supplier services under arrangements with others, it must furnish to CMS statistical, financial, and other information with respect to those services in the form and detail prescribed by CMS.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 46231, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.570</SECTNO> <SUBJECT>Interim per capita payments.</SUBJECT> <P>(a) <E T="03">Principle of payment.</E> (1) CMS makes monthly advance payments equivalent to the HMO's or CMP's interim per capita rate for each beneficiary who is registered in CMS records as a Medicare enrollee of the HMO or CMP.</P> <P>(2) Additional lump-sum payments may be made at other times during the contract period, at CMS's discretion, to adjust the total amounts paid during the contract period to the level of incurred costs.</P> <P>(b) <E T="03">Determination of rate.</E> The interim per capita rate of payment is equal to the estimated per capita cost of providing covered services to the HMO's or CMP's Medicare enrollees, based upon the types and components of costs that are reimbursable under this part. The interim per capita rate is determined annually by CMS on the basis of the HMO's or CMP's annual operating and enrollment forecast (as set forth in § 417.572) and may be revised during the contract period as explained in paragraphs (c) and (d) of this section.</P> <P>(c) <E T="03">Adjustments of payments.</E> In order to maintain the interim payments at the level of current reasonable costs, CMS will adjust the interim per capita rate, to the extent necessary, on the basis of adequate data supplied by the HMO or CMP in its interim estimated cost and enrollment reports or on other evidence showing that the rate based on actual costs is more or less than the current rate. Adjustments may also be made if there is—</P> <P>(1) A change in the number of Medicare enrollees that affects the per capita rate;</P> <P>(2) A material variation from the costs estimated when the annual operating budget was prepared; or</P> <P>(3) A significant change in the use of covered services by the HMO's or CMP's Medicare enrollees.</P> <P>(d) <E T="03">Reduction of interim payments.</E> If the HMO or CMP does not submit, on time, the reports and other data required to determine the proper amount of payment, CMS may reduce interim payments to the extent appropriate, or may take any other action authorized under this part. An interim payment reduction remains in effect until CMS can make a reasonable estimate of per capita costs.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.572</SECTNO> <SUBJECT>Budget and enrollment forecast and interim reports.</SUBJECT> <P>(a) <E T="03">Annual submittal.</E> The HMO or CMP must submit an annual operating budget and enrollment forecast, in the form and detail required by CMS, at least 90 days before the beginning of each contract period. The forecast must be based on financial and statistical data and records that can be verified if CMS requires a detailed review of supporting records. The data and records include, but are not limited to, all ledgers, books, records, and original evidence of costs, and statistical data used in the determination of reasonable cost.<PRTPAGE P="153"/> </P> <P>(b) <E T="03">Effect of failure to submit on time.</E> If the HMO or CMP does not submit the budget and enrollment forecast on time, CMS may—</P> <P>(1) Establish an interim per capita rate of payment on the basis of the best available data and adjust payments on the basis of that rate until the required reports are submitted and a new interim per capita rate can be established; or</P> <P>(2) If there is not enough data on which to base an interim per capita rate, inform the HMO or CMP that interim payments will not be made until the required reports are submitted.</P> <P>(c) <E T="03">Interim cost reports.</E> (1) An HMO or CMP must submit interim cost reports on a quarterly basis in the form and detail prescribed by CMS. These interim cost reports must be submitted no later than 60 days after the close of each quarter of the contract period.</P> <P>(2) CMS may reduce the frequency of the reports required under paragraph (c)(1) of this section if CMS determines that, on the basis of the HMO's or CMP's reporting experience, there is good cause to do so.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.574</SECTNO> <SUBJECT>Interim settlement.</SUBJECT> <P>(a) <E T="03">Determination.</E> Within 30 days following the receipt of the HMO's or CMP's final interim cost and enrollment reports, CMS will make an interim determination of the estimated amount payable to the HMO or CMP for the reasonable cost of covered services furnished to its Medicare enrollees during the contract period. CMS will base the determination on the interim cost report and enrollment data submitted by the HMO or CMP, and any other relevant data CMS finds appropriate. For this purpose, CMS will accept costs as reported, subject to later review or audit, unless there are obvious errors or inconsistencies.</P> <P>(b) <E T="03">Payment.</E> Any difference between the total amount of interim payments and the amount found payable on the basis of the interim determination under paragraph (a) of this section, must be paid by the HMO or CMP or will be paid by CMS, whichever is appropriate, no later than 30 days after CMS's determination.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.576</SECTNO> <SUBJECT>Final settlement.</SUBJECT> <P>(a) <E T="03">General rule.</E> Final settlement and payment of amounts due the HMO or CMP or the appropriate Medicare trust funds are made following the HMO's or CMP's submission and CMS's review of an independently certified cost report and supporting documents as described in paragraph (b) of this section.</P> <P>(b) <E T="03">Certified cost report as basis for final settlement</E>—(1) <E T="03">Timing of cost report.</E> The HMO or CMP must submit to CMS an independently certified cost report and supporting documents, in the form and detail required by CMS, no later than 180 days after the end of each contract period, unless CMS extends the period for good cause shown by the HMO or CMP.</P> <P>(2) <E T="03">Content of cost report.</E> The cost report and supporting documents must include the following:</P> <P>(i) The per capita costs incurred in furnishing covered services to its Medicare enrollees, determined in accordance with subpart O of this part and including—</P> <P>(A) The costs incurred by entities related to the HMO or CMP by common ownership or control; and</P> <P>(B) For reports for cost-reporting periods that begin on or after January 1, 1996, the costs of hospital and SNF services paid by Medicare's intermediaries under the option provided by § 417.532(d).</P> <P>(ii) The HMO's or CMP's methods of apportioning cost among Medicare enrollees, and nonenrolled patients, in accordance with the payment procedures specified in this subpart (as, applicable, in parts 412 and 413 of this chapter); and</P> <P>(iii) Any other information required by CMS.</P> <P>(3) <E T="03">Failure to report required financial information.</E> If the HMO or CMP fails to submit the required cost report and supporting documents within 180 days (or an extended period approved by CMS under paragraph (b)(1) of this section), CMS may—</P> <P>(i) Consider the failure to report as evidence of likely overpayment; and<PRTPAGE P="154"/> </P> <P>(ii) Initiate recovery of amounts previously paid, or reduce interim payments, or both.</P> <P>(c) <E T="03">Final determination and adjustment.</E> (1) After receipt of acceptable reports as specified in paragraph (b) of this section, CMS determines the total payment due the HMO or CMP for furnishing covered services to its Medicare enrollees (which is subject to the audit provisions of this subpart) and makes a retroactive adjustment to bring interim payments into agreement with the payable amount due the HMO or CMP.</P> <P>(2) A final settlement may be made with the HMO or CMP even though a provider that is not owned or operated by the HMO or CMP or related to the HMO or CMP by common ownership or control and that provides services to the HMO's or CMP's Medicare enrollees has not had a final settlement with CMS under parts 412 and 413 of this chapter for services furnished by the provider to Medicare beneficiaries who are not enrolled in the HMO or CMP. In this situation—</P> <P>(i) CMS must be satisfied that the costs of covered services furnished to the HMO's or CMP's Medicare enrollees, as shown in the reports specified in paragraph (b) of this section, are reasonable and that the interest of the Medicare program would best be served by not delaying final settlement with the HMO or CMP until there is a final settlement with the provider for services furnished to Medicare beneficiaries not enrolled in the HMO or CMP; and</P> <P>(ii) Prompt settlement with the HMO or CMP would be in the best interest of the Medicare program if, for instance, the provider's costs represent an insignificant portion of total payment due to the HMO or CMP; or if CMS is satisfied that the provider's costs, as shown in the reports specified in paragraph (b) of this section, will not be modified, to any significant extent, by the final settlement with the provider under parts 412 and 413 of this chapter.</P> <P>(d) <E T="03">Notice of amount of payment.</E> The notice of amount of Medicare payment—</P> <P>(1) Explains CMS's determination regarding total Medicare payment due the HMO or CMP for the contract period covered by the financial information specified in paragraph (b) of this section;</P> <P>(2) Relates this determination to the HMO's or CMP's claimed total payable cost for that period;</P> <P>(3) Explains the amounts and reasons, by appropriate reference to law, regulations, and Medicare program policy and procedures, if the determined amounts differ from the HMO's or CMP's claim; and</P> <P>(4) Informs the HMO or CMP of its right to a hearing in accordance with subpart R of part 405 of this chapter.</P> <P>(e) <E T="03">Basis for retroactive adjustment.</E> (1) CMS's determination (as contained in the notice of amount of Medicare payment) constitutes the basis for making retroactive adjustments to any Medicare payment made to the HMO or CMP during the period to which the determination applies.</P> <P>(2) Further payments to the HMO or CMP may be withheld or offset in order to recover, or to aid in the recovery of, any overpayment identified in the determination as having been made to the HMO or CMP, even if the HMO or CMP requests a hearing under subpart R of part 405 of this chapter.</P> <P>(3) Any withholding continues until the earliest of the following occurs:</P> <P>(i) The overpayment is liquidated.</P> <P>(ii) The HMO or CMP enters into an agreement with CMS to refund the overpaid amount.</P> <P>(iii) CMS, on the basis of subsequently acquired information, determines that there was no overpayment.</P> <P>(iv) The decision of a hearing specified in paragraph (d)(4) of this section is that there was no overpayment.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 51 FR 34833, Sept. 30, 1986; 58 FR 38082, July 15, 1993; 60 FR 34888, July 5, 1995; 60 FR 46231, Sept. 6, 1995]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart P—Medicare Payment: Risk Basis</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>50 FR 1346, Jan. 10, 1985, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 417.580</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) <E T="03">Basis.</E> This subpart implements those portions of section 1876 (a), (e), and (g) of the Act that pertain to the amount CMS pays an organization for <PRTPAGE P="155"/>its Medicare enrollees who are enrolled on a risk basis.</P> <P>(b) <E T="03">Scope.</E> This subpart sets forth—</P> <P>(1) Method of payment;</P> <P>(2) Procedures for determining the HMO's or CMP's payment rate; and</P> <P>(3) Procedures for determining the additional benefits (and their value) the HMO or CMP must provide to its Medicare enrollees.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 58 FR 38080, July 15, 1993; 60 FR 46231, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.582</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart—</P> <P> <E T="03">AAPCC</E> stands for adjusted average per capita cost.</P> <P> <E T="03">ACR</E> stands for adjusted community rate.</P> <P> <E T="03">Actuarial factors</E> means factors such as the age, sex, and disability level distribution of the population and any other relevant factors that CMS determines have a significant effect on the level of utilization and cost of health services.</P> <P> <E T="03">APCRP</E> stands for average of per capita rates of payment.</P> <P> <E T="03">Class of Medicare enrollees</E> means a group of Medicare enrollees of an HMO or CMP that CMS constructs on the basis of actuarial factors.</P> <P> <E T="03">Similar area</E> means an area similar to the HMO's or CMP's geographic area but free from special characteristics that would distort the determination of the AAPCC.</P> <P> <E T="03">U.S. per capita incurred cost</E> means the average per capita cost, including intermediary or carrier administrative costs, incurred by Medicare, as determined on an accrual basis, for covered services furnished to Medicare beneficiaries nationwide during the most recent period for which CMS has complete data.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 58 FR 38080, July 15, 1993; 60 FR 46232, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.584</SECTNO> <SUBJECT>Payment to HMOs or CMPs with risk contracts.</SUBJECT> <P>Except in the circumstances specified in § 417.440(d) for inpatient hospital care, and as provided in § 417.585 for hospice care, CMS makes payment for covered services only to the HMO or CMP.</P> <P>(a) <E T="03">Principle of payment.</E> CMS makes monthly advance payments equivalent to the HMO's or CMP's per capita rate of payment for each beneficiary who is registered in CMS records as a Medicare enrollee of the HMO or CMP.</P> <P>(b) <E T="03">Determination of rate.</E> (1) The annual per capita rate of payment for each class of Medicare enrollees is equal to 95 percent of the AAPCC (as determined under the provisions of § 417.588) for that class of Medicare enrollees.</P> <P>(2) CMS furnishes each HMO or CMP with its per capita rate of payment for each class of Medicare enrollees not later than 90 days before the beginning of the HMO's or CMP's contract period.</P> <P>(c) <E T="03">Adjustments to payments.</E> If the actual number of Medicare enrollees differs from the estimated number on which the amount of advance monthly payment was based, CMS adjusts subsequent monthly payments to take account of the difference.</P> <P>(d) <E T="03">Reduction of payments.</E> If an HMO or CMP requests a reduction in its monthly payment in accordance with § 417.592(b)(2), CMS reduces the amount of payment by the appropriate amount.</P> <P>(e) <E T="03">Determination of rate for calendar year 1998.</E> For calendar year 1998, HMOs or CMPs with risk contracts will be paid in accordance with principles contained in subpart F of part 422 of this chapter.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 52 FR 8901, Mar. 20, 1987; 58 FR 38082, July 15, 1993; 60 FR 46232, Sept. 6, 1995; 63 FR 35067, June 26, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.585</SECTNO> <SUBJECT>Special rules: Hospice care.</SUBJECT> <P>(a) No payment is made to an HMO or CMP on behalf of a Medicare enrollee who has elected hospice care under § 418.24 of this chapter except for the portion of the payment applicable to the additional benefits described in § 417.592. This no-payment rule is effective from the first day of the month following the month of election to receive hospice care, until the first day of the month following the month in which the enrollee resumes normal Medicare coverage.</P> <P>(b) During the time the election is in effect, the HMO or CMP may bill CMS on a fee-for-service basis (subject to the usual Medicare rules of payment) <PRTPAGE P="156"/>but only for the following covered Medicare services:</P> <P>(1) Services of the enrollee's attending physician if the physician is an employee or contractor of the HMO or CMP and is not employed by or under contract to the enrollee's hospice.</P> <P>(2) Services not related to the treatment of the terminal condition for which the enrollee elected hospice care or a condition related to the terminal condition.</P> <P>(3) Services furnished after the revocation or expiration of the enrollee's hospice election until the full monthly capitation payments begin again.</P> <P>(c) Payment for hospice care services furnished to Medicare enrollees of an HMO or CMP is made to the Medicare-participating hospice elected by the enrollee.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60 FR 46232, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.588</SECTNO> <SUBJECT>Computation of adjusted average per capita cost (AAPCC).</SUBJECT> <P>(a) <E T="03">Basic data.</E> In computing the AAPCC, CMS uses the U.S. per capita incurred cost and adjusts it by the factors specified in paragraph (c) of this section to establish an AAPCC for each class of Medicare enrollees.</P> <P>(b) <E T="03">Advance notice to the HMO or CMP.</E> Before the beginning of a contract period, CMS informs the HMO or CMP of the specific adjustment factors it will use in computing the AAPCC.</P> <P>(c) <E T="03">Adjustment factors</E>—(1) <E T="03">Geographic.</E> CMS makes an adjustment to reflect the relative level of Medicare expenditures for beneficiaries who reside in the HMO's or CMP's geographic area (or a similar area). This adjustment is based on reimbursement for Medicare covered services and uses the most accurate and timely data that pertain to the HMO's or CMP's geographic area and that is available to CMS when it makes the determination.</P> <P>(2) <E T="03">Enrollment.</E> CMS makes a further adjustment to remove the cost effect of all area Medicare beneficiaries who are enrolled in the HMO or CMP or another HMO or CMP.</P> <P>(3) <E T="03">Age, sex, and disability status.</E> CMS makes adjustments to reflect the age and sex distribution and the disability status of the HMO's or CMP's enrollees based on Medicare program experience and available data that indicate cost differences that result from those factors.</P> <P>(4) <E T="03">Other relevant factors.</E> If accurate data are available and appropriate, CMS makes adjustments to reflect welfare and institutional status and other relevant factors.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38083, July 15, 1993; 60 FR 46232, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.590</SECTNO> <SUBJECT>Computation of the average of the per capita rates of payment.</SUBJECT> <P>(a) <E T="03">Computation by the HMO or CMP.</E> As indicated in § 417.584(b), before an HMO's or CMP's contract period begins, CMS determines a per capita rate of payment for each class of the HMO's or CMP's Medicare enrollees. In order to determine the additional benefits required under § 417.592, weighted averages of those per capita rates must be computed separately for enrollees entitled to Part A and Part B, and for enrollees entitled only to Part B. Except as provided in paragraph (b) of this section, the HMO or CMP must make the computations.</P> <P>(b) <E T="03">Computation by CMS.</E> If the HMO or CMP claims to have insufficient enrollment experience to make the computations required by paragraph (a) of this section, and CMS agrees with the claim, CMS makes the computations, using the best available information, which may include the enrollment experience of other risk HMOs and CMPs.</P> <CITA>[58 FR 38075, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.592</SECTNO> <SUBJECT>Additional benefits requirement.</SUBJECT> <P>(a) <E T="03">General rules.</E> (1) An HMO or CMP that has an APCRP (as determined under § 417.590) greater than its ACR (as determined under § 417.594) must elect one of the options specified in paragraph (b) of this section.</P> <P>(2) The dollar value of the elected option must, over the course of a contract period, be at least equal to the difference between the APCRP and the proposed ACR.</P> <P>(b) <E T="03">Options</E>—(1) <E T="03">Additional benefits.</E> Provide its Medicare enrollees with additional benefits in accordance with paragraph (c) of this section.<PRTPAGE P="157"/> </P> <P>(2) <E T="03">Payment reduction.</E> Request CMS to reduce its monthly payments.</P> <P>(3) <E T="03">Combination of additional benefits and payment reduction.</E> Provide fewer than the additional benefits required under paragraph (b)(1) of this section and request CMS to reduce the monthly payments by the remaining difference between the APCRP and the ACR.</P> <P>(4) <E T="03">Combination of additional benefits and withholding in a stabilization fund.</E> Provide fewer than the additional benefits required under paragraph (b)(1) of this section, and request CMS to withhold in a stabilization fund (as provided in § 417.596) the remaining difference between the APCRP and the ACR.</P> <P>(c) <E T="03">Special rules: Additional benefits option.</E> (1) The HMO or CMP must determine additional benefits separately for enrollees entitled to both Part A and Part B benefits and those entitled only to Part B.</P> <P>(2) The HMO or CMP may elect to provide additional benefits in any of the following forms—</P> <P>(i) A reduction in the HMO's or CMP's premium or in other charges it imposes in the form of deductibles or coinsurance.</P> <P>(ii) Health benefits in addition to the required Part A and Part B covered services.</P> <P>(iii) A combination of reduced charges and additional benefits.</P> <P>(d) <E T="03">Notification to CMS.</E> (1) The HMO or CMP must give CMS notice of its ACR and its weighted APCRP at least 45 days before its contract period begins.</P> <P>(2) An HMO or CMP that elects the option of providing additional benefits must include in its submittal—</P> <P>(i) A description of the additional benefits it will provide to its Medicare enrollees; and</P> <P>(ii) Supporting evidence to show that the selected benefits meet the requirements of paragraph (a)(2) of this section with respect to dollar value equivalence.</P> <CITA>[60 FR 46232, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.594</SECTNO> <SUBJECT>Computation of adjusted community rate (ACR).</SUBJECT> <P>(a) <E T="03">Basic rule.</E> Each HMO or CMP must compute its basic rate as follows:</P> <P>(1) Compute an initial rate in accordance with paragraph (b) of this section.</P> <P>(2) Adjust and reduce the initial rate in accordance with paragraphs (c) and (d) of this section.</P> <P>(b) <E T="03">Computation of initial rates.</E> (1) The HMO or CMP must compute its initial rate using either of the following systems:</P> <P>(i) A community rating system as defined in § 417.104(b); or</P> <P>(ii) A system, approved by CMS, under which the HMO or CMP develops an aggregate premium for all its enrollees and weights the aggregate by the size of the various enrolled groups that compose its enrollment. </P> <FP>(For purposes of this section, enrolled groups are defined as employee groups or other bodies of subscribers that enroll in the HMO or CMP through payment of premiums.)</FP> <P>(2) Regardless of which method the HMO or CMP uses—</P> <P>(i) The initial rate must be equal to the premium it would charge its non-Medicare enrollees for the Medicare-covered services;</P> <P>(ii) The HMO or CMP must compute the rates separately for enrollees entitled to Medicare Part A and Part B and for those entitled only to Part B; and</P> <P>(iii) The HMO or CMP must identify and take into account anticipated revenue from health insurance payers for those services for which Medicare is not the primary payer as provided in § 417.528.</P> <P>(3) Except as provided in paragraph (b)(4) of this section, the HMO or CMP must identify in its initial rate calculation, the following components whose rates must be consistent with rates used by the HMO or CMP in calculating premiums for non-Medicare enrollees:</P> <P>(i) Hospital services (services covered under Medicare Part A and Part B shown separately).</P> <P>(ii) Physicians' services.</P> <P>(iii) Other medical services (for example, X-ray and laboratory services).</P> <P>(iv) Home health services.</P> <P>(v) Out-of-plan claims for emergency services.</P> <P>(vi) Skilled nursing care services.</P> <P>(vii) Ambulance services.</P> <P>(viii) Other Medicare covered services.<PRTPAGE P="158"/> </P> <P>(ix) General and administrative.</P> <P>(x) Noncovered Medicare services (for example, eyeglasses).</P> <P>(xi) Services for which Medicare is the secondary payer.</P> <P>(xii) Enrollee liabilities (for example, deductibles, coinsurance, or copayments) for covered services.</P> <P>(4) An HMO or CMP that does not usually separate its premium components as described in paragraph (b)(3) of this section may calculate its initial rate with the methods it uses for its other enrolled groups if the HMO or CMP provides CMS with the documentation necessary to support any adjustments the HMO or CMP makes to the initial rate in accordance with paragraph (e) of this section.</P> <P>(5) The initial rate calculation must not carry forward any losses experienced by the HMO or CMP during prior contract periods. The HMO or CMP must submit supporting documentation to assure CMS that rates do not include past losses but only premiums for the price of additional benefits and services of the upcoming contract period.</P> <P>(c) <E T="03">Adjustment of initial rates</E>—(1) <E T="03">Purpose of adjustment.</E> The purpose of adjustment is to reflect the utilization characteristics of Medicare enrollees.</P> <P>(2) <E T="03">Adjustment by the HMO or CMP.</E> The HMO or CMP may adjust the rate for a particular service using more than one of the following factors if they do not duplicate each other:</P> <P>(i) <E T="03">Unit of service.</E> If the HMO or CMP purchases or identifies services on a unit of service basis and the unit of service is defined the same for all enrollees, the HMO or CMP may make an adjustment in its initial rate to reflect the number of units of services furnished to its Medicare enrollees in comparison to those furnished to other enrollees.</P> <P>(ii) <E T="03">Complexity or intensity of services.</E> The HMO or CMP may make an adjustment to reflect the differences in the complexity or intensity of services furnished to its Medicare enrollees if the calculation of its initial rate includes the elements of this adjustment.</P> <P>(3) <E T="03">Support documentation.</E> All adjustments made by the HMO or CMP must be accompanied by adequate supporting data. If an HMO or CMP does not have sufficient enrollment experience to develop this data, it may, during its initial contract period, use documented statistics from a nationally recognized statistical source.</P> <P>(4) <E T="03">Adjustment by CMS.</E> If the HMO or CMP does not have adequate data to adjust the initial rate calculated under paragraph (b) of this section to reflect the utilization characteristics of its Medicare enrollees, CMS will, at the HMO's or CMP's request, adjust the initial rate. CMS adjusts the rate on the basis of differences in the utilization characteristics of—</P> <P>(i) Medicare and non-Medicare enrollees in other HMOs or CMPs; or</P> <P>(ii) Medicare beneficiaries (in the HMO's or CMP's area, or State, or the United States) who are eligible to enroll in an HMO or CMP and other individuals in that same area, or State, or the United States.</P> <P>(d) <E T="03">Reduction of adjusted rates.</E> The HMO or CMP or CMS further reduces the adjusted rates by the actuarial value of applicable Medicare deductibles and coinsurance.</P> <P>(e) <E T="03">CMS review</E>—(1) <E T="03">Submission of data.</E> The HMO or CMP must submit its ACR and the methodology used to compute it for CMS review and approval, and must include adequate supporting data.</P> <P>(2) <E T="03">Appeals procedures.</E> (i) If CMS determines that an HMO's or CMP's ACR computation is not acceptable, the HMO or CMP may, within 30 days after receipt of notice of the determination, file with CMS a request for a hearing.</P> <P>(ii) The request must state why the HMO or CMP believes the determination is incorrect, and include any supporting evidence the HMO or CMP considers pertinent.</P> <P>(iii) A hearing officer designated by CMS conducts the hearing in accordance with the hearing procedures set forth in §§ 405.1819 through 405.1833 of this chapter.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38080, July 15, 1993; 60 FR 46232, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.596</SECTNO> <SUBJECT>Establishment of a benefit stabilization fund.</SUBJECT> <P>(a) <E T="03">General.</E> If an HMO or CMP is required to provide its Medicare enrollees with additional benefits as described in § 417.592, the organization <PRTPAGE P="159"/>may request that CMS withhold a part of its monthly per capita payment in a benefit stabilization fund. The fund will be used to prevent excessive fluctuation in the provision of those additional benefits in subsequent contract periods.</P> <P>(b) <E T="03">Notification to CMS.</E> An HMO's or CMP's request to have monies withheld in a benefit stabilization fund must be made when the HMO or CMP notifies CMS under § 417.592(d) of its ACR and its APCRP in preparation for its next contract period.</P> <P>(c) <E T="03">Limitations on the amounts withheld</E>—(1) <E T="03">Limit per contract period.</E> Except as provided in paragraph (c)(3) of this section, CMS does not withhold in a benefit stabilization fund more than 15 percent of the difference between an HMO's or CMP's ACR and its ACPRP for a given contract period.</P> <P>(2) <E T="03">Cumulative limit.</E> If CMS has established a benefit stabilization fund for an HMO or CMP, it does not approve a request for withholding made by that HMO or CMP for a subsequent contract period that would cause the total value of the benefit stabilization fund to exceed 25 percent of the difference between the HMO's or CMP's ACR and the average of its per capita rates of payment for that subsequent contract period.</P> <P>(3) <E T="03">Exception.</E> CMS may grant an exception to the limit described in paragraph (c)(1) of this section if an HMO or CMP can demonstrate to CMS's satisfaction that the value of the additional benefits it provides to its Medicare enrollees fluctuates substantially in excess of 15 percent from one contract period to another.</P> <P>(d) <E T="03">Financial management of benefit stabilization funds.</E> (1) The amounts withheld by CMS to establish and maintain a benefit stabilization fund are in the custody of the Federal Health Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund.</P> <P>(2) The amounts withheld in a benefit stabilization fund are accounted for by CMS in accounts in which interest does not accrue to the HMO or CMP.</P> <CITA>[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended by 56 FR 46571, Sept. 13, 1991; 58 FR 38083, July 15, 1993; 60 FR 46233, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.597</SECTNO> <SUBJECT>Withdrawal from a benefit stabilization fund.</SUBJECT> <P>(a) <E T="03">Notification to CMS.</E> An HMO's or CMP's request to make a withdrawal from its benefit stabilization fund for use during a contract period must be made when the HMO or CMP notifies CMS of its ACR and its ACPRP for that contract period. In making its request, the HMO or CMP must—</P> <P>(1) Indicate how it intends to use the withdrawn amounts;</P> <P>(2) Justify the need for the withdrawal in terms of stabilizing the additional benefits it provides to Medicare enrollees;</P> <P>(3) Document the HMO's or CMP's experience with fluctuations of revenue requirements relative to the additional benefits it provides to Medicare enrollees; and</P> <P>(4) Document its experience during the contract period previous to the one for which it requests withdrawal to ensure that the HMO or CMP will not be using the withdrawn amounts to refinance losses suffered during that previous contract period.</P> <P>(b) <E T="03">Criteria for CMS approval.</E> CMS approves a request for a withdrawal from a benefit stabilization fund for use during the next contract period only if—</P> <P>(1) The HMO's or CMP's average of its per capita rates of payment for the next contract period is less than that of the previous contract period;</P> <P>(2) The HMO's or CMP's ACR for the next contract period is significantly higher than that of the previous contract period; or</P> <P>(3) The HMO's or CMP's revenue requirements for the next contract period for providing the additional benefits it provided during the previous contract period is significantly higher than the requirements for that previous period and the ACR for the next contract period results in an additional benefits package that is less in total value than that of the previous contract period.</P> <P>(c) <E T="03">Basis for denial.</E> CMS does not approve a request for a withdrawal from a benefit stabilization fund if the withdrawal would allow the HMO or CMP to—<PRTPAGE P="160"/> </P> <P>(1) Offer without charge the supplemental services it provides to its Medicare enrollees under the provisions of § 417.440 (b)(2) or (b)(3); or</P> <P>(2) Refinance prior contract period losses or to avoid losses in the upcoming contract period.</P> <P>(d) <E T="03">Form of payment.</E> Payment of monies withdrawn from a benefit stabilization fund is made, in equal parts, as an additional amount to the monthly advance payment made to the HMO or CMP under § 417.584 during the period of the contract.</P> <CITA>[58 FR 38075, July 15, 1993, as amended at 60 FR 46233, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.598</SECTNO> <SUBJECT>Annual enrollment reconciliation.</SUBJECT> <P>CMS's payment to an HMO or CMP may be subject to an enrollment reconciliation at least annually. CMS conducts this reconciliation as necessary to ensure that the payments made do not exceed or fall short of the appropriate per capita rate of payment for each Medicare enrollee of the HMO or CMP during the contract period. The HMO or CMP must submit any information or reports required by CMS to conduct the reconciliation.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38080, July 15, 1993; 60 FR 46233, Sept. 6, 1995]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart Q—Beneficiary Appeals</HD> <SECTION> <SECTNO>§ 417.600</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) <E T="03">Statutory basis.</E> (1) Section 1869 of the Act provides the right to a redetermination, reconsideration, hearing, and judicial review for individuals dissatisfied with a determination regarding their Medicare benefits.</P> <P>(2) Section 1876 of the Act provides for Medicare payments to HMOs and CMPs that contract with CMS to enroll Medicare beneficiaries and furnish Medicare-covered health care services to them.</P> <P>(3) Section 234 of the MMA requires section 1876 contractors to operate under the same provisions as MA plans where two plans of the same type enter the cost plan contract's service area.</P> <P>(b) <E T="03">Applicability.</E> (1) The rights, procedures, and requirements relating to beneficiary appeals and grievances set forth in subpart M of part 422 of this chapter also apply to Medicare contracts with HMOs and CMPs under section 1876 of the Act.</P> <P>(2) In applying those provisions, references to section 1852 of the Act must be read as references to section 1876 of the Act, and references to MA organizations as references to HMOs and CMPs.</P> <CITA>[60 FR 46233, Sept. 6, 1995, as amended at 62 FR 23374, Apr. 30, 1997; 70 FR 4713, Jan. 28, 2005]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart R—Medicare Contract Appeals</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>50 FR 1346, Jan. 10, 1985, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 417.640</SECTNO> <SUBJECT>Determinations subject to appeal.</SUBJECT> <P>This subpart establishes the procedures for making and reviewing the following initial determinations:</P> <P>(a) A determination that an HMO or CMP is not qualified to enter into a contract with CMS under section 1876 of the Act.</P> <P>(b) A determination that an HMO or CMP is qualified only for a reasonable cost contract.</P> <P>(c) A determination to terminate, or to refuse to renew, a contract with an HMO or CMP because—</P> <P>(1) The HMO or CMP has failed substantially to carry out the terms of the contract;</P> <P>(2) The HMO or CMP is carrying out the contract in a manner that is inconsistent with the efficient and effective administration of section 1876 of the Act;</P> <P>(3) The HMO or CMP no longer meets the applicable conditions necessary to qualify as an HMO or CMP under section 1876 of the Act and this subpart; or</P> <P>(4) The HMO or CMP has failed to comply with the composition of enrollment requirements specified in § 417.413(d).</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 46572, Sept. 13, 1991; 58 FR 38080, July 15, 1993]</CITA> </SECTION> <SECTION> <PRTPAGE P="161"/> <SECTNO>§ 417.642</SECTNO> <SUBJECT>Administrative actions that are not initial determinations.</SUBJECT> <P>Administrative actions that are not initial determinations under this subpart include, but are not limited to, CMS's refusal to renew a contract with an HMO or CMP when the refusal is not based on the causes specifed in § 417.640(c).</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38080, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.644</SECTNO> <SUBJECT>Notice of initial determination.</SUBJECT> <P>(a) When CMS makes an initial determination, it gives the HMO or CMP written notice.</P> <P>(b) The notice specifies—</P> <P>(1) The reasons for the determination; and</P> <P>(2) The HMO's or CMP's right to request reconsideration.</P> <P>(c) CMS mails the notice to the HMO or CMP at least 90 days before the end of the contract period, or in the case of termination, at least 90 days before the effective date of the termination.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38083, July 15, 1993; 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.646</SECTNO> <SUBJECT>Effect of initial determination.</SUBJECT> <P>The initial determination is final and binding on all parties unless—</P> <P>(a) It is reconsidered in accordance with §§ 417.648 through 417.658;</P> <P>(b) In the case of an initial determination described in § 417.640(c), a request for a hearing is filed; or</P> <P>(c) It is revised as a result of a reopening under § 417.692.</P> </SECTION> <SECTION> <SECTNO>§ 417.648</SECTNO> <SUBJECT>Reconsideration: Applicability.</SUBJECT> <P>(a) Reconsideration is the first step for appealing an organization determination specified in § 417.640(a) or (b).</P> <P>(b) CMS reconsiders either of the specified determinations if the HMO or CMP files a written request in accordance with § 417.650.</P> <CITA>[60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.650</SECTNO> <SUBJECT>Request for reconsideration.</SUBJECT> <P>(a) <E T="03">Method and place for filing a request.</E> A request for reconsideration must be made in writing and filed with any CMS office.</P> <P>(b) <E T="03">Time for filing a request.</E> Except as provided in paragraph (c) of this section, the request for reconsideration must be filed within 60 days from the date of the notice of the initial determination.</P> <P>(c) <E T="03">Extension of time to file a request.</E> CMS may, in response to a party's written petition showing good cause, accept a request for reconsideration after the expiration of the 60 day period.</P> <P>(d) <E T="03">Proper party to file a request.</E> Only an authorized official of the entity that was a party to an initial determination may file the request for reconsideration.</P> <P>(e) <E T="03">Withdrawal of a request.</E> A request for reconsideration may be withdrawn by the party who filed the request at any time before the notice of the reconsidered determination is mailed. The request for withdrawal must be in writing and filed with CMS. If CMS approves, the request for reconsideration is withdrawn.</P> </SECTION> <SECTION> <SECTNO>§ 417.652</SECTNO> <SUBJECT>Opportunity to submit evidence.</SUBJECT> <P>CMS provides the parties to the reconsideration reasonable opportunity to present as evidence any documents or written statements that are relevant and material to the matters at issue.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.654</SECTNO> <SUBJECT>Reconsidered determination.</SUBJECT> <P>A reconsidered determination is a new determination that—</P> <P>(a) Is based on a review of the initial determination, the evidence and findings upon which that was based, and any other written evidence submitted before notice of the reconsidered determination is mailed, including facts relating to the status of the entity subsequent to the initial determination; and</P> <P>(b) Affirms, reverses, or modifies the initial determination.</P> </SECTION> <SECTION> <SECTNO>§ 417.656</SECTNO> <SUBJECT>Notice of reconsidered determination.</SUBJECT> <P>(a) CMS gives the parties written notice of the reconsidered determination.</P> <P>(b) The notice—<PRTPAGE P="162"/> </P> <P>(1) Contains findings with respect to the HMO's or CMP's qualifications to enter into a contract with CMS under section 1876 of the Act;</P> <P>(2) States the specific reasons for the reconsidered determination; and</P> <P>(3) Informs the party of its right to a hearing if it is dissatisfied with the determination.</P> <CITA>[60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.658</SECTNO> <SUBJECT>Effect of reconsidered determination.</SUBJECT> <P>A reconsidered determination is final and binding on all parties unless a request for a hearing is filed in accordance with § 417.662 or it is revised in accordance with § 417.692.</P> </SECTION> <SECTION> <SECTNO>§ 417.660</SECTNO> <SUBJECT>Right to a hearing.</SUBJECT> <P>The following parties are entitled to a hearing:</P> <P>(a) An entity that has been determined in a reconsidered determination to be unqualified to enter into a contract with CMS under section 1876 of the Act.</P> <P>(b) An HMO or CMP that has been determined in a reconsidered determination to be qualified only for a reasonable cost contract.</P> <P>(c) An HMO or CMP whose contract with CMS has been terminated or has not been renewed as a result of an initial determination as provided in § 417.640(c).</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38083, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.662</SECTNO> <SUBJECT>Request for hearing.</SUBJECT> <P>(a) <E T="03">Method and place for filing a request.</E> A request for a hearing must be made in writing and filed by an authorized official of the entity or HMO or CMP that was the party to the determination under appeal. The request for a hearing must be filed with any CMS office.</P> <P>(b) <E T="03">Time for filing a request.</E> Except as provided in paragraph (c) of this section, a request for a hearing must be filed within 60 days after the date of receipt of the notice of initial or reconsidered determination.</P> <P>(c) <E T="03">Extension of time to file a request.</E> If good cause is shown, the 60-day period to request a hearing may be extended by CMS.</P> <P>(d) <E T="03">Parties to a hearing.</E> The parties to a hearing must be—</P> <P>(1) The parties described in § 417.660;</P> <P>(2) At the discretion of the hearing officer, any interested parties who make a showing that their rights may be prejudiced by the decision to be rendered at the hearing; and</P> <P>(3) CMS.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38083, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.664</SECTNO> <SUBJECT>Postponement of effective date of initial determination.</SUBJECT> <P>When a request for a hearing with respect to an initial determination is filed timely—</P> <P>(a) The effective date of the initial determination to terminate a contract with an HMO or CMP will be postponed until a hearing decision is reached; and</P> <P>(b) The current contract will be extended at the end of the contract period (in the case of a determination not to renew) only—</P> <P>(1) If CMS finds that an extension of the contract will be consistent with the purpose of section 1876 of the Act; and</P> <P>(2) For such period as CMS and the HMO or CMP agree.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38083, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.666</SECTNO> <SUBJECT>Designation of hearing officer.</SUBJECT> <P>CMS designates a hearing officer to conduct the hearing. The hearing officer need not be an ALJ.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.668</SECTNO> <SUBJECT>Disqualification of hearing officer.</SUBJECT> <P>(a) A hearing officer may not conduct a hearing in a case in which he or she is prejudiced or partial to any party or has any interest in the matter pending for decision.</P> <P>(b) A party to the hearing who objects to the designated hearing officer must notify that officer in writing at the earliest opportunity.</P> <P>(c) The hearing officer must consider the objections, and may, at his or her discretion, either proceed with the hearing or withdraw.<PRTPAGE P="163"/> </P> <P>(1) If the hearing officer withdraws, CMS designates another hearing officer to conduct the hearing.</P> <P>(2) If the hearing officer does not withdraw, the objecting party may, after the hearing, present objections and request that the officer's decision be revised or a new hearing be held before another hearing officer. The objections must be submitted to CMS.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.670</SECTNO> <SUBJECT>Time and place of hearing.</SUBJECT> <P>(a) The hearing officer fixes a time and place for the hearing and sends written notice to the parties. The notice also informs the parties of the general and specific issues to be resolved and information about the hearing procedure.</P> <P>(b) The hearing officer may, on his or her own motion, or at the request of a party, change the time and place for the hearing. The hearing officer may adjourn or postpone the hearing.</P> <P>(c) The hearing officer will give the parties reasonable notice of any change in the time or place of hearing, or of adjournment or postponement.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38081, July 15, 1993; 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.672</SECTNO> <SUBJECT>Appointment of representatives.</SUBJECT> <P>A party may appoint as its representative at the hearing anyone not disqualified or suspended from acting as a representative before CMS or otherwise prohibited by law.</P> </SECTION> <SECTION> <SECTNO>§ 417.674</SECTNO> <SUBJECT>Authority of representatives.</SUBJECT> <P>(a) A representative appointed and qualified in accordance with § 417.672 may, on behalf of the represented party—</P> <P>(1) Give or accept any notice or request pertinent to the proceedings set forth in this subpart;</P> <P>(2) Present evidence and allegations as to facts and law in any proceedings affecting that party; and</P> <P>(3) Obtain information to the same extent as the party.</P> <P>(b) A notice or request sent to the representative has the same force and effect as if it had been sent to the party.</P> </SECTION> <SECTION> <SECTNO>§ 417.676</SECTNO> <SUBJECT>Conduct of hearing.</SUBJECT> <P>(a) The hearing is open to the parties and to the public.</P> <P>(b) The hearing officer inquires fully into all the matters at issue and receives in evidence the testimony of witnesses and any documents that are relevant and material.</P> <P>(c) The hearing officer provides the parties an opportunity to enter any objection to the inclusion of any document.</P> <P>(d) The hearing officer decides the order in which the evidence and the arguments of the parties are presented and the conduct of the hearing.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.678</SECTNO> <SUBJECT>Evidence.</SUBJECT> <P>The hearing officer rules on the admissibility of evidence and may admit evidence that would be inadmissible under rules applicable to court procedures.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.680</SECTNO> <SUBJECT>Witnesses.</SUBJECT> <P>(a) The hearing officer may examine the witnesses.</P> <P>(b) The parties or their representatives are permitted to examine their witnesses and cross-examine witnesses of other parties.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.682</SECTNO> <SUBJECT>Discovery.</SUBJECT> <P>(a) Prehearing discovery is permitted upon timely request of a party.</P> <P>(b) A request is timely if it is made before the beginning of the hearing.</P> <P>(c) A reasonable time for inspection and reproduction of documents is provided by order of the hearing officer.</P> <P>(d) The hearing officer's order on all discovery matters is final.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.684</SECTNO> <SUBJECT>Prehearing.</SUBJECT> <P>The hearing officer may schedule a prehearing conference if he or she believes that a conference would more clearly define the issues.</P> </SECTION> <SECTION> <PRTPAGE P="164"/> <SECTNO>§ 417.686</SECTNO> <SUBJECT>Record of hearing.</SUBJECT> <P>(a) A complete record of the proceedings at the hearing is made and transcribed and made available to all parties upon request.</P> <P>(b) The record may not be closed until a hearing decision has been issued.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.688</SECTNO> <SUBJECT>Authority of hearing officer.</SUBJECT> <P>In exercising his or her authority, the hearing officer must comply with the provisions of title XVIII and related provisions of the Act, the regulations issued by CMS, and general instructions issued by CMS in implementing that Act.</P> </SECTION> <SECTION> <SECTNO>§ 417.690</SECTNO> <SUBJECT>Notice and effect of hearing decision.</SUBJECT> <P>(a) As soon as practical after the close of the hearing, the hearing officer issues a written decision that—</P> <P>(1) Is based upon the evidence of record; and</P> <P>(2) Contains separately numbered findings of fact and conclusions of law.</P> <P>(b) The hearing officer provides a copy of the hearing decision to each party.</P> <P>(c) The hearing decision is final and binding unless it is reopened and revised in accordance with § 417.692.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.692</SECTNO> <SUBJECT>Reopening of initial or reconsidered determination or decision of a hearing officer.</SUBJECT> <P>(a) <E T="03">Initial or reconsidered determination.</E> An initial or reconsidered determination may be reopened and revised by CMS upon its own motion within one year of the date of the notice of determination.</P> <P>(b) <E T="03">Decision of hearing officer.</E> A decision of a hearing officer that is unfavorable to any party and is otherwise final may be reopened and revised by the hearing officer upon the officer's own motion within one year of the notice of the hearing decision. It may be reopened and revised by another hearing officer designated by CMS if the hearing officer who issued the decision is unavailable.</P> <P>(c) <E T="03">Notices.</E> (1) The notice of reopening and of any revisions following the reopening is mailed to the parties.</P> <P>(2) The notice of revision specifies the reasons for revisions.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.694</SECTNO> <SUBJECT>Effect of revised determination.</SUBJECT> <P>The revision of an initial or reconsidered determination is binding unless a party files a written request for hearing of the revised determination in accordance with § 417.662.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 60 FR 46234, Sept. 6, 1995]</CITA> </SECTION> </SUBPART> <SUBPART> <RESERVED>Subparts S-T [Reserved]</RESERVED> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart U—Health Care Prepayment Plans</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>50 FR 1375, Jan. 10, 1985, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 417.800</SECTNO> <SUBJECT>Payment to HCPPs: Definitions and basic rules.</SUBJECT> <P>(a) <E T="03">Definitions.</E> As used in this subpart, unless the context indicates otherwise—</P> <P> <E T="03">Covered Part B services</E> means physicians' services, diagnostic X-ray tests, laboratory, other diagnostic tests, and any additional medical and other health services, that the HCPP furnishes to its Medicare enrollees.</P> <P> <E T="03">Health care prepayment plan (HCPP)</E> means an organization that meets the following conditions:</P> <P>(1) Effective January 1, 1999, (or on the effective date of the HCPP agreement in the case of a 1998 applicant) either—</P> <P>(A) Is union or employer sponsored; or</P> <P>(B) Does not provide, or arrange for the provision of, any inpatient hospital services.</P> <P>(2) Is responsible for the organization, financing, and delivery of covered Part B services to a defined population on a prepayment basis.</P> <P>(3) Meets the conditions specified in paragraph (b) of this section.</P> <P>(4) Elects to be reimbursed on a reasonable cost basis.<PRTPAGE P="165"/> </P> <P> <E T="03">Medicare enrollee</E> means a beneficiary under Part B of Medicare who has been identified on CMS records as an enrollee of the HCPP. <E T="03">Reporting period</E> means the period specified by CMS for which an HCPP must report its costs and utilization.</P> <P>(b) <E T="03">Qualifying conditions.</E> (1) Except as provided in paragraph (b)(2) of this section, an organization wishing to participate as an HCPP must—</P> <P>(i) Enter into a written agreement with CMS as specified in § 417.801;</P> <P>(ii) Furnish physicians' services through its employees or under a formal arrangement with a medical group, independent practice association or individual physicians; and</P> <P>(iii) Furnish covered Part B services to its Medicare enrollees through institutions, entities, and persons that have qualified under the applicable requirements of title XVIII of the Social Security Act and section 353 of the PHS Act.</P> <P>(2) An organization that, as of January 31, 1983, was being reimbursed on a reasonable cost basis under section 1833(a)(1)(A) of the Act, and that would not otherwise meet the conditions specified in paragraph (b)(1) of this section, may receive reimbursement on a reasonable cost basis as an HCPP, provided it files an agreement with CMS as required by § 417.801.</P> <P>(c) <E T="03">Payment of reasonable cost.</E> (1) Except as otherwise provided in this subpart, CMS pays an HCPP on the basis of the reasonable cost it incurs, as specified in subpart O of this part, for the covered Part B services furnished to its Medicare enrollees.</P> <P>(2) <E T="03">Payment for Part B services: Basic rules.</E> (i) <E T="03">Cost basis payment.</E> Except as provided in paragraph (d) of this section, CMS pays an HCPP on the basis of the reasonable costs it incurs, as specified in subpart O of this part, for the covered Part B services furnished to its Medicare enrollees.</P> <P>(ii) <E T="03">Deductions.</E> In determining the amount due an HCPP for covered Part B services furnished to its Medicare enrollees, CMS deducts, from the reasonable cost actually incurred by the HCPP, the following:</P> <P>(A) The actuarial value of the Part B deductible.</P> <P>(B) An amount equal to 20 percent of the cost incurred for any service that is subject to the Medicare coinsurance.</P> <P>(d) <E T="03">Covered services not reimbursed to an HCPP.</E> (1) Services reimbursed under Part A are not reimbursable to an HCPP. CMS makes payment for these services directly to the hospital, or other provider of services, on a reasonable cost basis through the provider's Medicare fiscal intermediary (for more details, see parts 412 and 413 of this chapter).</P> <P>(2) Covered Part B services furnished by a provider of services to an HCPP's Medicare enrollees are not payable to the HCPP. CMS makes payment for these services to the provider on behalf of the Medicare enrollee through the provider's Medicare fiscal intermediary. This requirement does not affect Medicare payment to the HCPP for physicians' services furnished to its Medicare enrollees for which the physicians are compensated by the HCPP.</P> <P>(e) <E T="03">Payment for services to nonenrollees.</E> CMS makes payment to an HCPP for covered Part B services furnished by the HCPP to a Medicare beneficiary who is not enrolled in the HCPP if the beneficiary assigns his rights to payment in accordance with § 424.55 of this chapter. Payment is made on a reasonable charge basis through the HCPP's Medicare carrier.</P> <CITA>[50 FR 1346, Jan. 10, 1985, as amended at 51 FR 34833, Sept. 30, 1986; 53 FR 6648, Mar. 2, 1988; 57 FR 7135, Feb. 28, 1992; 58 FR 38081, July 15, 1993; 60 FR 34888, July 5, 1995; 63 FR 35067, June 26, 1998; 63 FR 52611, Oct. 1, 1998]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.801</SECTNO> <SUBJECT>Agreements between CMS and health care prepayment plans.</SUBJECT> <P>(a) <E T="03">General requirement.</E> (1) In order to participate and receive payment under the Medicare program as an HCPP as defined in § 417.800, an organization must enter into a written agreement with CMS.</P> <P>(2) An existing group practice prepayment plan (GPPP) that continues as an HCPP under this subpart U must have entered into a written agreement with CMS within 60 days of January 31, 1983.</P> <P>(b) <E T="03">Terms.</E> The agreement must provide that the HCPP agrees to—<PRTPAGE P="166"/> </P> <P>(1) Maintain compliance with the requirements for participation and reimbursement on a reasonable cost basis of HCPPs as specified in § 417.800;</P> <P>(2) Not charge the Medicare enrollee or any other person for items or services for which that enrollee is entitled to have payment made under the provisions of this part, except for any deductible or coinsurance amounts for which the enrollee is liable;</P> <P>(3) Refund, as promptly as possible, any money incorrectly collected as charges or premiums, or in any other way from Medicare enrollees in the HCPP in accordance with the requirements specified in § 417.456;</P> <P>(4) Not impose any limitations on the acceptance of Medicare enrollees or beneficiaries for care and treatment that it does not impose on all other individuals;</P> <P>(5) Meet the advance directives requirements specified in § 417.436(d) of this part;</P> <P>(6) Establish administrative review procedures in accordance with §§ 417.830 through 417.840 for Medicare enrollees who are dissatisfied with denied services or claims; and</P> <P>(7) Consider any additional requirements that CMS finds necessary or desirable for efficient and effective program administration.</P> <P>(c) <E T="03">Duration of agreement.</E> Except for the term of the initial agreement, the agreement is for a term of one year and may be renewed annually by mutual consent. The term of the initial agreement is set by CMS.</P> <P>(d) <E T="03">Termination or nonrenewal of agreement by CMS.</E> (1) CMS may terminate or not renew an agreement if it determines that—</P> <P>(i) The HCPP no longer meets the requirements for participation and reimbursement as an HCPP as specified in § 417.800;</P> <P>(ii) The HCPP is not in substantial compliance with the provisions of the agreement, applicable CMS regulations, or applicable provisions of the Medicare law; or</P> <P>(iii) The HCPP undergoes a change in ownership as specified in subpart M of this part.</P> <P>(2) CMS will give notice of termination or nonrenewal to the HCPP at least 90 days before the effective date stated in the notice.</P> <P>(e) <E T="03">Termination or nonrenewal of agreement by HCPP.</E> (1) If an HCPP does not wish to renew its agreement at the end of the term, it must give written notice to CMS at least 90 days before the end of the term of the agreement. If an HCPP wishes to terminate its agreement before the end of the term, it must file a written notice with CMS stating the intended effective date of termination.</P> <P>(2) CMS may approve the termination date proposed by the HCPP, or set a different date no later than 6 months after that date. CMS makes this decision based on a finding that termination on a specific date would not—</P> <P>(i) Unduly disrupt the furnishing of services to the community serviced by the HCPP; or</P> <P>(ii) Otherwise interfere with the efficient administration of the Medicare program.</P> <CITA>[50 FR 1375, Jan. 10, 1985, as amended at 57 FR 8202, Mar. 6, 1992; 58 FR 38081, July 15, 1993; 59 FR 49843, Sept. 30, 1994; 59 FR 59943, Nov. 21, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.802</SECTNO> <SUBJECT>Allowable costs.</SUBJECT> <P>(a) <E T="03">General rule.</E> The costs that are considered allowable for HCPP reimbursement are the same as those for reasonable cost HMOs and CMPs specified in subpart O of this part, except those in §§ 417.531, 417.532 (a)(3) and (c) through (g), 417.536 (l) and (m), 417.546, 417.548, and 417.550(b)(2).</P> <P>(b) <E T="03">Physicians' services and other Part B supplier services furnished under arrangements</E>—(1) <E T="03">Principle.</E> The amount paid by an HCPP for physicians' services and other Part B supplier services furnished under arrangements is an allowable cost to the extent it is reasonable.</P> <P>(2) <E T="03">Application: Payment on other than a fee-for-service basis.</E> If the HCPP pays for physicians' services and other Part B supplier services on other than a fee-for-service basis—</P> <P>(i) Except as specified in paragraph (b)(2)(ii) of this section, the costs incurred by the HCPP may be considered reasonable if they—</P> <P>(A) Do not exceed those that a prudent and cost-conscious buyer would incur to purchase those services; and<PRTPAGE P="167"/> </P> <P>(B) Are comparable to costs incurred for similar services furnished by similar physicians and other suppliers in the same or a similar locality.</P> <P>(ii)(A) If a physician group to whom the HCPP makes payment compensates its physicians on a fee-for-service basis, the HCPP's payment to the group may not exceed the reasonable charges for those services, as defined in subpart E of part 405 of this chapter.</P> <P>(B) Payment in excess of the limits specified in paragraph (b)(2)(ii)(A) of this section is allowable if the group has procedures under which members of the group accept effective incentives, such as risk-sharing, designed to avoid unnecessary or unduly costly utilization of health services. In such cases, the amount paid by the HCPP is considered reasonable if it meets the conditions specified in paragraph (b)(2)(i) of this section.</P> <P>(3) <E T="03">Application: Payment on a fee-for-service basis.</E> If the HCPP pays for physicians' services and other Part B supplier services on a fee-for-service basis—</P> <P>(i) Except as specified in paragraph (b)(3)(ii) of this section, the costs incurred by the HCPP are considered reasonable if they do not exceed—</P> <P>(A) The reasonable charges for those services, as defined in subpart E of part 405 of this chapter; and</P> <P>(B) The amount that CMS would pay for those services if they were furnished to beneficiaries who are not enrolled in the HCPP and who receive the services from sources other than providers of services or other entities that are reimbursed on a reasonable cost basis.</P> <P>(ii) Payment to a physician group organized on an individual-practice basis is not subject to the paragraph (b)(3)(i) of this section if the group pays its physicians on a fee-for-service basis and has procedures under which the members of the group accept effective incentives, such as risk-sharing, designed to avoid unnecessary or unduly costly utilization of health services. In these cases, the amount paid by an HCPP is considered reasonable if it meets the conditions specified in paragraph (b)(2)(i) of this section.</P> <CITA>[50 FR 1375, Jan. 10, 1985, as amended at 58 FR 38081, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.804</SECTNO> <SUBJECT>Cost apportionment.</SUBJECT> <P>(a) The HCPP follows the cost apportionment principles specified in §§ 417.552 through 417.566, except for provisions on provider costs and provisions on departmental apportionment.</P> <P>(b) The HCPP may use a method for reporting costs that is approved by CMS. CMS bases its approval on a finding that the method—</P> <P>(1) Results in an accurate and equitable allocation of allowable costs; and</P> <P>(2) Is justifiable from an administrative and cost efficiency standpoint.</P> </SECTION> <SECTION> <SECTNO>§ 417.806</SECTNO> <SUBJECT>Financial records, statistical data, and cost finding.</SUBJECT> <P>(a) The principles specified in § 417.568 apply to HCPPs, except those in paragraph (c) of that section.</P> <P>(b) The HCPP may use a method for reporting costs that is approved by CMS. CMS bases its approval on a finding that the method—</P> <P>(1) Results in an accurate and equitable allocation of allowable costs; and</P> <P>(2) Is justifiable from an administrative and cost efficiency standpoint.</P> <P>(c) An HCPP must permit the Department and the Comptroller General to audit or inspect any books and records of the HCPP and of any related organization that pertain to the determination of amounts payable for covered Part B services furnished its Medicare enrollees. For purposes of this requirement, the principles specified in § 417.486 apply to HCPPs.</P> <CITA>[50 FR 1375, Jan. 10, 1985, as amended at 58 FR 38081, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.808</SECTNO> <SUBJECT>Interim per capita payments.</SUBJECT> <P>The HCPP follows the principles specified in §§ 417.570 and 417.572 on interim per capita payments, except for the following:</P> <P>(a) When applying these principles to HCPPs, the term “reporting period” should be used instead of the term “contract period” contained in that section.</P> <P>(b) An HCPP must submit to CMS an annual operating budget and enrollment forecast, in the form and detail specified by CMS, at least 60 days before the beginning of each reporting period. A reporting period must be 12 consecutive months, except that the <PRTPAGE P="168"/>HCPP's initial reporting period for participating in Medicare may be as short as 6 months or as long as 18 months.</P> <P>(c) An HCPP must submit to CMS an interim cost report and enrollment data applicable to the first 6-month period of the HCPP's reporting period in the form and detail specified by CMS. The interim cost report must be submitted not later than 45 days after the close of the first 6-month period of the HCPP's reporting period.</P> <P>(d) In lieu of an interim payment based on the actual monthly enrollment in an HCPP, CMS and the HCPP may agree to a uniform monthly interim reimbursement rate for a reporting period. This interim rate is based on the HCPP's budget and enrollment forecast, if CMS is satisfied that the rate is consistent with efficiency and economy, and will not result in excessive adjustment at the end of the reporting period.</P> </SECTION> <SECTION> <SECTNO>§ 417.810</SECTNO> <SUBJECT>Final settlement.</SUBJECT> <P>(a) <E T="03">General requirement.</E> CMS and an HCPP must make a final settlement, and payment of amounts due either to the HCPP or to CMS, following the submission and review of the HCPP's annual cost report and the supporting documents specified in paragraph (b) of this section.</P> <P>(b) <E T="03">Annual cost report as basis for final settlement</E>—(1) <E T="03">Form and due date.</E> An HCPP must submit to CMS a cost report and supporting documents in the form and detail specified by CMS, no later than 120 days following the close of a reporting period.</P> <P>(2) <E T="03">Contents.</E> The report must include—</P> <P>(i) The HCPP's per capita incurred costs of providing covered Part B services to its Medicare enrollees during the reporting period, including any costs incurred by another organization related to the HCPP by common ownership or control;</P> <P>(ii) The HCPP's methods of apportioning costs among its Medicare enrollees, enrollees who are not Medicare beneficiaries, and other nonenrollees, including Medicare beneficiaries receiving health care services on a fee-for-service or other basis; and</P> <P>(iii) Information on enrollment and other data as specified by CMS.</P> <P>(3) <E T="03">Extension of time to submit cost report.</E> CMS may grant an HCPP an extension of time to submit a cost report for good cause shown.</P> <P>(4) <E T="03">Failure to report required financial information.</E> If an HCPP does not submit the required cost report and supporting documents within the time specified in paragraph (b)(1) of this section, and has not requested and received an extension of time for good cause shown, CMS may—</P> <P>(i) Regard the failure to report this information as evidence of likely overpayment and reduce or suspend interim payments to the HCPP; and</P> <P>(ii) Determine that amounts previously paid are overpayments, and make appropriate recovery.</P> <P>(c) <E T="03">Determination of final settlement.</E> Following the HCPP's submission of the reports specified in paragraph (b) of this section in acceptable form, CMS makes a determination of the total reimbursement due the HCPP for the reporting period and the difference, if any, between this amount and the total interim payments made to the HCPP. CMS sends to the HCPP a notice of the amount of reimbursement by the Medicare program. This notice—</P> <P>(1) Explains CMS's determination of total reimbursement due the HCPP for the reporting period; and</P> <P>(2) Informs the HCPP of its right to have the determination reviewed at a hearing as provided in part 405, subpart R of this chapter.</P> <P>(d) <E T="03">Payment of amounts due.</E> (1) Within 30 days of CMS's determination, CMS or the HCPP, as appropriate, will make payment of any difference between the total amount due and the total interim payments made to the HCPP by CMS.</P> <P>(2) If the HCPP does not pay CMS within 30 days of CMS's determination of any amounts the HCPP owes CMS, CMS may offset further payments to the HCPP to recover, or to aid in the recovery of, any overpayment identified in its determination.</P> <P>(3) Any offset of payments CMS makes under paragraph (d)(2) of this section will remain in effect even if the HCPP has requested a hearing on the determination under the provisions of part 405, subpart R of this chapter.</P> <P>(e) <E T="03">Tentative settlement.</E> (1) If a final settlement cannot be made within 90 <PRTPAGE P="169"/>days after the HCPP submits the report specified in paragraph (b) of this section, CMS will make an interim settlement by estimating the amount payable to the HCPP.</P> <P>(2) CMS or the HCPP will make payment within 30 days of CMS's determination under the tentative settlement of any estimated amounts due.</P> <P>(3) The tentative settlement is subject to adjustment at the time of a final settlement.</P> <CITA>[50 FR 1375, Jan. 10, 1985, as amended at 58 FR 38081, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.830</SECTNO> <SUBJECT>Scope of regulations on beneficiary appeals.</SUBJECT> <P>Sections 417.832 through 417.840 establish procedures for the presentation and resolution of organization determinations, reconsiderations, hearings, Departmental Appeals Board review, court reviews, and finality of decisions that are applicable to Medicare enrollees of an HCPP.</P> <CITA>[59 FR 59943, Nov. 21, 1994, as amended at 61 FR 32348, June 24, 1996]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.832</SECTNO> <SUBJECT>Applicability of requirements and procedures.</SUBJECT> <P>(a) The administrative review rights and procedures specified in §§ 417.834 through 417.840 pertain to disputes involving an organization determination, as defined in § 417.838, with which the enrollee is dissatisfied.</P> <P>(b) Physicians and other individuals who furnish items or services under arrangements with an HCPP have no right of administrative review under §§ 417.834 through 417.840.</P> <P>(c) The provisions of part 405 dealing with the representation of parties apply to organization determinations and appeals.</P> <P>(d) The provisions of part 405 dealing with administrative law judge hearings, Medicare Appeals Council review, and judicial review are applicable, unless otherwise provided.</P> <CITA>[59 FR 59943, Nov. 21, 1994, as amended at 70 FR 4713, Jan. 28, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.834</SECTNO> <SUBJECT>Responsibility for establishing administrative review procedures.</SUBJECT> <P>The HCPP is responsible for establishing and maintaining the administrative review procedures that are specified in §§ 417.830 through 417.840.</P> <CITA>[59 FR 59943, Nov. 21, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.836</SECTNO> <SUBJECT>Written description of administrative review procedures.</SUBJECT> <P>Each HCPP is responsible for ensuring that all Medicare enrollees are informed in writing of the administrative review procedures that are available to them.</P> <CITA>[59 FR 59943, Nov. 21, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.838</SECTNO> <SUBJECT>Organization determinations.</SUBJECT> <P>(a) <E T="03">Actions that are organization determinations.</E> For purposes of §§ 417.830 through 417.840, an organization determination is a refusal to furnish or arrange for services, or reimburse the party for services provided to the beneficiary, on the grounds that the services are not covered by Medicare.</P> <P>(b) <E T="03">Actions that are not organization determinations.</E> The following are not organization determinations for purposes of §§ 417.830 through 417.840:</P> <P>(1) A determination regarding services that were furnished by the HCPP, either directly or under arrangement, for which the enrollee has no further obligation for payment.</P> <P>(2) A determination regarding services that are not covered under the HCPP's agreement with CMS.</P> <CITA>[59 FR 59943, Nov. 21, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.840</SECTNO> <SUBJECT>Administrative review procedures.</SUBJECT> <P>The HCPP must apply § 422.568 through § 422.619 of this chapter to organization determinations that affect its Medicare enrollees, and to reconsiderations, hearings, Medicare Appeals Council review, and judicial review of those organization determinations.</P> <CITA>[70 FR 4713, Jan. 28, 2005]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart V—Administration of Outstanding Loans and Loan Guarantees</HD> <SECTION> <SECTNO>§ 417.910</SECTNO> <SUBJECT>Applicability.</SUBJECT> <P>The regulations in this subpart apply, as appropriate, to public and private entities that have loans or loan guarantees that—<PRTPAGE P="170"/> </P> <P>(a) Were awarded to them before October 1986 under section 1304 or section 1305 of the PHS Act; and</P> <P>(b) Are still outstanding.</P> <CITA>[59 FR 49842, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.911</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>As used in this subpart—</P> <P> <E T="03">Any 12-month period</E> means the 12-month period beginning on the first day of any month.</P> <P> <E T="03">Expansion of services</E> means—(1) The addition of any health service not previously provided by or through the HMO, that requires an increase in the facilities, equipment, or health professionals of the HMO; or</P> <P>(2) The improvement or upgrading of existing facilities or equipment, or an increase in the number of categories of health professionals, of the HMO so that the HMO could provide directly services that it previously provided through contract or referral or which it could not previously provide with its existing facilities or equipment.</P> <P> <E T="03">First 60 months of operation or expansion</E> means the 60-month period beginning on the first day of the month during which the HMO first provided services to enrollees, or in the case of significant expansion, first provided services in accordance with its expansion plan.</P> <P> <E T="03">Health system agency</E> means an entity that has been designated in accordance with section 1515 of the PHS Act; and the term <E T="03">State health planning and development agency</E> means an agency that has been designated in accordance with section 1521 of the PHS Act.</P> <P> <E T="03">Initial costs of operation</E> means any cost incurred in the first 60 months of an operation or expansion that met any of the following requirements:</P> <P>(1) Under generally accepted accounting principles or under accounting practices prescribed or permitted by State regulatory authority, was not a capital cost.</P> <P>(2) Was required by State regulatory authority to meet reserves or tangible net equity requirements.</P> <P>(3) Was for a payment made to reduce balance sheet liabilities existing at the beginning of the 60-month period, but only if—(i) The payment had been approved in writing by the Secretary; and</P> <P>(ii) The total of these payments did not exceed 20 percent of the amount of the loan.</P> <P>(4) Was for a small capital expenditure, but only if—(i) The cost had been approved in writing by the Secretary; and</P> <P>(ii) The total of these costs did not exceed $200,000 in any 12-month period, and $400,000 during the first 60 months of operation or expansion.</P> <P> <E T="03">Nonprofit</E> as applied to a private entity, means a private agency, institution, or organization, no part of the net earnings of which inures, or may lawfully inure, to the benefit of any private shareholder or individual.</P> <P> <E T="03">Significant expansion</E> means—(1) A planned substantial increase in the enrollment of the HMO, that requires an increase in the number of health professionals serving enrollees of the HMO or an expansion of the physical capacity of the HMO's total health facilities; or</P> <P>(2) A planned expansion of the service area beyond the current service area, that would be made possible by the addition of health service delivery facilities and health professionals to serve enrollees at a new site or sites in areas previously without service sites.</P> <P> <E T="03">Small capital expenditure</E> means expenditures for—(1) Equipment as defined in 45 CFR 74.132; or</P> <P>(2) Alterations and renovations required to change the interior arrangements or other physical characteristics of an existing facility or installed equipment, so that it may be more effectively used for its currently designated purpose, or adapted to a changed use.</P> <CITA>[58 FR 38076, July 15, 1993, as amended at 59 FR 49842, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.920</SECTNO> <SUBJECT>Planning and initial development.</SUBJECT> <P>(a) Under section 1304 of the PHS Act, grants and loan guarantees were awarded for projects for planning and initial development of HMOs.</P> <P>(b) Planning projects included projects for any of the following:</P> <P>(1) Establishment of an HMO.</P> <P>(2) Significant expansion of the HMO's enrollment or geographic area.<PRTPAGE P="171"/> </P> <P>(c) Initial development projects included projects for any of the following:</P> <P>(1) Establishment of an HMO.</P> <P>(2) Significant expansion of the HMO's enrollment or geographic area.</P> <P>(3) Expansion of the range or amount of services furnished by the HMO.</P> <CITA>[58 FR 38076, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.930</SECTNO> <SUBJECT>Initial costs of operation.</SUBJECT> <P>Under section 1305 of the PHS, loans and loan guarantees were awarded for initial costs of operation of HMOs.</P> <CITA>[58 FR 38077, July 15, 1993]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.931</SECTNO> <RESERVED>[Reserved]</RESERVED> </SECTION> <SECTION> <SECTNO>§ 417.934</SECTNO> <SUBJECT>Reserve requirement.</SUBJECT> <P>(a) <E T="03">Timing.</E> Unless the Secretary approved a longer period, an entity that received a loan or loan guarantee under section 1305 of the PHS Act was required to establish a restricted reserve account on the earlier of the following:</P> <P>(1) When the HMO's revenues and costs of operation reached the break-even point.</P> <P>(2) At the end of the 60-month period following the Secretary's endorsement of the loan or loan guarantee.</P> <P>(b) <E T="03">Purpose and amount of reserve.</E> The reserve had to be constituted so as to accumulate, no later than 12 years after endorsement of the loan or loan guarantee, an amount equal to 1 year's principal and interest.</P> <CITA>[59 FR 49842, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.937</SECTNO> <SUBJECT>Loan and loan guarantee provisions.</SUBJECT> <P>(a) <E T="03">Disbursement of loan proceeds.</E> The principal amount of any loan made or guaranteed by the Secretary under this subpart was disbursed to the entity in accordance with an agreement entered into between the parties to the loan and approved by the Secretary.</P> <P>(b) <E T="03">Length and maturity of loans.</E> The principal amount of each loan or loan guarantee, together with interest thereon, is repayable over a period of 22 years, beginning on the date of endorsement of the loan, or loan guarantee by the Secretary. The Secretary could approve a shorter repayment period if he or she determined that a repayment period of less than 22 years is more appropriate to an entity's total financial plan.</P> <P>(c) <E T="03">Repayment.</E> The principal amount of each loan or loan guarantee, together with interest thereon is repayable in accordance with a repayment schedule that is agreed upon by the parties to the loan or loan guarantee and approved by the Secretary before or at the time of endorsement of the loan. Unless otherwise specifically authorized by the Secretary, each loan made or guaranteed by the Secretary is repayable in substantially level combined installments of principal and interest to be paid at intervals not less frequently than annually, sufficient in amount to amortize the loan through the final year of the life of the loan. Principal repayment during the first 60 months of operation could be deferred with payment of interest only during that period. The Secretary could set rates of interest for each disbursement at a rate comparable to the rate of interest prevailing on the date of disbursement for marketable obligations of the United States of comparable maturities, adjusted to provide for appropriate administrative charges.</P> <CITA>[59 FR 49842, Sept. 30, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 417.940</SECTNO> <SUBJECT>Civil action to enforce compliance with assurances.</SUBJECT> <P>The provisions of § 417.163(g) apply to entities that have outstanding loans or loan guarantees administered under this subpart.</P> <CITA>[59 FR 49843, Sept. 30, 1994]</CITA> </SECTION> </SUBPART> </PART> <PART> <EAR>Pt. 418</EAR> <HD SOURCE="HED">PART 418—HOSPICE CARE</HD> <CONTENTS> <SUBPART> <HD SOURCE="HED">Subpart A—General Provision and Definitions</HD> <SECHD>Sec.</SECHD> <SECTNO>418.1</SECTNO> <SUBJECT>Statutory basis.</SUBJECT> <SECTNO>418.2</SECTNO> <SUBJECT>Scope of part.</SUBJECT> <SECTNO>418.3</SECTNO> <SUBJECT>Definitions.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Eligibility, Election and Duration of Benefits</HD> <SECTNO>418.20</SECTNO> <SUBJECT>Eligibility requirements.</SUBJECT> <SECTNO>418.21</SECTNO> <SUBJECT>Duration of hospice care coverage—Election periods.</SUBJECT> <SECTNO>418.22</SECTNO> <SUBJECT>Certification of terminal illness.</SUBJECT> <SECTNO>418.24</SECTNO> <SUBJECT>Election of hospice care.</SUBJECT> <SECTNO>418.25</SECTNO> <SUBJECT>Admission to hospice care.</SUBJECT> <SECTNO>418.26</SECTNO> <SUBJECT>Discharge from hospice care.<PRTPAGE P="172"/> </SUBJECT> <SECTNO>418.28</SECTNO> <SUBJECT>Revoking the election of hospice care.</SUBJECT> <SECTNO>418.30</SECTNO> <SUBJECT>Change of the designated hospice.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Conditions of Participation—General Provisions and Administration</HD> <SECTNO>418.50</SECTNO> <SUBJECT>Condition of participation—General provisions.</SUBJECT> <SECTNO>418.52</SECTNO> <SUBJECT>Condition of participation—Governing body.</SUBJECT> <SECTNO>418.54</SECTNO> <SUBJECT>Condition of participation—Medical director.</SUBJECT> <SECTNO>418.56</SECTNO> <SUBJECT>Condition of participation—Professional management.</SUBJECT> <SECTNO>418.58</SECTNO> <SUBJECT>Condition of participation—Plan of care.</SUBJECT> <SECTNO>418.60</SECTNO> <SUBJECT>Condition of participation—Continuation of care.</SUBJECT> <SECTNO>418.62</SECTNO> <SUBJECT>Condition of participation—Informed consent.</SUBJECT> <SECTNO>418.64</SECTNO> <SUBJECT>Condition of participation—Inservice training.</SUBJECT> <SECTNO>418.66</SECTNO> <SUBJECT>Condition of participation—Quality assurance.</SUBJECT> <SECTNO>418.68</SECTNO> <SUBJECT>Condition of participation—Interdisciplinary group.</SUBJECT> <SECTNO>418.70</SECTNO> <SUBJECT>Condition of participation—Volunteers.</SUBJECT> <SECTNO>418.72</SECTNO> <SUBJECT>Condition of participation—Licensure.</SUBJECT> <SECTNO>418.74</SECTNO> <SUBJECT>Condition of participation—Central clinical records.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Conditions of Participation: Core Services</HD> <SECTNO>418.80</SECTNO> <SUBJECT>Condition of participation—Furnishing of core services.</SUBJECT> <SECTNO>418.82</SECTNO> <SUBJECT>Condition of participation—Nursing services.</SUBJECT> <SECTNO>418.83</SECTNO> <SUBJECT>Nursing services—Waiver of requirement that substantially all nursing services be routinely provided directly by a hospice.</SUBJECT> <SECTNO>418.84</SECTNO> <SUBJECT>Condition of participation—Medical social services.</SUBJECT> <SECTNO>418.86</SECTNO> <SUBJECT>Condition of participation—Physician services.</SUBJECT> <SECTNO>418.88</SECTNO> <SUBJECT>Condition of participation—Counseling services.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Conditions of Participation: Other Services</HD> <SECTNO>418.90</SECTNO> <SUBJECT>Condition of participation—Furnishing of other services.</SUBJECT> <SECTNO>418.92</SECTNO> <SUBJECT>Condition of participation—Physical therapy, occupational therapy, and speech-language pathology.</SUBJECT> <SECTNO>418.94</SECTNO> <SUBJECT>Condition of participation—Home health aide and homemaker services.</SUBJECT> <SECTNO>418.96</SECTNO> <SUBJECT>Condition of participation—Medical supplies.</SUBJECT> <SECTNO>418.98</SECTNO> <SUBJECT>Condition of participation—Short term inpatient care.</SUBJECT> <SECTNO>418.100</SECTNO> <SUBJECT>Condition of participation—Hospices that provide inpatient care directly.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Covered Services</HD> <SECTNO>418.200</SECTNO> <SUBJECT>Requirements for coverage.</SUBJECT> <SECTNO>418.202</SECTNO> <SUBJECT>Covered services.</SUBJECT> <SECTNO>418.204</SECTNO> <SUBJECT>Special coverage requirements.</SUBJECT> <SECTNO>418.205</SECTNO> <SUBJECT>Special requirements for hospice pre-election evaluation and counseling services.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart G—Payment for Hospice Care</HD> <SECTNO>418.301</SECTNO> <SUBJECT>Basic rules.</SUBJECT> <SECTNO>418.302</SECTNO> <SUBJECT>Payment procedures for hospice care.</SUBJECT> <SECTNO>418.304</SECTNO> <SUBJECT>Payment for physician and nurse practitioner services.</SUBJECT> <SECTNO>418.306</SECTNO> <SUBJECT>Determination of payment rates.</SUBJECT> <SECTNO>418.307</SECTNO> <SUBJECT>Periodic interim payments.</SUBJECT> <SECTNO>418.308</SECTNO> <SUBJECT>Limitation on the amount of hospice payments.</SUBJECT> <SECTNO>418.309</SECTNO> <SUBJECT>Hospice cap amount.</SUBJECT> <SECTNO>418.310</SECTNO> <SUBJECT>Reporting and recordkeeping requirements.</SUBJECT> <SECTNO>418.311</SECTNO> <SUBJECT>Administrative appeals.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart H—Coinsurance</HD> <SECTNO>418.400</SECTNO> <SUBJECT>Individual liability for coinsurance for hospice care.</SUBJECT> <SECTNO>418.402</SECTNO> <SUBJECT>Individual liability for services that are not considered hospice care.</SUBJECT> <SECTNO>418.405</SECTNO> <SUBJECT>Effect of coinsurance liability on Medicare payment.</SUBJECT> </SUBPART> </CONTENTS> <AUTH> <HD SOURCE="HED">Authority:</HD> <P>Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).</P> </AUTH> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>48 FR 56026, Dec. 16, 1983, unless otherwise noted.</P> </SOURCE> <SUBPART> <HD SOURCE="HED">Subpart A—General Provision and Definitions</HD> <SECTION> <SECTNO>§ 418.1</SECTNO> <SUBJECT>Statutory basis.</SUBJECT> <P>This part implements section 1861(dd) of the Social Security Act. Section 1861(dd) specifies services covered as hospice care and the conditions that a hospice program must meet in order to participate in the Medicare program. The following sections of the Act are also pertinent:</P> <P>(a) Sections 1812(a) (4) and (d) of the Act specify eligibility requirements for the individual and the benefit periods.</P> <P>(b) Section 1813(a)(4) of the Act specifies coinsurance amounts.</P> <P>(c) Sections 1814(a)(7) and 1814(i) of the Act contain conditions and limitations on coverage of, and payment for, hospice care.<PRTPAGE P="173"/> </P> <P>(d) Sections 1862(a) (1), (6) and (9) of the Act establish limits on hospice coverage.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 57 FR 36017, Aug. 12, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.2</SECTNO> <SUBJECT>Scope of part.</SUBJECT> <P>Subpart A of this part sets forth the statutory basis and scope and defines terms used in this part. Subpart B specifies the eligibility requirements and the benefit periods. Subpart C specifies conditions of participation for hospices. Subpart D describes the covered services and specifies the limits on services covered as hospice care. Subpart E specifies the reimbursement methods and procedures. Subpart F specifies coinsurance amounts applicable to hospice care.</P> </SECTION> <SECTION> <SECTNO>§ 418.3</SECTNO> <SUBJECT>Definitions.</SUBJECT> <P>For purposes of this part—</P> <P> <E T="03">Attending physician</E> means a—(1)(i) Doctor of medicine or osteopathy legally authorized to practice medicine and surgery by the State in which he or she performs that function or action; or</P> <P>(ii) Nurse practitioner who meets the training, education, and experience requirements as the Secretary may prescribe; and</P> <P>(2) Is identified by the individual, at the time he or she elects to receive hospice care, as having the most significant role in the determination and delivery of the individual's medical care.</P> <P> <E T="03">Bereavement counseling</E> means counseling services provided to the individual's family after the individual's death.</P> <P> <E T="03">Cap period</E> means the twelve-month period ending October 31 used in the application of the cap on overall hospice reimbursement specified in § 418.309.</P> <P> <E T="03">Employee</E> means an employee (defined by section 210(j) of the Act) of the hospice or, if the hospice is a subdivision of an agency or organization, an employee of the agency or organization who is appropriately trained and assigned to the hospice unit. “Employee” also refers to a volunteer under the jurisdiction of the hospice.</P> <P> <E T="03">Hospice</E> means a public agency or private organization or subdivision of either of these that—is primarily engaged in providing care to terminally ill individuals.</P> <P> <E T="03">Physician</E> means physician as defined in § 410.20 of this chapter.</P> <P> <E T="03">Representative</E> means an individual who has been authorized under State law to terminate medical care or to elect or revoke the election of hospice care on behalf of a terminally ill individual who is mentally or physically incapacitated.</P> <P> <E T="03">Social worker</E> means a person who has at least a bachelor's degree from a school accredited or approved by the Council on Social Work Education.</P> <P> <E T="03">Terminally ill</E> means that the individual has a medical prognosis that his or her life expectancy is 6 months or less if the illness runs its normal course.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 52 FR 4499, Feb. 12, 1987; 50 FR 50834, Dec. 11, 1990; 70 FR 45144, Aug. 4, 2005]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Eligibility, Election and Duration of Benefits</HD> <SECTION> <SECTNO>§ 418.20</SECTNO> <SUBJECT>Eligibility requirements.</SUBJECT> <P>In order to be eligible to elect hospice care under Medicare, an individual must be—</P> <P>(a) Entitled to Part A of Medicare; and</P> <P>(b) Certified as being terminally ill in accordance with § 418.22.</P> </SECTION> <SECTION> <SECTNO>§ 418.21</SECTNO> <SUBJECT>Duration of hospice care coverage—Election periods.</SUBJECT> <P>(a) Subject to the conditions set forth in this part, an individual may elect to receive hospice care during one or more of the following election periods:</P> <P>(1) An initial 90-day period;</P> <P>(2) A subsequent 90-day period; or</P> <P>(3) An unlimited number of subsequent 60-day periods.</P> <P>(b) The periods of care are available in the order listed and may be elected separately at different times.</P> <CITA>[55 FR 50834, Dec. 11, 1990, as amended at 57 FR 36017, Aug. 12, 1992; 70 FR 70546, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <PRTPAGE P="174"/> <SECTNO>§ 418.22</SECTNO> <SUBJECT>Certification of terminal illness.</SUBJECT> <P>(a) <E T="03">Timing of certification</E>—(1) <E T="03">General rule.</E> The hospice must obtain written certification of terminal illness for each of the periods listed in § 418.21, even if a single election continues in effect for an unlimited number of periods, as provided in § 418.24(c).</P> <P>(2) <E T="03">Basic requirement.</E> Except as provided in paragraph (a)(3) of this section, the hospice must obtain the written certification before it submits a claim for payment.</P> <P>(3) <E T="03">Exception.</E> If the hospice cannot obtain the written certification within 2 calendar days, after a period begins, it must obtain an oral certification within 2 calendar days and the written certification before it submits a claim for payment.</P> <P>(b) <E T="03">Content of certification.</E> Certification will be based on the physician's or medical director's clinical judgment regarding the normal course of the individual's illness. The certification must conform to the following requirements:</P> <P>(1) The certification must specify that the individual's prognosis is for a life expectancy of 6 months or less if the terminal illness runs its normal course.</P> <P>(2) Clinical information and other documentation that support the medical prognosis must accompany the certification and must be filed in the medical record with the written certification as set forth in paragraph (d)(2) of this section. Initially, the clinical information may be provided verbally, and must be documented in the medical record and included as part of the hospice's eligibility assessment.</P> <P>(c) <E T="03">Sources of certification.</E> (1) For the initial 90-day period, the hospice must obtain written certification statements (and oral certification statements if required under paragraph (a)(3) of this section) from—</P> <P>(i) The medical director of the hospice or the physician member of the hospice interdisciplinary group; and</P> <P>(ii) The individual's attending physician, if the individual has an attending physician. The attending physician must meet the definition of physician specified in § 410.20 of this subchapter.</P> <P>(2) For subsequent periods, the only requirement is certification by one of the physicians listed in paragraph (c)(1)(i) of this section.</P> <P>(d) <E T="03">Maintenance of records.</E> Hospice staff must—</P> <P>(1) Make an appropriate entry in the patient's medical record as soon as they receive an oral certification; and</P> <P>(2) File written certifications in the medical record.</P> <CITA>[55 FR 50834, Dec. 11, 1990, as amended at 57 FR 36017, Aug. 12, 1992; 70 FR 45144, Aug. 4, 2005; 70 FR 70547, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.24</SECTNO> <SUBJECT>Election of hospice care.</SUBJECT> <P>(a) <E T="03">Filing an election statement.</E> An individual who meets the eligibility requirement of § 418.20 may file an election statement with a particular hospice. If the individual is physically or mentally incapacitated, his or her representative (as defined in § 418.3) may file the election statement.</P> <P>(b) <E T="03">Content of election statement.</E> The election statement must include the following:</P> <P>(1) Identification of the particular hospice that will provide care to the individual.</P> <P>(2) The individual's or representative's acknowledgement that he or she has been given a full understanding of the palliative rather than curative nature of hospice care, as it relates to the individual's terminal illness.</P> <P>(3) Acknowledgement that certain Medicare services, as set forth in paragraph (d) of this section, are waived by the election.</P> <P>(4) The effective date of the election, which may be the first day of hospice care or a later date, but may be no earlier than the date of the election statement.</P> <P>(5) The signature of the individual or representative.</P> <P>(c) <E T="03">Duration of election.</E> An election to receive hospice care will be considered to continue through the initial election period and through the subsequent election periods without a break in care as long as the individual—</P> <P>(1) Remains in the care of a hospice;</P> <P>(2) Does not revoke the election; and</P> <P>(3) Is not discharged from the hospice under the provisions of § 418.26.</P> <P>(d) <E T="03">Waiver of other benefits.</E> For the duration of an election of hospice care, <PRTPAGE P="175"/>an individual waives all rights to Medicare payments for the following services:</P> <P>(1) Hospice care provided by a hospice other than the hospice designated by the individual (unless provided under arrangements made by the designated hospice).</P> <P>(2) Any Medicare services that are related to the treatment of the terminal condition for which hospice care was elected or a related condition or that are equivalent to hospice care except for services—</P> <P>(i) Provided by the designated hospice:</P> <P>(ii) Provided by another hospice under arrangements made by the designated hospice; and</P> <P>(iii) Provided by the individual's attending physician if that physician is not an employee of the designated hospice or receiving compensation from the hospice for those services.</P> <P>(e) <E T="03">Re-election of hospice benefits.</E> If an election has been revoked in accordance with § 418.28, the individual (or his or her representative if the individual is mentally or physically incapacitated) may at any time file an election, in accordance with this section, for any other election period that is still available to the individual.</P> <CITA>[55 FR 50834, Dec. 11, 1990, as amended at 70 FR 70547, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.25</SECTNO> <SUBJECT>Admission to hospice care.</SUBJECT> <P>(a) The hospice admits a patient only on the recommendation of the medical director in consultation with, or with input from, the patient's attending physician (if any).</P> <P>(b) In reaching a decision to certify that the patient is terminally ill, the hospice medical director must consider at least the following information:</P> <P>(1) Diagnosis of the terminal condition of the patient.</P> <P>(2) Other health conditions, whether related or unrelated to the terminal condition.</P> <P>(3) Current clinically relevant information supporting all diagnoses.</P> <CITA>[70 FR 70547, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.26</SECTNO> <SUBJECT>Discharge from hospice care.</SUBJECT> <P>(a) <E T="03">Reasons for discharge.</E> A hospice may discharge a patient if—</P> <P>(1) The patient moves out of the hospice's service area or transfers to another hospice;</P> <P>(2) The hospice determines that the patient is no longer terminally ill; or</P> <P>(3) The hospice determines, under a policy set by the hospice for the purpose of addressing discharge for cause that meets the requirements of paragraphs (a)(3)(i) through (a)(3)(iv) of this section, that the patient's (or other persons in the patient's home) behavior is disruptive, abusive, or uncooperative to the extent that delivery of care to the patient or the ability of the hospice to operate effectively is seriously impaired. The hospice must do the following before it seeks to discharge a patient for cause:</P> <P>(i) Advise the patient that a discharge for cause is being considered;</P> <P>(ii) Make a serious effort to resolve the problem(s) presented by the patient's behavior or situation;</P> <P>(iii) Ascertain that the patient's proposed discharge is not due to the patient's use of necessary hospice services; and</P> <P>(iv) Document the problem(s) and efforts made to resolve the problem(s) and enter this documentation into its medical records.</P> <P>(b) <E T="03">Discharge order.</E> Prior to discharging a patient for any reason listed in paragraph (a) of this section, the hospice must obtain a written physician's discharge order from the hospice medical director. If a patient has an attending physician involved in his or her care, this physician should be consulted before discharge and his or her review and decision included in the discharge note.</P> <P>(c) <E T="03">Effect of discharge.</E> An individual, upon discharge from the hospice during a particular election period for reasons other than immediate transfer to another hospice—</P> <P>(1) Is no longer covered under Medicare for hospice care;</P> <P>(2) Resumes Medicare coverage of the benefits waived under § 418.24(d); and</P> <P>(3) May at any time elect to receive hospice care if he or she is again eligible to receive the benefit.</P> <P>(d) <E T="03">Discharge planning.</E> (1) The hospice must have in place a discharge planning process that takes into account the prospect that a patient's condition <PRTPAGE P="176"/>might stabilize or otherwise change such that the patient cannot continue to be certified as terminally ill.</P> <P>(2) The discharge planning process must include planning for any necessary family counseling, patient education, or other services before the patient is discharged because he or she is no longer terminally ill.</P> <CITA>[70 FR 70547, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.28</SECTNO> <SUBJECT>Revoking the election of hospice care.</SUBJECT> <P>(a) An individual or representative may revoke the individual's election of hospice care at any time during an election period.</P> <P>(b) To revoke the election of hospice care, the individual or representative must file a statement with the hospice that includes the following information:</P> <P>(1) A signed statement that the individual or representative revokes the individual's election for Medicare coverage of hospice care for the remainder of that election period.</P> <P>(2) The date that the revocation is to be effective. (An individual or representative may not designate an effective date earlier than the date that the revocation is made).</P> <P>(c) An individual, upon revocation of the election of Medicare coverage of hospice care for a particular election period—</P> <P>(1) Is no longer covered under Medicare for hospice care;</P> <P>(2) Resumes Medicare coverage of the benefits waived under § 418.24(e)(2); and</P> <P>(3) May at any time elect to receive hospice coverage for any other hospice election periods that he or she is eligible to receive.</P> </SECTION> <SECTION> <SECTNO>§ 418.30</SECTNO> <SUBJECT>Change of the designated hospice.</SUBJECT> <P>(a) An individual or representative may change, once in each election period, the designation of the particular hospice from which hospice care will be received.</P> <P>(b) The change of the designated hospice is not a revocation of the election for the period in which it is made.</P> <P>(c) To change the designation of hospice programs, the individual or representative must file, with the hospice from which care has been received and with the newly designated hospice, a statement that includes the following information:</P> <P>(1) The name of the hospice from which the individual has received care and the name of the hospice from which he or she plans to receive care.</P> <P>(2) The date the change is to be effective.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Conditions of Participation—General Provisions and Administration</HD> <SECTION> <SECTNO>§ 418.50</SECTNO> <SUBJECT>Condition of participation—General provisions.</SUBJECT> <P>(a) <E T="03">Standard: Compliance.</E> A hospice must maintain compliance with the conditions of this subpart and subparts D and E of this part.</P> <P>(b) <E T="03">Standard: Required services.</E> A hospice must be primarily engaged in providing the care and services described in § 418.202, must provide bereavement counseling and must—</P> <P>(1) Make nursing services, physician services, and drugs and biologicals routinely available on a 24-hour basis;</P> <P>(2) Make all other covered services available on a 24-hour basis to the extent necessary to meet the needs of individuals for care that is reasonable and necessary for the palliation and management of terminal illness and related conditions; and</P> <P>(3) Provide these services in a manner consistent with accepted standards of practice.</P> <P>(c) <E T="03">Standard: Disclosure of information.</E> The hospice must meet the disclosure of information requirements at § 420.206 of this chapter.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 55 FR 50834, Dec. 11, 1990]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.52</SECTNO> <SUBJECT>Condition of participation—Governing body.</SUBJECT> <P>A hospice must have a governing body that assumes full legal responsibility for determining, implementing and monitoring policies governing the hospice's total operation. The governing body must designate an individual who is responsible for the day to day management of the hospice program. The governing body must also ensure that all services provided are <PRTPAGE P="177"/>consistent with accepted standards of practice.</P> </SECTION> <SECTION> <SECTNO>§ 418.54</SECTNO> <SUBJECT>Condition of participation—Medical director.</SUBJECT> <P>The medical director must be a hospice employee who is a doctor of medicine or osteopathy who assumes overall responsibility for the medical component of the hospice's patient care program.</P> </SECTION> <SECTION> <SECTNO>§ 418.56</SECTNO> <SUBJECT>Condition of participation—Professional management.</SUBJECT> <P>Subject to the conditions of participation pertaining to services in §§ 418.80 and 418.90, a hospice may arrange for another individual or entity to furnish services to the hospice's patients. If services are provided under arrangement, the hospice must meet the following standards:</P> <P>(a) <E T="03">Standard: Continuity of care.</E> The hospice program assures the continuity of patient/family care in home, outpatient, and inpatient settings.</P> <P>(b) <E T="03">Standard: Written agreement.</E> The hospice has a legally binding written agreement for the provision of arranged services. The agreement includes at least the following:</P> <P>(1) Identification of the services to be provided.</P> <P>(2) A stipulation that services may be provided only with the express authorization of the hospice.</P> <P>(3) The manner in which the contracted services are coordinated, supervised, and evaluated by the hospice.</P> <P>(4) The delineation of the role(s) of the hospice and the contractor in the admission process, patient/family assessment, and the interdisciplinary group care conferences.</P> <P>(5) Requirements for documenting that services are furnished in accordance with the agreement.</P> <P>(6) The qualifications of the personnel providing the services.</P> <P>(c) <E T="03">Standard: Professional management responsibility.</E> The hospice retains professional management responsibility for those services and ensures that they are furnished in a safe and effective manner by persons meeting the qualifications of this part, and in accordance with the patient's plan of care and the other requirements of this part.</P> <P>(d) <E T="03">Standard: Financial responsibility.</E> The hospice retains responsibility for payment for services.</P> <P>(e) <E T="03">Standard: Inpatient care.</E> The hospice ensures that inpatient care is furnished only in a facility which meets the requirements in § 418.98 and its arrangement for inpatient care is described in a legally binding written agreement that meets the requirements of paragraph (b) and that also specifies, at a minimum—</P> <P>(1) That the hospice furnishes to the inpatient provider a copy of the patient's plan of care and specifies the inpatient services to be furnished;</P> <P>(2) That the inpatient provider has established policies consistent with those of the hospice and agrees to abide by the patient care protocols established by the hospice for its patients;</P> <P>(3) That the medical record includes a record of all inpatient services and events and that a copy of the discharge summary and, if requested, a copy of the medical record are provided to the hospice;</P> <P>(4) The party responsible for the implementation of the provisions of the agreement; and</P> <P>(5) That the hospice retains responsibility for appropriate hospice care training of the personnel who provide the care under the agreement.</P> <CITA>[48 FR 56026, Dec. 16, 1983; 48 FR 57282, Dec. 29, 1983]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.58</SECTNO> <SUBJECT>Condition of participation—Plan of care.</SUBJECT> <P>A written plan of care must be established and maintained for each individual admitted to a hospice program, and the care provided to an individual must be in accordance with the plan.</P> <P>(a) <E T="03">Standard: Establishment of plan.</E> The plan must be established by the attending physician, the medical director or physician designee and interdisciplinary group prior to providing care.</P> <P>(b) <E T="03">Standard: Review of plan.</E> The plan must be reviewed and updated, at intervals specified in the plan, by the attending physician, the medical director or physician designee and interdisciplinary group. These reviews must be documented.</P> <P>(c) <E T="03">Standard: Content of plan.</E> The plan must include an assessment of the individual's needs and identification of the <PRTPAGE P="178"/>services including the management of discomfort and symptom relief. It must state in detail the scope and frequency of services needed to meet the patient's and family's needs.</P> </SECTION> <SECTION> <SECTNO>§ 418.60</SECTNO> <SUBJECT>Condition of participation—Continuation of care.</SUBJECT> <P>A hospice may not discontinue or diminish care provided to a Medicare beneficiary because of the beneficiary's inability to pay for that care.</P> </SECTION> <SECTION> <SECTNO>§ 418.62</SECTNO> <SUBJECT>Condition of participation—Informed consent.</SUBJECT> <P>A hospice must demonstrate respect for an individual's rights by ensuring that an informed consent form that specifies the type of care and services that may be provided as hospice care during the course of the illness has been obtained for every individual, either from the individual or representative as defined in § 418.3.</P> </SECTION> <SECTION> <SECTNO>§ 418.64</SECTNO> <SUBJECT>Condition of participation—Inservice training.</SUBJECT> <P>A hospice must provide an ongoing program for the training of its employees.</P> </SECTION> <SECTION> <SECTNO>§ 418.66</SECTNO> <SUBJECT>Condition of participation—Quality assurance.</SUBJECT> <P>A hospice must conduct an ongoing, comprehensive, integrated, self-assessment of the quality and appropriateness of care provided, including inpatient care, home care and care provided under arrangements. The findings are used by the hospice to correct identified problems and to revise hospice policies if necessary. Those responsible for the quality assurance program must—</P> <P>(a) Implement and report on activities and mechanisms for monitoring the quality of patient care;</P> <P>(b) Identify and resolve problems; and</P> <P>(c) Make suggestions for improving patient care.</P> </SECTION> <SECTION> <SECTNO>§ 418.68</SECTNO> <SUBJECT>Condition of participation—Interdisciplinary group.</SUBJECT> <P>The hospice must designate an interdisciplinary group or groups composed of individuals who provide or supervise the care and services offered by the hospice.</P> <P>(a) <E T="03">Standard: Composition of group.</E> The hospice must have an interdisciplinary group or groups that include at least the following individuals who are employees of the hospice:</P> <P>(1) A doctor of medicine or osteopathy.</P> <P>(2) A registered nurse.</P> <P>(3) A social worker.</P> <P>(4) A pastoral or other counselor.</P> <P>(b) <E T="03">Standard: Role of group.</E> The interdisciplinary group is responsible for—</P> <P>(1) Participation in the establishment of the plan of care;</P> <P>(2) Provision or supervision of hospice care and services;</P> <P>(3) Periodic review and updating of the plan of care for each individual receiving hospice care; and</P> <P>(4) Establishment of policies governing the day-to-day provision of hospice care and services.</P> <P>(c) If a hospice has more than one interdisciplinary group, it must designate in advance the group it chooses to execute the functions described in paragraph (b)(4) of this section.</P> <P>(d) <E T="03">Standard: Coordinator.</E> The hospice must designate a registered nurse to coordinate the implementation of the plan of care for each patient.</P> </SECTION> <SECTION> <SECTNO>§ 418.70</SECTNO> <SUBJECT>Condition of participation—Volunteers.</SUBJECT> <P>The hospice in accordance with the numerical standards, specified in paragraph (e) of this section, uses volunteers, in defined roles, under the supervision of a designated hospice employee.</P> <P>(a) <E T="03">Standard: Training.</E> The hospice must provide appropriate orientation and training that is consistent with acceptable standards of hospice practice.</P> <P>(b) <E T="03">Standard: Role.</E> Volunteers must be used in administrative or direct patient care roles.</P> <P>(c) <E T="03">Standard: Recruiting and retaining.</E> The hospice must document active and ongoing efforts to recruit and retain volunteers.</P> <P>(d) <E T="03">Standard: Cost saving.</E> The hospice must document the cost savings achieved through the use of volunteers. Documentation must include—</P> <P>(1) The identification of necessary positions which are occupied by volunteers;<PRTPAGE P="179"/> </P> <P>(2) The work time spent by volunteers occupying those positions; and</P> <P>(3) Estimates of the dollar costs which the hospice would have incurred if paid employees occupied the positions identified in paragraph (d)(1) for the amount of time specified in paragraph (d)(2).</P> <P>(e) <E T="03">Standard: Level of activity.</E> A hospice must document and maintain a volunteer staff sufficient to provide administrative or direct patient care in an amount that, at a minimum, equals 5 percent of the total patient care hours of all paid hospice employees and contract staff. The hospice must document a continuing level of volunteer activity. Expansion of care and services achieved through the use of volunteers, including the type of services and the time worked, must be recorded.</P> <P>(f) <E T="03">Standard: Availability of clergy.</E> The hospice must make reasonable efforts to arrange for visits of clergy and other members of religious organizations in the community to patients who request such visits and must advise patients of this opportunity.</P> </SECTION> <SECTION> <SECTNO>§ 418.72</SECTNO> <SUBJECT>Condition of participation—Licensure.</SUBJECT> <P>The hospice and all hospice employees must be licensed in accordance with applicable Federal, State and local laws and regulations.</P> <P>(a) <E T="03">Standard: Licensure of program.</E> If State or local law provides for licensing of hospices, the hospice must be licensed.</P> <P>(b) <E T="03">Standard: Licensure of employees.</E> Employees who provide services must be licensed, certified or registered in accordance with applicable Federal or State laws.</P> </SECTION> <SECTION> <SECTNO>§ 418.74</SECTNO> <SUBJECT>Condition of participation—Central clinical records.</SUBJECT> <P>In accordance with accepted principles of practice, the hospice must establish and maintain a clinical record for every individual receiving care and services. The record must be complete, promptly and accurately documented, readily accessible and systematically organized to facilitate retrieval.</P> <P>(a) <E T="03">Standard: Content.</E> Each clinical record is a comprehensive compilation of information. Entries are made for all services provided. Entries are made and signed by the person providing the services. The record includes all services whether furnished directly or under arrangements made by the hospice. Each individual's record contains—</P> <P>(1) The initial and subsequent assessments;</P> <P>(2) The plan of care;</P> <P>(3) Identification data;</P> <P>(4) Consent and authorization and election forms;</P> <P>(5) Pertinent medical history; and</P> <P>(6) Complete documentation of all services and events (including evaluations, treatments, progress notes, etc.).</P> <P>(b) <E T="03">Standard; Protection of information.</E> The hospice must safeguard the clinical record against loss, destruction and unauthorized use.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Conditions of Participation: Core Services</HD> <SECTION> <SECTNO>§ 418.80</SECTNO> <SUBJECT>Condition of participation—Furnishing of core services.</SUBJECT> <P>Except as permitted in § 418.83, a hospice must ensure that substantially all the core services described in this subpart are routinely provided directly by hospice employees. A hospice may use contracted staff if necessary to supplement hospice employees in order to meet the needs of patients during periods of peak patient loads or under extraordinary circumstances. If contracting is used, the hospice must maintain professional, financial, and administrative responsibility for the services and must assure that the qualifications of staff and services provided meet the requirements specified in this subpart.</P> <CITA>[52 FR 7416, Mar. 11, 1987, as amended at 55 FR 50835, Dec. 11, 1990]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.82</SECTNO> <SUBJECT>Condition of participation—Nursing services.</SUBJECT> <P>The hospice must provide nursing care and services by or under the supervision of a registered nurse.</P> <P>(a) Nursing services must be directed and staffed to assure that the nursing needs of patients are met.</P> <P>(b) Patient care responsibilities of nursing personnel must be specified.</P> <P>(c) Services must be provided in accordance with recognized standards of practice.</P> </SECTION> <SECTION> <PRTPAGE P="180"/> <SECTNO>§ 418.83</SECTNO> <SUBJECT>Nursing services—Waiver of requirement that substantially all nursing services be routinely provided directly by a hospice.</SUBJECT> <P>(a) CMS may approve a waiver of the requirement in § 418.80 for nursing services provided by a hospice which is located in a non-urbanized area. The location of a hospice that operates in several areas is considered to be the location of its central office. The hospice must provide evidence that it was operational on or before January 1, 1983, and that it made a good faith effort to hire a sufficient number of nurses to provide services directly. CMS bases its decision as to whether to approve a waiver application on the following:</P> <P>(1) The current Bureau of the Census designations for determining non-urbanized areas.</P> <P>(2) Evidence that a hospice was operational on or before January 1, 1983 including:</P> <P>(i) Proof that the organization was established to provide hospice services on or before January 1, 1983;</P> <P>(ii) Evidence that hospice-type services were furnished to patients on or before January 1, 1983; and</P> <P>(iii) Evidence that the hospice care was a discrete activity rather than an aspect of another type of provider's patient care program on or before January 1, 1983.</P> <P>(3) Evidence that a hospice made a good faith effort to hire nurses, including:</P> <P>(i) Copies of advertisements in local newspapers that demonstrate recruitment efforts;</P> <P>(ii) Job descriptions for nurse employees;</P> <P>(iii) Evidence that salary and benefits are competitive for the area; and</P> <P>(iv) Evidence of any other recruiting activities (e.g., recruiting efforts at health fairs and contacts with nurses at other providers in the area);</P> <P>(b) Any waiver request is deemed to be granted unless it is denied within 60 days after it is received.</P> <P>(c) Waivers will remain effective for one year at a time.</P> <P>(d) CMS may approve a maximum of two one-year extensions for each initial waiver. If a hospice wishes to receive a one-year extension, the hospice must submit a certification to CMS, prior to the expiration of the waiver period, that the employment market for nurses has not changed significantly since the time the initial waiver was granted.</P> <CITA>[52 FR 7416, Mar. 11, 1987]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.84</SECTNO> <SUBJECT>Condition of participation—Medical social services.</SUBJECT> <P>Medical social services must be provided by a qualified social worker, under the direction of a physician.</P> </SECTION> <SECTION> <SECTNO>§ 418.86</SECTNO> <SUBJECT>Condition of participation—Physician services.</SUBJECT> <P>In addition to palliation and management of terminal illness and related conditions, physician employees of the hospice, including the physician member(s) of the interdisciplinary group, must also meet the general medical needs of the patients to the extent that these needs are not met by the attending physician.</P> </SECTION> <SECTION> <SECTNO>§ 418.88</SECTNO> <SUBJECT>Condition of participation—Counseling services.</SUBJECT> <P>Counseling services must be available to both the individual and the family. Counseling includes bereavement counseling, provided after the patient's death as well as dietary, spiritual and any other counseling services for the individual and family provided while the individual is enrolled in the hospice.</P> <P>(a) <E T="03">Standard: Bereavement counseling.</E> There must be an organized program for the provision of bereavement services under the supervision of a qualified professional. The plan of care for these services should reflect family needs, as well as a clear delineation of services to be provided and the frequency of service delivery (up to one year following the death of the patient). A special coverage provision for bereavement counseling is specified § 418.204(c).</P> <P>(b) <E T="03">Standard: Dietary counseling.</E> Dietary counseling, when required, must be provided by a qualified individual.</P> <P>(c) <E T="03">Standard: Spiritual counseling.</E> Spiritual counseling must include notice to patients as to the availability of clergy as provided in § 418.70(f).</P> <P>(d) <E T="03">Standard: Additional counseling.</E> Counseling may be provided by other members of the interdisciplinary group <PRTPAGE P="181"/>as well as by other qualified professionals as determined by the hospice.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Conditions of Participation: Other Services</HD> <SECTION> <SECTNO>§ 418.90</SECTNO> <SUBJECT>Condition of participation—Furnishing of other services.</SUBJECT> <P>A hospice must ensure that the services described in this subpart are provided directly by hospice employees or under arrangements made by the hospice as specified in § 418.56.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 55 FR 50835, Dec. 11, 1990]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.92</SECTNO> <SUBJECT>Condition of participation—Physical therapy, occupational therapy, and speech-language pathology.</SUBJECT> <P>(a) Physical therapy services, occupational therapy services, and speech-language patholgy services must be available, and when provided, offered in a manner consistent with accepted standards of practice.</P> <P>(b)(1) If the hospice engages in laboratory testing outside of the context of assisting an individual in self-administering a test with an appliance that has been cleared for that purpose by the FDA, such testing must be in compliance with all applicable requirements of part 493 of this chapter.</P> <P>(2) If the hospice chooses to refer specimens for laboratory testing to another laboratory, the referral laboratory must be certified in the appropriate specialties and subspecialties of services in accordance with the applicable requirements of part 493 of this chapter.</P> <CITA>[57 FR 7135, Feb. 28, 1992]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.94</SECTNO> <SUBJECT>Condition of participation—Home health aide and homemaker services.</SUBJECT> <P>Home health aide and homemaker services must be available and adequate in frequency to meet the needs of the patients. A home health aide is a person who meets the training, attitude and skill requirements specified in § 484.36 of this chapter.</P> <P>(a) <E T="03">Standard: Supervision.</E> A registered nurse must visit the home site at least every two weeks when aide services are being provided, and the visit must include an assessment of the aide services.</P> <P>(b) <E T="03">Standard: Duties.</E> Written instructions for patient care are prepared by a registered nurse. Duties include, but may not be limited to, the duties specified in § 484.36(c) of this chapter.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 55 FR 50835, Dec. 11, 1990]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.96</SECTNO> <SUBJECT>Condition of participation—Medical supplies.</SUBJECT> <P>Medical supplies and appliances including drugs and biologicals, must be provided as needed for the palliation and management of the terminal illness and related conditions.</P> <P>(a) <E T="03">Standard: Administration.</E> All drugs and biologicals must be administered in accordance with accepted standards of practice.</P> <P>(b) <E T="03">Standard: Controlled drugs in the patient's home.</E> The hospice must have a policy for the disposal of controlled drugs maintained in the patient's home when those drugs are no longer needed by the patient.</P> <P>(c) <E T="03">Standard: Administration of drugs and biologicals.</E> Drugs and biologicals are administered only by the following individuals:</P> <P>(1) A licensed nurse or physician.</P> <P>(2) An employee who has completed a State-approved training program in medication administration.</P> <P>(3) The patient if his or her attending physician has approved.</P> <P>(4) Any other individual in accordance with applicable State and local laws. The persons, and each drug and biological they are authorized to administer, must be specified in the patient's plan of care.</P> </SECTION> <SECTION> <SECTNO>§ 418.98</SECTNO> <SUBJECT>Condition of participation—Short term inpatient care.</SUBJECT> <P>Inpatient care must be available for pain control, symptom management and respite purposes, and must be provided in a participating Medicare or Medicaid facility.</P> <P>(a) <E T="03">Standard: Inpatient care for symptom control.</E> Inpatient care for pain control and symptom management must be provided in one of the following:</P> <P>(1) A hospice that meets the condition of participation for providing inpatient care directly as specified in § 418.100.<PRTPAGE P="182"/> </P> <P>(2) A hospital or an SNF that also meets the standards specified in § 418.100 (a) and (e) regarding 24-hour nursing service and patient areas.</P> <P>(b) <E T="03">Standard: Inpatient care for respite purposes.</E> Inpatient care for respite purposes must be provided by one of the following:</P> <P>(1) A provider specified in paragraph (a) of this section.</P> <P>(2) An ICF that also meets the standards specified in § 418.100 (a) and (e) regarding 24-hour nursing service and patient areas.</P> <P>(c) <E T="03">Standard: Inpatient care limitation.</E> The total number of inpatient days used by Medicare beneficiaries who elected hospice coverage in any 12-month period preceding a certification survey in a particular hospice may not exceed 20 percent of the total number of hospice days for this group of beneficiaries.</P> <P>(d) <E T="03">Standard: Exemption from limitation.</E> Until October 1, 1986, any hospice that began operation before January 1, 1975 is not subject to the limitation specified in paragraph (c).</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 55 FR 50835, Dec. 11, 1990]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.100</SECTNO> <SUBJECT>Condition of participationHospices that provide inpatient care directly.</SUBJECT> <EXT-XREF HREF="20060922" REFID="14">Link to an amendment published at 71 FR 55339, Sept. 22, 2006.</EXT-XREF> <P>A hospice that provides inpatient care directly must comply with all of the following standards.</P> <P>(a) <E T="03">Standard: Twenty-four-hour nursing services.</E> (1) The facility provides 24-hour nursing services which are sufficient to meet total nursing needs and which are in accordance with the patient plan of care. Each patient receives treatments, medications, and diet as prescribed, and is kept comfortable, clean, well-groomed, and protected from accident, injury, and infection.</P> <P>(2) Each shift must include a registered nurse who provides direct patient care.</P> <P>(b) <E T="03">Standard: Disaster preparedness.</E> The hospice has an acceptable written plan, periodically rehearsed with staff, with procedures to be followed in the event of an internal or external disaster and for the care of casualties (patients and personnel) arising from such disasters.</P> <P>(c) <E T="03">Standard: Health and safety laws.</E> The hospice must meet all Federal, State, and local laws, regulations, and codes pertaining to health and safety, such as provisions regulating—</P> <P>(1) Construction, maintenance, and equipment for the hospice;</P> <P>(2) Sanitation;</P> <P>(3) Communicable and reportable diseases; and</P> <P>(4) Post mortem procedures.</P> <P>(d) <E T="03">Standard: Fire protection.</E> (1) Except as otherwise provided in this section—</P> <P>(i) The hospice must meet the provisions applicable to nursing homes of the 2000 edition of the Life Safety Code of the National Fire Protection Association. The Director of the Office of the Federal Register has approved the NFPA 101 <E T="51">®</E> 2000 edition of the Life Safety Code, issued January 14, 2000, for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. A copy of the Code is available for inspection at the CMS Information Resource Center, 7500 Security Boulevard, Baltimore, MD or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: <E T="03">http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.</E> Copies may be obtained from the National Fire Protection Association, 1 Batterymarch Park, Quincy, MA 02269. If any changes in this edition of the Code are incorporated by reference, CMS will publish notice in the <E T="04">Federal Register</E> to announce the changes.</P> <P>(ii) Chapter 19.3.6.3.2, exception number 2 of the adopted edition of the LSC does not apply to a hospice.</P> <P>(2) In consideration of a recommendation by the State survey agency, CMS may waive, for periods deemed appropriate, specific provisions of the Life Safety Code which, if rigidly applied would result in unreasonable hardship for the hospice, but only if the waiver would not adversely affect the health and safety of the patients.</P> <P>(3) The provisions of the adopted edition of the Life Safety Code do not apply in a State if CMS finds that a fire and safety code imposed by State <PRTPAGE P="183"/>law adequately protects patients in hospices.</P> <P>(4) Beginning March 13, 2006, a hospice must be in compliance with Chapter 9.2.9, Emergency Lighting.</P> <P>(5) Beginning March 13, 2006, Chapter 19.3.6.3.2, exception number 2 does not apply to hospices.</P> <P>(6) Notwithstanding any provisions of the 2000 edition of the Life Safety Code to the contrary, a hospice may place alcohol-based hand rub dispensers in its facility if—</P> <P>(i) Use of alcohol-based hand rub dispensers does not conflict with any State or local codes that prohibit or otherwise restrict the placement of alcohol-based hand rub dispensers in health care facilities;</P> <P>(ii) The dispensers are installed in a manner that minimizes leaks and spills that could lead to falls;</P> <P>(iii) The dispensers are installed in a manner that adequately protects against access by vulnerable populations; and</P> <P>(iv) The dispensers are installed in accordance with chapter 18.3.2.7 or chapter 19.3.2.7 of the 2000 edition of the Life Safety Code, as amended by NFPA Temporary Interim Amendment 00-1(101), issued by the Standards Council of the National Fire Protection Association on April 15, 2004. The Director of the Office of the Federal Register has approved NFPA Temporary Interim Amendment 00-1(101) for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. A copy of the amendment is available for inspection at the CMS Information Resource Center, 7500 Security Boulevard, Baltimore, MD and at the Office of the Federal Register, 800 North Capitol Street NW., Suite 700, Washington, DC. Copies may be obtained from the National Fire Protection Association, 1 Batterymarch Park, Quincy, MA 02269. If any additional changes are made to this amendment, CMS will publish notice in the <E T="04">Federal Register</E> to announce the changes.</P> <P>(e) <E T="03">Standard: Patient areas.</E> (1) The hospice must design and equip areas for the comfort and privacy of each patient and family members.</P> <P>(2) The hospice must have—</P> <P>(i) Physical space for private patient/family visiting;</P> <P>(ii) Accommodations for family members to remain with the patient throughout the night;</P> <P>(iii) Accommodations for family privacy after a patient's death; and</P> <P>(iv) Decor which is homelike in design and function.</P> <P>(3) Patients must be permitted to receive visitors at any hour, including small children.</P> <P>(f) <E T="03">Standard: Patient rooms and toilet facilities.</E> Patient rooms are designed and equipped for adequate nursing care and the comfort and privacy of patients.</P> <P>(1) Each patient's room must—</P> <P>(i) Be equipped with or conveniently located near toilet and bathing facilities;</P> <P>(ii) Be at or above grade level;</P> <P>(iii) Contain a suitable bed for each patient and other appropriate furniture;</P> <P>(iv) Have closet space that provides security and privacy for clothing and personal belongings;</P> <P>(v) Contain no more than four beds;</P> <P>(vi) Measure at least 100 square feet for a single patient room or 80 square feet for each patient for a multipatient room; and</P> <P>(vii) Be equipped with a device for calling the staff member on duty.</P> <P>(2) For an existing building, CMS may waive the space and occupancy requirements of paragraphs (f)(1) (v) and (vi) of this section for as long as it is considered appropriate if it finds that—</P> <P>(i) The requirements would result in unreasonable hardship on the hospice if strictly enforced; and</P> <P>(ii) The waiver serves the particular needs of the patients and does not adversely affect their health and safety.</P> <P>(g) <E T="03">Standard: Bathroom facilities.</E> The hospice must—</P> <P>(1) Provide an adequate supply of hot water at all times for patient use; and</P> <P>(2) Have plumbing fixtures with control valves that automatically regulate the temperature of the hot water used by patients.</P> <P>(h) <E T="03">Standard: Linen.</E> The hospice has available at all times a quantity of linen essential for proper care and comfort of patients. Linens are handled, stored, processed, and transported in such a manner as to prevent the spread of infection.<PRTPAGE P="184"/> </P> <P>(i) <E T="03">Standard: Isolation areas.</E> The hospice must make provision for isolating patients with infectious diseases.</P> <P>(j) <E T="03">Standard: Meal service, menu planning, and supervision.</E> The hospice must—</P> <P>(1) Serve at least three meals or their equivalent each day at regular times, with not more than 14 hours between a substantial evening meal and breakfast;</P> <P>(2) Procure, store, prepare, distribute, and serve all food under sanitary conditions;</P> <P>(3) Have a staff member trained or experienced in food management or nutrition who is responsible for—</P> <P>(i) Planning menus that meet the nutritional needs of each patient, following the orders of the patient's physician and, to the extent medically possible, the recommended dietary allowances of the Food and Nutrition Board of the National Research Council, National Academy of Sciences (Recommended Dietary Allowances (9th ed., 1981) is available from the Printing and Publications Office, National Academy of Sciences, Washington, DC 20418); and</P> <P>(ii) Supervising the meal preparation and service to ensure that the menu plan is followed; and</P> <P>(4) If the hospice has patients who require medically prescribed special diets, have the menus for those patients planned by a professionally qualified dietitian and supervise the preparation and serving of meals to ensure that the patient accepts the special diet.</P> <P>(k) <E T="03">Standard: Pharmaceutical services.</E> The hospice provides appropriate methods and procedures for the dispensing and administering of drugs and biologicals. Whether drugs and biologicals are obtained from community or institutional pharmacists or stocked by the facility, the facility is responsible for drugs and biologicals for its patients, insofar as they are covered under the program and for ensuring that pharmaceutical services are provided in accordance with accepted professional principles and appropriate Federal, State, and local laws. (See § 405.1124(g), (h), and (i) of this chapter.)</P> <P>(1) <E T="03">Licensed pharmacist.</E> The hospice must—</P> <P>(i) Employ a licensed pharmacist; or</P> <P>(ii) Have a formal agreement with a licensed pharmacist to advise the hospice on ordering, storage, administration, disposal, and recordkeeping of drugs and biologicals.</P> <P>(2) <E T="03">Orders for medications.</E> (i) A physician must order all medications for the patient.</P> <P>(ii) If the medication order is verbal—</P> <P>(A) The physician must give it only to a licensed nurse, pharmacist, or another physician; and</P> <P>(B) The individual receiving the order must record and sign it immediately and have the prescribing physician sign it in a manner consistent with good medical practice.</P> <P>(3) <E T="03">Administering medications.</E> Medications are administered only by one of the following individuals:</P> <P>(i) A licensed nurse or physician.</P> <P>(ii) An employee who has completed a State-approved training program in medication administration.</P> <P>(iii) The patient if his or her attending physician has approved.</P> <P>(4) <E T="03">Control and accountability.</E> The pharmaceutical service has procedures for control and accountability of all drugs and biologicals throughout the facility. Drugs are dispensed in compliance with Federal and State laws. Records of receipt and disposition of all controlled drugs are maintained in sufficient detail to enable an accurate reconciliation. The pharmacist determines that drug records are in order and that an account of all controlled drugs is maintained and reconciled.</P> <P>(5) <E T="03">Labeling of drugs and biologicals.</E> The labeling of drugs and biologicals is based on currently accepted professional principles, and includes the appropriate accessory and cautionary instructions, as well as the expiration date when applicable.</P> <P>(6) <E T="03">Storage.</E> In accordance with State and Federal laws, all drugs and biologicals are stored in locked compartments under proper temperature controls and only authorized personnel have access to the keys. Separately locked compartments are provided for storage of controlled drugs listed in Schedule II of the Comprehensive Drug Abuse Prevention & Control Act of 1970 and other drugs subject to abuse, except under single unit package drug <PRTPAGE P="185"/>distribution systems in which the quantity stored is minimal and a missing dose can be readily detected. An emergency medication kit is kept readily available.</P> <P>(7) <E T="03">Drug disposal.</E> Controlled drugs no longer needed by the patient are disposed of in compliance with State requirements. In the absence of State requirements, the pharmacist and a registered nurse dispose of the drugs and prepare a record of the disposal.</P> <CITA>[48 FR 56026, Dec. 16, 1983; 48 FR 57282, Dec. 29, 1983; 49 FR 23010, June 1, 1984, as amended at 53 FR 11509, Apr. 7, 1988; 55 FR 50835, Dec. 11, 1990; 68 FR 1386, Jan. 10, 2003; 69 FR 18803, Apr. 9, 2004; 69 FR 49266, Aug. 11, 2004; 70 FR 15237, Mar. 25, 2005]</CITA> <EFFDNOTP> <HD SOURCE="HED">Effective Date Note:</HD> <P>At 71 FR 55339, Sept. 22, 2006, § 418.100 was amended by revising paragraph (d)(6)(iii), by amending paragraph (d)(6)(iv) by removing the last sentence and by removing the period at the end of the paragraph and adding in its place “; and” and by adding paragraph (d)(6)(v), effective October 23, 2006. For the convenience of the user, the revised text is set forth as follows:</P> <REVTXT> <SECTION> <SECTNO>§ 418.100</SECTNO> <SUBJECT>Condition of participation: Hospices that provide inpatient care directly.</SUBJECT> <STARS/> <P>(d) * * *</P> <P>(6) * * *</P> <P>(iii) The dispensers are installed in a manner that adequately protects against inappropriate access;<STARS/> </P> <P>(v) The dispensers are maintained in accordance with dispenser manufacturer guidelines.<STARS/> </P> </SECTION> <SUBPART> <HD SOURCE="HED">Subpart F—Covered Services</HD> <SECTION> <SECTNO>§ 418.200</SECTNO> <SUBJECT>Requirements for coverage.</SUBJECT> <P>To be covered, hospice services must meet the following requirements. They must be reasonable and necessary for the palliation or management of the terminal illness as well as related conditions. The individual must elect hospice care in accordance with § 418.24 and a plan of care must be established as set forth in § 418.58 before services are provided. The services must be consistent with the plan of care. A certification that the individual is terminally ill must be completed as set forth in § 418.22.</P> </SECTION> <SECTION> <SECTNO>§ 418.202</SECTNO> <SUBJECT>Covered services.</SUBJECT> <P>All services must be performed by appropriately qualified personnel, but it is the nature of the service, rather than the qualification of the person who provides it, that determines the coverage category of the service. The following services are covered hospice services:</P> <P>(a) Nursing care provided by or under the supervision of a registered nurse.</P> <P>(b) Medical social services provided by a social worker under the direction of a physician.</P> <P>(c) Physicians' services performed by a physician as defined in § 410.20 of this chapter except that the services of the hospice medical director or the physician member of the interdisciplinary group must be performed by a doctor of medicine or osteopathy.</P> <P>(d) Counseling services provided to the terminally ill individual and the family members or other persons caring for the individual at home. Counseling, including dietary counseling, may be provided both for the purpose of training the individual's family or other caregiver to provide care, and for the purpose of helping the individual and those caring for him or her to adjust to the individual's approaching death.</P> <P>(e) Short-term inpatient care provided in a participating hospice inpatient unit, or a participating hospital or SNF, that additionally meets the standards in § 418.202 (a) and (e) regarding staffing and patient areas. Services provided in an inpatient setting must conform to the written plan of care. Inpatient care may be required for procedures necessary for pain control or acute or chronic symptom management.</P> <FP>Inpatient care may also be furnished as a means of providing respite for the individual's family or other persons caring for the individual at home. Respite care must be furnished as specified in § 418.98(b). Payment for inpatient care will be made at the rate appropriate to the level of care as specified in § 418.302.</FP> <P>(f) Medical appliances and supplies, including drugs and biologicals. Only <PRTPAGE P="186"/>drugs as defined in section 1861(t) of the Act and which are used primarily for the relief of pain and symptom control related to the individual's terminal illness are covered. Appliances may include covered durable medical equipment as described in § 410.38 of this chapter as well as other self-help and personal comfort items related to the palliation or management of the patient's terminal illness. Equipment is provided by the hospice for use in the patient's home while he or she is under hospice care. Medical supplies include those that are part of the written plan of care.</P> <P>(g) <E T="03">Home health aide services furnished by qualified aides as designated in § 418.94 and homemaker services.</E> Home health aides may provide personal care services as defined in § 409.45(b) of this chapter. Aides may perform household services to maintain a safe and sanitary environment in areas of the home used by the patient, such as changing bed linens or light cleaning and laundering essential to the comfort and cleanliness of the patient. Aide services must be provided under the general supervision of a registered nurse. Homemaker services may include assistance in maintenance of a safe and healthy environment and services to enable the individual to carry out the treatment plan.</P> <P>(h) Physical therapy, occupational therapy and speech-language pathology services in addition to the services described in § 409.33 (b) and (c) of this chapter provided for purposes of symptom control or to enable the patient to maintain activities of daily living and basic functional skills.</P> <P>(i) Effective April 1, 1998, any other service that is specified in the patient's plan of care as reasonable and necessary for the palliation and management of the patient's terminal illness and related conditions and for which payment may otherwise be made under Medicare.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 51 FR 41351, Nov. 14, 1986; 55 FR 50835, Dec. 11, 1990; 59 FR 65498, Dec. 20, 1994; 70 FR 70547, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.204</SECTNO> <SUBJECT>Special coverage requirements.</SUBJECT> <P>(a) <E T="03">Periods of crisis.</E> Nursing care may be covered on a continuous basis for as much as 24 hours a day during periods of crisis as necessary to maintain an individual at home. Either homemaker or home health aide services or both may be covered on a 24-hour continuous basis during periods of crisis but care during these periods must be predominantly nursing care. A period of crisis is a period in which the individual requires continuous care to achieve palliation or management of acute medical symptoms.</P> <P>(b) <E T="03">Respite care.</E> (1) Respite care is short-term inpatient care provided to the individual only when necessary to relieve the family members or other persons caring for the individual.</P> <P>(2) Respite care may be provided only on an occasional basis and may not be reimbursed for more than five consecutive days at a time.</P> <P>(c) <E T="03">Bereavement counseling.</E> Bereavement counseling is a required hospice service but it is not reimbursable.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 55 FR 50835, Dec. 11, 1990]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.205</SECTNO> <SUBJECT>Special requirements for hospice pre-election evaluation and counseling services.</SUBJECT> <P>(a) <E T="03">Definition.</E> As used in this section the following definition applies.</P> <P> <E T="03">Terminal illness</E> has the same meaning as defined in § 418.3.</P> <P>(b) <E T="03">General.</E> Effective January 1, 2005, payment for hospice pre-election evaluation and counseling services as specified in § 418.304(d) may be made to a hospice on behalf of a Medicare beneficiary if the requirements of this section are met.</P> <P>(1) <E T="03">The beneficiary.</E> The beneficiary:</P> <P>(i) Has been diagnosed as having a terminal illness as defined in § 418.3.</P> <P>(ii) Has not made a hospice election.</P> <P>(iii) Has not previously received hospice pre-election evaluation and consultation services specified under this section.</P> <P>(2) <E T="03">Services provided.</E> The hospice pre-election services include an evaluation of an individual's need for pain and symptom management and counseling <PRTPAGE P="187"/>regarding hospice and other care options. In addition, the services may include advising the individual regarding advanced care planning.</P> <P>(3) <E T="03">Provision of pre-election hospice services.</E> (i) The services must be furnished by a physician.</P> <P>(ii) The physician furnishing these services must be an employee or medical director of the hospice billing for this service.</P> <P>(iii) The services cannot be furnished by hospice personnel other than employed physicians, such as but not limited to nurse practitioners, nurses, or social workers, physicians under contractual arrangements with the hospice or by the beneficiary's physician, if that physician is not an employee of the hospice.</P> <P>(iv) If the beneficiary's attending physician is also the medical director or a physician employee of the hospice, the attending physician may not provide nor may the hospice bill for this service because that physician already possesses the expertise necessary to furnish end-of-life evaluation and management, and counseling services.</P> <P>(4) <E T="03">Documentation.</E> (i) If the individual's physician initiates the request for services of the hospice medical director or physician, appropriate documentation is required.</P> <P>(ii) The request or referral must be in writing, and the hospice medical director or physician employee is expected to provide a written note on the patient's medical record.</P> <P>(iii) The hospice agency employing the physician providing these services is required to maintain a written record of the services furnished.</P> <P>(iv) If the services are initiated by the beneficiary, the hospice agency is required to maintain a record of the services and documentation that communication between the hospice medical director or physician and the beneficiary's physician occurs, with the beneficiary's permission, to the extent necessary to ensure continuity of care.</P> <CITA>[69 FR 66425, Nov. 15, 2004]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart G—Payment for Hospice Care</HD> <SECTION> <SECTNO>§ 418.301</SECTNO> <SUBJECT>Basic rules.</SUBJECT> <P>(a) Medicare payment for covered hospice care is made in accordance with the method set forth in § 418.302.</P> <P>(b) Medicare reimbursement to a hospice in a cap period is limited to a cap amount specified in § 418.309.</P> <P>(c) The hospice may not charge a patient for services for which the patient is entitled to have payment made under Medicare or for services for which the patient would be entitled to payment, as described in § 489.21 of this chapter.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 56 FR 26919, June 12, 1991; 70 FR 70547, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.302</SECTNO> <SUBJECT>Payment procedures for hospice care.</SUBJECT> <P>(a) CMS establishes payment amounts for specific categories of covered hospice care.</P> <P>(b) Payment amounts are determined within each of the following categories:</P> <P>(1) <E T="03">Routine home care day.</E> A routine home care day is a day on which an individual who has elected to receive hospice care is at home and is not receiving continuous care as defined in paragraph (b)(2) of this section.</P> <P>(2) <E T="03">Continuous home care day.</E> A continuous home care day is a day on which an individual who has elected to receive hospice care is not in an inpatient facility and receives hospice care consisting predominantly of nursing care on a continuous basis at home. Home health aide or homemaker services or both may also be provided on a continuous basis. Continuous home care is only furnished during brief periods of crisis as described in § 418.204(a) and only as necessary to maintain the terminally ill patient at home.</P> <P>(3) <E T="03">Inpatient respite care day.</E> An inpatient respite care day is a day on which the individual who has elected hospice care receives care in an approved facility on a short-term basis for respite.</P> <P>(4) <E T="03">General inpatient care day.</E> A general inpatient care day is a day on which an individual who has elected hospice care receives general inpatient care in an inpatient facility for pain control or acute or chronic symptom <PRTPAGE P="188"/>management which cannot be managed in other settings.</P> <P>(c) The payment amounts for the categories of hospice care are fixed payment rates that are established by CMS in accordance with the procedures described in § 418.306. Payment rates are determined for the following categories:</P> <P>(1) Routine home care.</P> <P>(2) Continuous home care.</P> <P>(3) Inpatient respite care.</P> <P>(4) General inpatient care.</P> <P>(d)(1) The intermediary reimburses the hospice its appropriate payment amount for each day for which an eligible Medicare beneficiary is under the hospice's care.</P> <P>(2) Effective December 8, 2003, if a hospice makes arrangements with another hospice to provide services under the circumstances specified in section 1861(dd)(5)(D) of the Act, the intermediary reimburses the hospice for which the beneficiary has made an election as described in paragraph (d)(1) of this section.</P> <P>(e) The intermediary makes payment according to the following procedures:</P> <P>(1) Payment is made to the hospice for each day during which the beneficiary is eligible and under the care of the hospice, regardless of the amount of services furnished on any given day.</P> <P>(2) Payment is made for only one of the categories of hospice care described in § 418.302(b) for any particular day.</P> <P>(3) On any day on which the beneficiary is not an inpatient, the hospice is paid the routine home care rate, unless the patient receives continuous care as defined in paragraph (b)(2) of this section for a period of at least 8 hours. In that case, a portion of the continuous care day rate is paid in accordance with paragraph (e)(4) of this section.</P> <P>(4) The hospice payment on a continuous care day varies depending on the number of hours of continuous services provided. The continuous home care rate is divided by 24 to yield an hourly rate. The number of hours of continuous care provided during a continuous home care day is then multiplied by the hourly rate to yield the continuous home care payment for that day. A minimum of 8 hours of care must be furnished on a particular day to qualify for the continuous home care rate.</P> <P>(5) Subject to the limitations described in paragraph (f) of this section, on any day on which the beneficiary is an inpatient in an approved facility for inpatient care, the appropriate inpatient rate (general or respite) is paid depending on the category of care furnished. The inpatient rate (general or respite) is paid for the date of admission and all subsequent inpatient days, except the day on which the patient is discharged. For the day of discharge, the appropriate home care rate is paid unless the patient dies as an inpatient. In the case where the beneficiary is discharged deceased, the inpatient rate (general or respite) is paid for the discharge day. Payment for inpatient respite care is subject to the requirement that it may not be provided consecutively for more than 5 days at a time. Payment for the sixth and any subsequent day of respite care is made at the routine home care rate.</P> <P>(f) Payment for inpatient care is limited as follows: (1) The total payment to the hospice for inpatient care (general or respite) is subject to a limitation that total inpatient care days for Medicare patients not exceed 20 percent of the total days for which these patients had elected hospice care.</P> <P>(2) At the end of a cap period, the intermediary calculates a limitation on payment for inpatient care to ensure that Medicare payment is not made for days of inpatient care in excess of 20 percent of the total number of days of hospice care furnished to Medicare patients.</P> <P>(3) If the number of days of inpatient care furnished to Medicare patients is equal to or less than 20 percent of the total days of hospice care to Medicare patients, no adjustment is necessary. Overall payments to a hospice are subject to the cap amount specified in § 418.309.</P> <P>(4) If the number of days of inpatient care furnished to Medicare patients exceeds 20 percent of the total days of hospice care to Medicare patients, the total payment for inpatient care is determined in accordance with the procedures specified in paragraph (f)(5) of this section. That amount is compared to actual payments for inpatient care, <PRTPAGE P="189"/>and any excess reimbursement must be refunded by the hospice. Overall payments to the hospice are subject to the cap amount specified in § 418.309.</P> <P>(5) If a hospice exceeds the number of inpatient care days described in paragraph (f)(4), the total payment for inpatient care is determined as follows:</P> <P>(i) Calculate the ratio of the maximum number of allowable inpatient days to the actual number of inpatient care days furnished by the hospice to Medicare patients.</P> <P>(ii) Multiply this ratio by the total reimbursement for inpatient care made by the intermediary.</P> <P>(iii) Multiply the number of actual inpatient days in excess of the limitation by the routine home care rate.</P> <P>(iv) Add the amounts calculated in paragraphs (f)(5)(ii) and (iii) of this section.</P> <P>(g) Payment for routine home care and continuous home care is made on the basis of the geographic location where the service is provided.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 56 FR 26919, June 12, 1991; 70 FR 45145, Aug. 4, 2005; 70 FR 70547, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.304</SECTNO> <SUBJECT>Payment for physician and nurse practitioner services.</SUBJECT> <P>(a) The following services performed by hospice physicians and nurse practitioners are included in the rates described in § 418.302:</P> <P>(1) General supervisory services of the medical director.</P> <P>(2) Participation in the establishment of plans of care, supervision of care and services, periodic review and updating of plans of care, and establishment of governing policies by the physician member of the interdisciplinary group.</P> <P>(b) For services not described in paragraph (a) of this section, a specified Medicare contractor pays the hospice an amount equivalent to 100 percent of the physician fee schedule for those physician services furnished by hospice employees or under arrangements with the hospice. Reimbursement for these physician services is included in the amount subject to the hospice payment limit described in § 418.309. Services furnished voluntarily by physicians are not reimbursable.</P> <P>(c) Services of the patient's attending physician, if he or she is not an employee of the hospice or providing services under arrangements with the hospice, are not considered hospice services and are not included in the amount subject to the hospice payment limit described in § 418.309. These services are paid by the carrier under the procedures in subpart B, part 414 of this chapter.</P> <P>(d) <E T="03">Payment for hospice pre-election evaluation and counseling services.</E> The intermediary makes payment to the hospice for the services established in § 418.205. Payment for this service is set at an amount established under the physician fee schedule, for an office or other outpatient visit for evaluation and management associated with presenting problems of moderate severity and requiring medical decision-making of low complexity other than the portion of the amount attributable to the practice expense component. Payment for this pre-election service does not count towards the hospice cap amount.</P> <P>(e)(1) Effective December 8, 2003, Medicare pays for attending physician services provided by nurse practitioners to Medicare beneficiaries who have elected the hospice benefit and who have selected a nurse practitioner as their attending physician. This applies to nurse practitioners without regard to whether they are hospice employees.</P> <P>(2) Nurse practitioners may bill and receive payment for services only if the—</P> <P>(i) Nurse practitioner is the beneficiary's attending physician as defined in § 418.3;</P> <P>(ii) Services are medically reasonable and necessary;</P> <P>(iii) Services are performed by a physician in the absence of the nurse practitioner; and</P> <P>(iv) Services are not related to the certification of terminal illness specified in § 418.22.</P> <P>(3) Payment for nurse practitioner services are made at 85 percent of the physician fee schedule amount.</P> <CITA>[48 FR 56026, Dec. 16, 1983, as amended at 69 FR 66426, Nov. 15, 2004; 70 FR 45145, Aug. 4, 2005; 70 FR 70547, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <PRTPAGE P="190"/> <SECTNO>§ 418.306</SECTNO> <SUBJECT>Determination of payment rates.</SUBJECT> <P>(a) <E T="03">Applicability.</E> CMS establishes payment rates for each of the categories of hospice care described in § 418.302(b). The rates are established using the methodology described in section 1814(i)(1)(C) of the Act.</P> <P>(b) <E T="03">Payment rates.</E> The payment rates for routine home care and other services included in hospice care are as follows:</P> <P>(1) The following rates, which are 120 percent of the rates in effect on September 30, 1989, are effective January 1, 1990 through September 30, 1990 and October 21, 1990 through December 31, 1990:</P> <GPOTABLE CDEF="s25,7" COLS="2" OPTS="L0,7/8,g1,t1"> <ROW> <ENT I="01">Routine home care</ENT> <ENT>$75.80</ENT> </ROW> <ROW> <ENT I="11">Continuous home care:</ENT> </ROW> <ROW> <ENT I="02">Full rate for 24 hours</ENT> <ENT>442.40</ENT> </ROW> <ROW> <ENT I="02">Hourly rate</ENT> <ENT>18.43</ENT> </ROW> <ROW> <ENT I="01">Inpatient respite care</ENT> <ENT>78.40</ENT> </ROW> <ROW> <ENT I="01">General inpatient care</ENT> <ENT>337.20</ENT> </ROW> </GPOTABLE> <P>(2) Except for the period beginning October 21, 1990, through December 31, 1990, the payment rates for routine home care and other services included in hospice care for Federal fiscal years 1991, 1992, and 1993 and those that begin on or after October 1, 1997, are the payment rates in effect under this paragraph during the previous fiscal year increased by the market basket percentage increase as defined in section 1886(b)(3)(B)(iii) of the Act, otherwise applicable to discharges occurring in the fiscal year. The payment rates for the period beginning October 21, 1990, through December 31, 1990, are the same as those shown in paragraph (b)(1) of this section.</P> <P>(3) For Federal fiscal years 1994 through 2002, the payment rate is the payment rate in effect during the previous fiscal year increased by a factor equal to the market basket percentage increase minus—</P> <P>(i) 2 percentage points in FY 1994;</P> <P>(ii) 1.5 percentage points in FYs 1995 and 1996;</P> <P>(iii) 0.5 percentage points in FY 1997; and</P> <P>(iv) 1 percentage point in FY 1998 through FY 2002.</P> <P>(4) For Federal fiscal year 2001, the payment rate is the payment rate in effect during the previous fiscal year increased by a factor equal to the market basket percentage increase plus 5 percentage points. However, this payment rate is effective only for the period April 1, 2001 through September 30, 2001. For the period October 1, 2000 through March 31, 2001, the payment rate is based upon the rule under paragraph (b)(3)(iv) of this section. The payment rate in effect during the period April 1, 2001 through September 30, 2001 is considered the payment rate in effect during fiscal year 2001.</P> <P>(5) The payment rate for hospice services furnished during fiscal years 2001 and 2002 is increased by an additional 0.5 percent and 0.75 percent, respectively. This additional amount is not included in updating the payment rate as described in paragraph (b)(3) of this section.</P> <P>(c) <E T="03">Adjustment for wage differences.</E> CMS will issue annually, in the <E T="04">Federal Register,</E> a hospice wage index based on the most current available CMS hospital wage data, including any changes to the definitions of Metropolitan Statistical Areas. The payment rates established by CMS are adjusted by the intermediary to reflect local differences in wages according to the revised wage index.</P> <P>(d) <E T="03">Federal Register notices.</E> CMS publishes as a notice in the <E T="04">Federal Register</E> any proposal to change the methodology for determining the payment rates.</P> <CITA>[56 FR 26919, June 12, 1991, as amended at 59 FR 26960, May 25, 1994; 62 FR 42882, Aug. 8, 1997; 70 FR 70548, Nov. 22, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.307</SECTNO> <SUBJECT>Periodic interim payments.</SUBJECT> <P>Subject to the provisions of § 413.64(h) of this chapter, a hospice may elect to receive periodic interim payments (PIP) effective with claims received on or after July 1, 1987. Payment is made biweekly under the PIP method unless the hospice requests a longer fixed interval (not to exceed one month) between payments. The biweekly interim payment amount is based on the total estimated Medicare payments for the reporting period (as described in §§ 418.302-418.306). Each payment is made 2 weeks after the end of a biweekly period of service as described in § 413.64(h)(5) of this chapter. Under certain circumstances that are described in § 413.64(g) of this chapter, a hospice <PRTPAGE P="191"/>that is not receiving PIP may request an accelerated payment.</P> <CITA>[59 FR 36713, July 19, 1994]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.308</SECTNO> <SUBJECT>Limitation on the amount of hospice payments.</SUBJECT> <P>(a) Except as specified in paragraph (b) of this section, the total Medicare payment to a hospice for care furnished during a cap period is limited by the hospice cap amount specified in § 418.309.</P> <P>(b) Until October 1, 1986, payment to a hospice that began operation before January 1, 1975 is not limited by the amount of the hospice cap specified in § 418.309.</P> <P>(c) The intermediary notifies the hospice of the determination of program reimbursement at the end of the cap year in accordance with procedures similar to those described in § 405.1803 of this chapter.</P> <P>(d) Payments made to a hospice during a cap period that exceed the cap amount are overpayments and must be refunded.</P> <CITA>[48 FR 56026, Dec. 16, 1983; 48 FR 57282, Dec. 29, 1983]</CITA> </SECTION> <SECTION> <SECTNO>§ 418.309</SECTNO> <SUBJECT>Hospice cap amount.</SUBJECT> <P>The hospice cap amount is calculated using the following procedures:</P> <P>(a) The cap amount is $6,500 per year and is adjusted for inflation or deflation for cap years that end after October 1, 1984, by using the percentage change in the medical care expenditure category of the Consumer Price Index (CPI) for urban consumers that is published by the Bureau of Labor Statistics. This adjustment is made using the change in the CPI from March 1984 to the fifth month of the cap year. The cap year runs from November 1 of each year until October 31 of the following year.</P> <P>(b) Each hospice's cap amount is calculated by the intermediary by multiplying the adjusted cap amount determined in paragraph (a) of this section by the number of Medicare beneficiaries who elected to receive hospice care from that hospice during the cap period. For purposes of this calculation, the number of Medicare beneficiaries includes—</P> <P>(1) Those Medicare beneficiaries who have not previously been included in the calculation of any hospice cap and who have filed an election to receive hospice care, in accordance with § 418.24, from the hospice during the period beginning on September 28 (35 days before the beginning of the cap period) and ending on September 27 (35 days before the end of the cap period).</P> <P>(2) In the case in which a beneficiary has elected to receive care from more than one hospice, each hospice includes in its number of Medicare beneficiaries only that fraction which represents the portion of a patient's total stay in all hospices that was spent in that hospice. (The hospice can obtain this information by contacting the intermediary.)</P> </SECTION> <SECTION> <SECTNO>§ 418.310</SECTNO> <SUBJECT>Reporting and recordkeeping requirements.</SUBJECT> <P>Hospices must provide reports and keep records as the Secretary determines necessary to administer the program.</P> </SECTION> <SECTION> <SECTNO>§ 418.311</SECTNO> <SUBJECT>Administrative appeals.</SUBJECT> <P>A hospice that believes its payments have not been properly determined in accordance with these regulations may request a review from the intermediary or the Provider Reimbursement Review Board (PRRB) if the amount in controversy is at least $1,000 or $10,000, respectively. In such a case, the procedure in 42 CFR part 405, subpart R, will be followed to the extent that it is applicable. The PRRB, subject to review by the Secretary under § 405.1874 of this chapter, shall have the authority to determine the issues raised. The methods and standards for the calculation of the payment rates by CMS are not subject to appeal.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart H—Coinsurance</HD> <SECTION> <SECTNO>§ 418.400</SECTNO> <SUBJECT>Individual liability for coinsurance for hospice care.</SUBJECT> <P>An individual who has filed an election for hospice care in accordance with § 418.24 is liable for the following coinsurance payments. Hospices may charge individuals the applicable coinsurance amounts.<PRTPAGE P="192"/> </P> <P>(a) <E T="03">Drugs and biologicals.</E> An individual is liable for a coinsurance payment for each palliative drug and biological prescription furnished by the hospice while the individual is not an inpatient. The amount of coinsurance for each prescription approximates 5 percent of the cost of the drug or biological to the hospice determined in accordance with the drug copayment schedule established by the hospice, except that the amount of coinsurance for each prescription may not exceed $5. The cost of the drug or biological may not exceed what a prudent buyer would pay in similar circumstances. The drug copayment schedule must be reviewed for reasonableness and approved by the intermediary before it is used.</P> <P>(b) <E T="03">Respite care.</E> (1) The amount of coinsurance for each respite care day is equal to 5 percent of the payment made by CMS for a respite care day.</P> <P>(2) The amount of the individual's coinsurance liability for respite care during a hospice coinsurance period may not exceed the inpatient hospital deductible applicable for the year in which the hospice coinsurance period began.</P> <P>(3) The individual hospice coinsurance period—</P> <P>(i) Begins on the first day an election filed in accordance with § 418.24 is in effect for the beneficiary; and</P> <P>(ii) Ends with the close of the first period of 14 consecutive days on each of which an election is not in effect for the beneficiary.</P> </SECTION> <SECTION> <SECTNO>§ 418.402</SECTNO> <SUBJECT>Individual liability for services that are not considered hospice care.</SUBJECT> <P>Medicare payment to the hospice discharges an individual's liability for payment for all services, other than the hospice coinsurance amounts described in § 418.400, that are considered covered hospice care (as described in § 418.202). The individual is liable for the Medicare deductibles and coinsurance payments and for the difference between the reasonable and actual charge on unassigned claims on other covered services that are not considered hospice care. Examples of services not considered hospice care include: Services furnished before or after a hospice election period; services of the individual's attending physician, if the attending physician is not an employee of or working under an arrangement with the hospice; or Medicare services received for the treatment of an illness or injury not related to the individual's terminal condition.</P> </SECTION> <SECTION> <SECTNO>§ 418.405</SECTNO> <SUBJECT>Effect of coinsurance liability on Medicare payment.</SUBJECT> <P>The Medicare payment rates established by CMS in accordance with § 418.306 are not reduced when the individual is liable for coinsurance payments. Instead, when establishing the payment rates, CMS offsets the estimated cost of services by an estimate of average coinsurance amounts hospices collect.</P> <CITA>[56 FR 26919, June 12, 1991]</CITA> </SECTION> </SUBPART> <PART> <EAR>Pt. 419</EAR> <HD SOURCE="HED">PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES</HD> <CONTENTS> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions</HD> <SECHD>Sec.</SECHD> <SECTNO>419.1</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <SECTNO>419.2</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Categories of Hospitals and Services Subject to and Excluded From the Hospital Outpatient Prospective Payment System</HD> <SECTNO>419.20</SECTNO> <SUBJECT>Hospitals subject to the hospital outpatient prospective payment system.</SUBJECT> <SECTNO>419.21</SECTNO> <SUBJECT>Hospital outpatient services subject to the outpatient prospective payment system.</SUBJECT> <SECTNO>419.22</SECTNO> <SUBJECT>Hospital outpatient services excluded from payment under the hospital outpatient prospective payment system.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Basic Methodology for Determining Prospective Payment Rates for Hospital Outpatient Services</HD> <SECTNO>419.30</SECTNO> <SUBJECT>Base expenditure target for calendar year 1999.</SUBJECT> <SECTNO>419.31</SECTNO> <SUBJECT>Ambulatory payment classification (APC) system and payment weights.</SUBJECT> <SECTNO>419.32</SECTNO> <SUBJECT>Calculation of prospective payment rates for hospital outpatient services.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Payments to Hospitals</HD> <SECTNO>419.40</SECTNO> <SUBJECT>Payment concepts.</SUBJECT> <SECTNO>419.41</SECTNO> <SUBJECT>Calculation of national beneficiary copayment amounts and national Medicare program payment amounts.<PRTPAGE P="193"/> </SUBJECT> <SECTNO>419.42</SECTNO> <SUBJECT>Hospital election to reduce copayment.</SUBJECT> <SECTNO>419.43</SECTNO> <SUBJECT>Adjustments to national program payment and beneficiary copayment amounts.</SUBJECT> <SECTNO>419.44</SECTNO> <SUBJECT>Payment reductions for surgical procedures.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Updates</HD> <SECTNO>419.50</SECTNO> <SUBJECT>Annual updates.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Limitations on Review</HD> <SECTNO>419.60</SECTNO> <SUBJECT>Limitations on administrative and judicial review.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart G—Transitional Pass-through Payments</HD> <SECTNO>419.62</SECTNO> <SUBJECT>Transitional pass-through payments: General rules.</SUBJECT> <SECTNO>419.64</SECTNO> <SUBJECT>Transitional pass-through payments: Drugs and biologicals.</SUBJECT> <SECTNO>419.66</SECTNO> <SUBJECT>Transitional pass-through payments: Medical devices.</SUBJECT> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart H—Transitional Corridors</HD> <SECTNO>419.70</SECTNO> <SUBJECT>Transitional adjustment to limit decline in payment.</SUBJECT> </SUBPART> </CONTENTS> <AUTH> <HD SOURCE="HED">Authority:</HD> <P>Secs. 1102, 1833(t), and 1871 of the Social Security Act (42 U.S.C. 1302, 1395l(t), and 1395hh).</P> </AUTH> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>65 FR 18542, Apr. 7, 2000, unless otherwise noted.</P> </SOURCE> <SUBPART> <HD SOURCE="HED">Subpart A—General Provisions</HD> <SECTION> <SECTNO>§ 419.1</SECTNO> <SUBJECT>Basis and scope.</SUBJECT> <P>(a) <E T="03">Basis.</E> This part implements section 1833(t) of the Act by establishing a prospective payment system for services furnished on or after July 1, 2000 by hospital outpatient departments to Medicare beneficiaries who are registered on hospital records as outpatients.</P> <P>(b) <E T="03">Scope.</E> This subpart describes the basis of payment for outpatient hospital services under the prospective payment system. Subpart B sets forth the categories of hospitals and services that are subject to the outpatient hospital prospective payment system and those categories of hospitals and services that are excluded from the outpatient hospital prospective payment system. Subpart C sets forth the basic methodology by which prospective payment rates for hospital outpatient services are determined. Subpart D describes Medicare payment amounts, beneficiary copayment amounts, and methods of payment to hospitals under the hospital outpatient prospective payment system. Subpart E describes how the hospital outpatient prospective payment system may be updated. Subpart F describes limitations on administrative and judicial review. Subpart G describes the transitional payment adjustments that are made before 2004 to limit declines in payment for outpatient services.</P> </SECTION> <SECTION> <SECTNO>§ 419.2</SECTNO> <SUBJECT>Basis of payment.</SUBJECT> <P>(a) <E T="03">Unit of payment.</E> Under the hospital outpatient prospective payment system, predetermined amounts are paid for designated services furnished to Medicare beneficiaries. These services are identified by codes established under the Centers for Medicare & Medicaid Services Common Procedure Coding System (HCPCS). The prospective payment rate for each service or procedure for which payment is allowed under the hospital outpatient prospective payment system is determined according to the methodology described in subpart C of this part. The manner in which the Medicare payment amount and the beneficiary copayment amount for each service or procedure are determined is described in subpart D of this part.</P> <P>(b) <E T="03">Determination of hospital outpatient prospective payment rates: Included costs.</E> The prospective payment system establishes a national payment rate, standardized for geographic wage differences, that includes operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis. In general, these costs include, but are not limited to—</P> <P>(1) Use of an operating suite, procedure room, or treatment room;</P> <P>(2) Use of recovery room;</P> <P>(3) Use of an observation bed;</P> <P>(4) Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations;</P> <P>(5) Supplies and equipment for administering and monitoring anesthesia or sedation;</P> <P>(6) Intraocular lenses (IOLs);<PRTPAGE P="194"/> </P> <P>(7) Incidental services such as venipuncture;</P> <P>(8) Capital-related costs;</P> <P>(9) Implantable items used in connection with diagnostic X-ray tests, diagnostic laboratory tests, and other diagnostic tests;</P> <P>(10) Durable medical equipment that is implantable;</P> <P>(11) Implantable prosthetic devices (other than dental) which replace all or part of an internal body organ (including colostomy bags and supplies directly related to colostomy care), including replacement of these devices; and</P> <P>(12) Costs incurred to procure donor tissue other than corneal tissue.</P> <P>(c) <E T="03">Determination of hospital outpatient prospective payment rates: Excluded costs.</E> The following costs are excluded from the hospital outpatient prospective payment system.</P> <P>(1) The costs of direct graduate medical education activities as described in §§ 413.75 through 413.83 of this chapter.</P> <P>(2) The costs of nursing and allied health programs as described in § 413.85 of this chapter.</P> <P>(3) The costs associated with interns and residents not in approved teaching programs as described in § 415.202 of this chapter.</P> <P>(4) The costs of teaching physicians attributable to Part B services for hospitals that elect cost-based reimbursement for teaching physicians under § 415.160.</P> <P>(5) The reasonable costs of anesthesia services furnished to hospital outpatients by qualified nonphysician anesthetists (certified registered nurse anesthetists and anesthesiologists' assistants) employed by the hospital or obtained under arrangements, for hospitals that meet the requirements under § 412.113(c) of this chapter.</P> <P>(6) Bad debts for uncollectible deductibles and coinsurances as described in § 413.89(b) of this chapter.</P> <P>(7) Organ acquisition costs paid under Part B.</P> <P>(8) Corneal tissue acquisition costs.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 66 FR 59922, Nov. 30, 2001; 70 FR 47490, Aug. 12, 2005]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart B—Categories of Hospitals and Services Subject to and Excluded From the Hospital Outpatient Prospective Payment System</HD> <SECTION> <SECTNO>§ 419.20</SECTNO> <SUBJECT>Hospitals subject to the hospital outpatient prospective payment system.</SUBJECT> <P>(a) <E T="03">Applicability.</E> The hospital outpatient prospective payment system is applicable to any hospital participating in the Medicare program, except those specified in paragraph (b) of this section, for services furnished on or after August 1, 2000.</P> <P>(b) <E T="03">Hospitals excluded from the outpatient prospective payment system.</E> (1) Those services furnished by Maryland hospitals that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act are excluded from the hospital outpatient prospective payment system.</P> <P>(2) Critical access hospitals (CAHs) are excluded from the hospital outpatient prospective payment system.</P> <P>(3) A hospital located outside one of the 50 States, the District of Columbia, and Puerto Rico is excluded from the hospital outpatient prospective payment system.</P> <P>(4) A hospital of the Indian Health Service.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 66 FR 59922, Nov. 30, 2001]</CITA> </SECTION> <SECTION> <SECTNO>§ 419.21</SECTNO> <SUBJECT>Hospital outpatient services subject to the outpatient prospective payment system.</SUBJECT> <P>Except for services described in § 419.22, effective for services furnished on or after July 1, 2000, payment is made under the hospital outpatient prospective payment system for the following:</P> <P>(a) Medicare Part B services furnished to hospital outpatients designated by the Secretary under this part.</P> <P>(b) Services designated by the Secretary that are covered under Medicare Part B when furnished to hospital inpatients who are either not entitled to benefits under Part A or who have exhausted their Part A benefits but are entitled to benefits under Part B of the program.<PRTPAGE P="195"/> </P> <P>(c) Partial hospitalization services furnished by community mental health centers (CMHCs).</P> <P>(d) The following medical and other health services furnished by a comprehensive outpatient rehabilitation facility (CORF) when they are provided outside the patient's plan (of care); or by a home health agency (HHA) to patients who are not under an HHA plan or treatment; or by a hospice program furnishing services to patients outside the hospice benefit:</P> <P>(1) Antigens.</P> <P>(2) Splints and casts.</P> <P>(3) Hepatitis B vaccine.</P> <P>(e) Effective January 1, 2005, an initial preventive physical examination, as defined in § 410.16 of this chapter, if the examination is performed no later than 6 months after the individual's initial Part B coverage date that begins on or after January 1, 2005.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 67 FR 66813, Nov. 1, 2002; 69 FR 65863, Nov. 15, 2004]</CITA> </SECTION> <SECTION> <SECTNO>§ 419.22</SECTNO> <SUBJECT>Hospital outpatient services excluded from payment under the hospital outpatient prospective payment system.</SUBJECT> <P>The following services are not paid for under the hospital outpatient prospective payment system:</P> <P>(a) Physician services that meet the requirements of § 415.102(a) of this chapter for payment on a fee schedule basis.</P> <P>(b) Nurse practitioner and clinical nurse specialist services, as defined in section 1861(s)(2)(K)(ii) of the Act.</P> <P>(c) Physician assistant services, as defined in section 1861(s)(2)(K)(i) of the Act.</P> <P>(d) Certified nurse-midwife services, as defined in section 1861(gg) of the Act.</P> <P>(e) Services of qualified psychologists, as defined in section 1861(ii) of the Act.</P> <P>(f) Services of an anesthetist as defined in § 410.69 of this chapter.</P> <P>(g) Clinical social worker services as defined in section 1861(hh)(2) of the Act.</P> <P>(h) Outpatient therapy services described in section 1833(a)(8) of the Act.</P> <P>(i) Ambulance services, as described in section 1861(v)(1)(U) of the Act, or, if applicable, the fee schedule established under section 1834(l).</P> <P>(j) Except as provided in § 419.22(b)(11), prosthetic devices, prosthetics, prosthetic supplies, and orthotic devices.</P> <P>(k) Except as provided in § 419.2(b)(10), durable medical equipment supplied by the hospital for the patient to take home.</P> <P>(l) Clinical diagnostic laboratory services.</P> <P>(m) Services for patients with ESRD that are paid under the ESRD composite rate and drugs and supplies furnished during dialysis but not included in the composite rate.</P> <P>(n) Services and procedures that the Secretary designates as requiring inpatient care.</P> <P>(o) Hospital outpatient services furnished to SNF residents (as defined in § 411.15(p) of this chapter) as part of the patient's resident assessment or comprehensive care plan (and thus included under the SNF PPS) that are furnished by the hospital “under arrangements” but billable only by the SNF, regardless of whether or not the patient is in a Part A SNF stay.</P> <P>(p) Services that are not covered by Medicare by statute.</P> <P>(q) Services that are not reasonable or necessary for the diagnosis or treatment of an illness or disease.</P> <P>(r) Services defined in § 419.21(b) that are furnished to inpatients of hospitals that do not submit claims for outpatient services under Medicare Part B.</P> <P>(s) Effective December 8, 2003, screening mammography services and effective January 1, 2005, diagnostic mammography services.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 66 FR 59922, Nov. 30, 2001; 69 FR 65863, Nov. 15, 2004]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart C—Basic Methodology for Determining Prospective Payment Rates for Hospital Outpatient Services</HD> <SECTION> <SECTNO>§ 419.30</SECTNO> <SUBJECT>Base expenditure target for calendar year 1999.</SUBJECT> <P>(a) CMS estimates the aggregate amount that would be payable for hospital outpatient services in calendar year 1999 by summing—<PRTPAGE P="196"/> </P> <P>(1) The total amounts that would be payable from the Trust Fund for covered hospital outpatient services without regard to the outpatient prospective payment system described in this part; and</P> <P>(2) The total amounts of coinsurance that would be payable by beneficiaries to hospitals for covered hospital outpatient services without regard to the outpatient prospective payment system described in this part.</P> <P>(b) The estimated aggregate amount under paragraph (a) of this section is determined as though the deductible required under section 1833(b) of the Act did not apply.</P> </SECTION> <SECTION> <SECTNO>§ 419.31</SECTNO> <SUBJECT>Ambulatory payment classification (APC) system and payment weights.</SUBJECT> <P>(a) <E T="03">APC groups.</E> (1) CMS classifies outpatient services and procedures that are comparable clinically and in terms of resource use into APC groups. Except as specified in paragraph (a)(2) of this section, items and services within a group are not comparable with respect to the use of resources if the highest median cost for an item or service within the group is more than 2 times greater than the lowest median cost for an item or service within the group.</P> <P>(2) CMS may make exceptions to the requirements set forth in paragraph (a)(1) in unusual cases, such as low volume items and services, but may not make such an exception in the case of a drug or biological that has been designated as an orphan drug under section 526 of the Federal Food, Drug and Cosmetic Act.</P> <P>(3) The payment rate determined for an APC group in accordance with § 419.32, and the copayment amount and program payment amount determined for an APC group in accordance with subpart D of this part, apply to every HCPCS code classified within an APC group.</P> <P>(b) <E T="03">APC weighting factors.</E> (1) Using hospital outpatient claims data from calendar year 1996 and data from the most recent available hospital cost reports, CMS determines the median costs for the services and procedures within each APC group.</P> <P>(2) CMS assigns to each APC group an appropriate weighting factor to reflect the relative median costs for the services within the APC group compared to the median costs for the services in all APC groups.</P> <P>(c) <E T="03">Standardizing amounts.</E> (1) CMS determines the portion of costs determined in paragraph (b)(1) of this section that is labor-related. This is known as the “labor-related portion” of hospital outpatient costs.</P> <P>(2) CMS standardizes the median costs determined in paragraph (b)(1) of this section by adjusting for variations in hospital labor costs across geographic areas.</P> </SECTION> <SECTION> <SECTNO>§ 419.32</SECTNO> <SUBJECT>Calculation of prospective payment rates for hospital outpatient services.</SUBJECT> <P>(a) <E T="03">Conversion factor for 1999.</E> CMS calculates a conversion factor in such a manner that payment for hospital outpatient services furnished in 1999 would have equaled the base expenditure target calculated in § 419.30, taking into account APC group weights and estimated service frequencies and reduced by the amounts that would be payable in 1999 as outlier payments under § 419.43(d) and transitional pass-through payments under § 419.43(e).</P> <P>(b) <E T="03">Conversion factor for calendar year 2000 and subsequent years.</E> (1) Subject to paragraph (b)(2) of this section, the conversion factor for a calendar year is equal to the conversion factor calculated for the previous year adjusted as follows:</P> <P>(i) For calendar year 2000, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act reduced by one percentage point.</P> <P>(ii) For calendar year 2001—</P> <P>(A) For services furnished on or after January 1, 2001 and before April 1, 2001, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act reduced by one percentage point; and</P> <P>(B) For services furnished on or after April 1, 2001 and before January 1, 2002, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act, and increased by a transitional <PRTPAGE P="197"/>percentage allowance equal to 0.32 percent.</P> <P>(iii) For the portion of calendar year 2002 that is affected by these rules, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act reduced by one percentage point, without taking into account the transitional percentage allowance referenced in § 419.32(b)(ii)(B).</P> <P>(iv) For calendar year 2003 and subsequent years, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act.</P> <P>(2) Beginning in calendar year 2000, CMS may substitute for the hospital inpatient market basket percentage in paragraph (b) of this section a market basket percentage increase that is determined and applied to hospital outpatient services in the same manner that the hospital inpatient market basket percentage increase is determined and applied to inpatient hospital services.</P> <P>(c) <E T="03">Payment rates.</E> The payment rate for services and procedures for which payment is made under the hospital outpatient prospective payment system is the product of the conversion factor calculated under paragraph (a) or paragraph (b) of this section and the relative weight determined under § 419.31(b).</P> <P>(d) <E T="03">Budget neutrality.</E> (1) CMS adjusts the conversion factor as needed to ensure that updates and adjustments under § 419.50(a) are budget neutral.</P> <P>(2) In determining adjustments for 2004 and 2005, CMS will not take into account any additional expenditures per section 1833(t)(14) of the Act that would not have been made but for enactment of section 621 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 66 FR 59922, Nov. 30, 2001; 67 FR 9568, Mar. 1, 2002; 69 FR 832, Jan. 6, 2004]</CITA> <EFFDNOT> <HD SOURCE="HED">Effective Date Note:</HD> <P>At 66 FR 59922, Nov. 30, 2001, § 41932 was amended by revising paragraph (b)(1), effective Jan. 1, 2002. At 66 FR 67494, Dec. 31, 2001, paragraph (b)(1)(iii) was delayed indefinitely.</P> </EFFDNOT> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart D—Payments to Hospitals</HD> <SECTION> <SECTNO>§ 419.40</SECTNO> <SUBJECT>Payment concepts.</SUBJECT> <P>(a) In addition to the payment rate described in § 419.32, for each APC group there is a predetermined beneficiary copayment amount as described in § 419.41(a). The Medicare program payment amount for each APC group is calculated by applying the program payment percentage as described in § 419.41(b).</P> <P>(b) For purposes of this section—</P> <P>(1) Coinsurance percentage is calculated as the difference between the program payment percentage and 100 percent. The coinsurance percentage in any year is thus defined for each APC group as the greater of the following: the ratio of the APC group unadjusted copayment amount to the annual APC group payment rate, or 20 percent.</P> <P>(2) Program payment percentage is calculated as the lower of the following: the ratio of the APC group payment rate minus the APC group unadjusted copayment amount, to the APC group payment rate, or 80 percent.</P> <P>(3) Unadjusted copayment amount is calculated as 20 percent of the wage-adjusted national median of charges for services within an APC group furnished during 1996, updated to 1999 using an actuarial projection of charge increases for hospital outpatient department services during the period 1996 to 1999.</P> <P>(c) <E T="03">Limitation of copayment amount to inpatient hospital deductible amount.</E> The copayment amount for a procedure performed in a year cannot exceed the amount of the inpatient hospital deductible established under section 1813(b) of the Act for that year.</P> <CITA>[66 FR 59922, Nov. 30, 2001]</CITA> </SECTION> <SECTION> <SECTNO>§ 419.41</SECTNO> <SUBJECT>Calculation of national beneficiary copayment amounts and national Medicare program payment amounts.</SUBJECT> <P>(a) To calculate the unadjusted copayment amount for each APC group, CMS—</P> <P>(1) Standardizes 1996 hospital charges for the services within each APC group to offset variations in hospital labor costs across geographic areas;<PRTPAGE P="198"/> </P> <P>(2) Identifies the median of the wage-neutralized 1996 charges for each APC group; and</P> <P>(3) Determines the value equal to 20 percent of the wage-neutralized 1996 median charge for each APC group and multiplies that value by an actuarial projection of increases in charges for hospital outpatient department services during the period 1996 to 1999. The result is the unadjusted beneficiary copayment amount for the APC group.</P> <P>(b) CMS calculates annually the program payment percentage for every APC group on the basis of each group's unadjusted copayment amount and its payment rate after the payment rate is adjusted in accordance with § 419.32.</P> <P>(c) To determine payment amounts due for a service paid under the hospital outpatient prospective payment system, CMS makes the following calculations:</P> <P>(1) Makes the wage index adjustment in accordance with § 419.43.</P> <P>(2) Subtracts the amount of the applicable Part B deductible provided under § 410.160 of this chapter.</P> <P>(3) Multiplies the remainder by the program payment percentage for the group to determine the preliminary Medicare program payment amount.</P> <P>(4) Subtracts the program payment amount from the amount determined in paragraph (c)(2) of this section to determine the copayment amount.</P> <P>(i) The copayment amount for an APC cannot exceed the amount of the inpatient hospital deductible, established in accordance with § 409.82 of this chapter, for that year. For purposes of this paragraph (c)—</P> <P>(A) Effective for drugs and biologicals furnished on or after January 1, 2001, the copayment amount for multiple APCs for a single drug or biological furnished on the same day will be aggregated and treated as the copayment amount for one APC.</P> <P>(B) Effective for drugs and biologicals furnished on or after July 1, 2001, the copayment amount for the APC or APCs for a drug or biological furnished on the same day will be aggregated with the copayment amount for the APC that reflects the administration of the drug or biological furnished on that day and treated as the copayment amount for one APC.</P> <P>(ii) Effective for services furnished from April 1, 2001 through December 31, 2001, the national unadjusted coinsurance rate for an APC cannot exceed 57 percent of the prospective payment rate for that APC.</P> <P>(iii) The national unadjusted coinsurance rate for an APC cannot exceed 55 percent in calendar years 2002 and 2003; 50 percent in calendar year 2004; 45 percent in calendar year 2005; and 40 percent in calendar year 2006 and thereafter.</P> <P>(iv) The copayment amount is computed as if the adjustments under § 419.43(d) and (e) (and any adjustment made under § 419.43(f) in relation to these adjustments) had not been paid.</P> <P>(5) Adds the amount by which the copayment amount would have exceeded the inpatient hospital deductible for that year to the preliminary Medicare program payment amount determined in paragraph (c)(3) of this section to determine the final Medicare program payment amount.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 65 FR 67829, Nov. 13, 2000; 66 FR 59923, Nov. 30, 2001]</CITA> </SECTION> <SECTION> <SECTNO>§ 419.42</SECTNO> <SUBJECT>Hospital election to reduce coinsurance.</SUBJECT> <P>(a) A hospital may elect to reduce coinsurance for any or all APC groups on a calendar year basis. A hospital may not elect to reduce copayment amounts for some, but not all, services within the same group.</P> <P>(b) A hospital must notify its fiscal intermediary of its election to reduce coinsurance no later than—</P> <P>(1) June 1, 2000, for coinsurance elections for the period July 1, 2000 through December 31, 2000; or</P> <P>(2) December 1 preceding the beginning of each subsequent calendar year.</P> <P>(c) The hospital's election must be properly documented. It must specifically identify the APCs to which it applies and the copayment amount (within the limits identified below) that the hospital has selected for each group.</P> <P>(d) The election of reduced coinsurance remains in effect unchanged during the year for which the election was made.</P> <P>(e) In electing reduced coinsurance, a hospital may elect a copayment amount that is less than that year's <PRTPAGE P="199"/>wage-adjusted copayment amount for the group but not less than 20 percent of the APC payment rate as determined in § 419.32.</P> <P>(f) The hospital may advertise and otherwise disseminate information concerning the reduced level of coinsurance that it has elected. All advertisements and information furnished to Medicare beneficiaries must specify that the coinsurance reductions advertised apply only to the specified services of that hospital and that coinsurance reductions are available only for hospitals that choose to reduce coinsurance for hospital outpatient services and are not allowed in any other ambulatory settings or physician offices.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 65 FR 67829, Nov. 13, 2000; 66 FR 59923, Nov. 30, 2001]</CITA> </SECTION> <SECTION> <SECTNO>§ 419.43</SECTNO> <SUBJECT>Adjustments to national program payment and beneficiary copayment amounts.</SUBJECT> <P>(a) <E T="03">General rule.</E> CMS determines national prospective payment rates for hospital outpatient department services and determines a wage adjustment factor to adjust the portion of the APC payment and national beneficiary copayment amount attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner.</P> <P>(b) <E T="03">Labor-related portion of payment and copayment rates for hospital outpatient services.</E> CMS determines the portion of hospital outpatient costs attributable to labor and labor-related costs (known as the “labor-related portion” of hospital outpatient costs) in accordance with § 419.31(c)(1).</P> <P>(c) <E T="03">Wage index factor.</E> CMS uses the hospital inpatient prospective payment system wage index established in accordance with part 412 of this chapter to make the adjustment referred to in paragraph (a) of this section.</P> <P>(d) <E T="03">Outlier adjustment</E>—(1) <E T="03">General rule.</E> Subject to paragraph (d)(4) of this section, CMS provides for an additional payment for a hospital outpatient service (or group of services) not excluded under paragraph (f) of this section for which a hospital's charges, adjusted to cost, exceed the following:</P> <P>(i) A fixed multiple of the sum of—</P> <P>(A) The applicable Medicare hospital outpatient payment amount determined under § 419.32(c), as adjusted under § 419.43 (other than for adjustments under this paragraph (d) or paragraph (e) of this section); and</P> <P>(B) Any transitional pass-through payment under paragraph (e) of this section.</P> <P>(ii) At the option of CMS, a fixed dollar amount.</P> <P>(2) <E T="03">Amount of adjustment.</E> The amount of the additional payment under paragraph (d)(1) of this section is determined by CMS and approximates the marginal cost of care beyond the applicable cutoff point under paragraph (d)(1) of this section.</P> <P>(3) <E T="03">Limit on aggregate outlier adjustments</E>—(i) <E T="03">In general.</E> The total of the additional payments made under this paragraph (d) for covered hospital outpatient department services furnished in a year (as estimated by CMS before the beginning of the year) may not exceed the applicable percentage specified in paragraph (d)(3)(ii) of this section of the total program payments (sum of both the Medicare and beneficiary payments to the hospital) estimated to be made under this part for all hospital outpatient services furnished in that year. If this paragraph is first applied to less than a full year, the limit applies only to the portion of the year.</P> <P>(ii) <E T="03">Applicable percentage.</E> For purposes of paragraph (d)(3)(i) of this section, the term “applicable percentage” means a percentage specified by CMS up to (but not to exceed)—</P> <P>(A) For a year (or portion of a year) before 2004, 2.5 percent; and</P> <P>(B) For 2004 and thereafter, 3.0 percent.</P> <P>(4) <E T="03">Transitional authority.</E> In applying paragraph (d)(1) of this section for hospital outpatient services furnished before January 1, 2002, CMS may—</P> <P>(i) Apply paragraph (d)(1) of this section to a bill for these services related to an outpatient encounter (rather than for a specific service or group of services) using hospital outpatient payment amounts and transitional pass-through payments covered under the bill; and<PRTPAGE P="200"/> </P> <P>(ii) Use an appropriate cost-to-charge ratio for the hospital or CMHC (as determined by CMS), rather than for specific departments within the hospital.</P> <P>(e) <E T="03">Budget neutrality.</E> CMS establishes payment under paragraph (d) of this section in a budget-neutral manner excluding services and groups specified in paragraph (f) of this section.</P> <P>(f) <E T="03">Excluded services and groups.</E> Drugs and biologicals that are paid under a separate APC and devices of brachytherapy, consisting of a seed or seeds (including a radioactive source) are excluded from qualification for outlier payments.</P> <P>(g) <E T="03">Payment adjustment for certain rural hospitals</E>—(1) <E T="03">General rule.</E> CMS provides for additional payment for covered hospital outpatient services not excluded under paragraph (g)(4) of this section, furnished on or after January 1, 2006, if the hospital—</P> <P>(i) Is a sole community hospital under § 412.92 of this chapter; and</P> <P>(ii) Is located in a rural area as defined in § 412.64(b) of this chapter or is treated as being located in a rural area under § 412.103 of this chapter.</P> <P>(2) <E T="03">Amount of adjustment.</E> The amount of the additional payment under paragraph (g)(1) of this section is determined by CMS and is based on the difference between costs incurred by hospitals that meet the criteria in paragraphs (g)(1)(i) and (g)(1)(ii) of this section and costs incurred by hospitals located in urban areas.</P> <P>(3) <E T="03">Budget neutrality.</E> CMS establishes the payment adjustment under paragraph (g)(2) of this section in a budget neutral manner, excluding services and groups specified in paragraph (g)(4) of this section.</P> <P>(4) <E T="03">Excluded services and groups.</E> Drugs and biologicals that are paid under a separate APC, devices of brachytheraphy consisting of a seed or seeds (including a radioactive source), and devices paid under § 419.66 are excluded from qualification for the payment adjustment in paragraph (g)(2) of this section.</P> <P>(5) <E T="03">Copayment.</E> The payment adjustment in paragraph (g)(2) of this section is applied before calculating copayment amounts.</P> <P>(6) <E T="03">Outliers.</E> The payment adjustment in paragraph (g)(2) of this section is applied before calculating outlier payments.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 65 FR 47677, Aug. 3, 2000; 66 FR 55856, Nov. 2, 2001; 69 FR 832, Jan. 6, 2004; 70 FR 68727, Nov. 10, 2005; 70 FR 76178, Dec. 23, 2005]</CITA> </SECTION> <SECTION> <SECTNO>§ 419.44</SECTNO> <SUBJECT>Payment reductions for surgical procedures.</SUBJECT> <P>(a) <E T="03">Multiple surgical procedures.</E> When more than one surgical procedure for which payment is made under the hospital outpatient prospective payment system is performed during a single surgical encounter, the Medicare program payment amount and the beneficiary copayment amount are based on—</P> <P>(1) The full amounts for the procedure with the highest APC payment rate; and</P> <P>(2) One-half of the full program and the beneficiary payment amounts for all other covered procedures.</P> <P>(b) <E T="03">Terminated procedures.</E> When a surgical procedure is terminated prior to completion due to extenuating circumstances or circumstances that threaten the well-being of the patient, the Medicare program payment amount and the beneficiary copayment amount are based on—</P> <P>(1) The full amounts if the procedure is discontinued after the induction of anesthesia or after the procedure is started; or</P> <P>(2) One-half of the full program and the beneficiary coinsurance amounts if the procedure is discontinued after the patient is prepared for surgery and taken to the room where the procedure is to be performed but before anesthesia is induced.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart E—Updates</HD> <SECTION> <SECTNO>§ 419.50</SECTNO> <SUBJECT>Annual review.</SUBJECT> <P>(a) <E T="03">General rule.</E> Not less often than annually, CMS reviews and updates groups, relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors.</P> <P>(b) <E T="03">Consultation requirement.</E> CMS will consult with an expert outside advisory <PRTPAGE P="201"/>panel composed of an appropriate selection of representatives of providers to review (and advise CMS concerning) the clinical integrity of the groups and weights. The panel may use data collected or developed by entities and organizations (other than the Department of Health and Human Services) in conducting the review.</P> <P>(c) <E T="03">Effective dates.</E> CMS conducts the first annual review under paragraph (a) of this section in 2001 for payments made in 2002.</P> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart F—Limitations on Review</HD> <SECTION> <SECTNO>§ 419.60</SECTNO> <SUBJECT>Limitations on administrative and judicial review.</SUBJECT> <P>There can be no administrative or judicial review under sections 1869 and 1878 of the Act or otherwise of the following:</P> <P>(a) The development of the APC system, including—</P> <P>(1) Establishment of the groups and relative payment weights;</P> <P>(2) Wage adjustment factors;</P> <P>(3) Other adjustments; and</P> <P>(4) Methods for controlling unnecessary increases in volume.</P> <P>(b) The calculation of base amounts described in section 1833(t)(3) of the Act.</P> <P>(c) Periodic adjustments described in section 1833(t)(9) of the Act.</P> <P>(d) The establishment of a separate conversion factor for hospitals described in section 1886(d)(1)(B)(v) of the Act.</P> <P>(e) The determination of the fixed multiple, or a fixed dollar cutoff amount, the marginal cost of care, or applicable percentage under § 419.43(d) or the determination of insignificance of cost, the duration of the additional payments (consistent with subpart G of this part), the determination of initial and new categories under § 419.66, the portion of the Medicare hospital outpatient fee schedule amount associated with particular devices, drugs, or biologicals, and the application of any pro rata reduction under § 419.62(c).</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 66 FR 55856, Nov. 2, 2001]</CITA> </SECTION> </SUBPART> <SUBPART> <HD SOURCE="HED">Subpart G—Transitional Pass-through Payments</HD> <SOURCE> <HD SOURCE="HED">Source:</HD> <P>66 FR 55856, Nov. 2, 2001, unless otherwise noted.</P> </SOURCE> <SECTION> <SECTNO>§ 419.62</SECTNO> <SUBJECT>Transitional pass-through payments: General rules.</SUBJECT> <P>(a) <E T="03">General.</E> CMS provides for additional payments under §§ 419.64 and 419.66 for certain innovative medical devices, drugs, and biologicals.</P> <P>(b) <E T="03">Budget neutrality.</E> CMS establishes the additional payments under §§ 419.64 and 419.66 in a budget neutral manner.</P> <P>(c) <E T="03">Uniform prospective reduction of pass-through payments.</E> (1) If CMS estimates before the beginning of a calendar year that the total amount of pass-through payments under §§ 419.64 and 419.66 for the year would exceed the applicable percentage (as described in paragraph (c)(2) of this section) of the total amount of Medicare payments under the outpatient prospective payment system. CMS will reduce, pro rata, the amount of each of the additional payments under §§ 419.64 and 419.66 for that year to ensure that the applicable percentage is not exceeded.</P> <P>(2) The applicable percentages are as follows:</P> <P>(i) For a year before CY 2004, the applicable percentage is 2.5 percent.</P> <P>(ii) For 2004 and subsequent years, the applicable percentage is a percentage specified by CMS up to (but not to exceed) 2.0 percent.</P> <P>(d) <E T="03">CY 2002 incorporated amount.</E> For the portion of CY 2002 affected by these rules, CMS incorporated 75 percent of the estimated pass-through costs (before the incorporation and any pro rata reduction) for devices into the procedure APCs associated with these devices.</P> <CITA>[66 FR 55856, 55865, Nov. 2, 2001; 67 FR 9568, Mar. 1, 2002]</CITA> <EFFDNOT> <HD SOURCE="HED">Effective Date Note:</HD> <P>At 66 FR 55865, Nov. 2, 2001, § 419.62 was amended by adding paragraph (d), effective Jan. 1, 2002. At 66 FR 67494, Dec. 31, 2001, the amendment was delayed indefinitely.</P> </EFFDNOT> </SECTION> <SECTION> <SECTNO>§ 419.64</SECTNO> <SUBJECT>Transitional pass-through payments: Drugs and biologicals.</SUBJECT> <P>(a) <E T="03">Eligibility for pass-through payment.</E> CMS makes a transitional pass-through payment for the following <PRTPAGE P="202"/>drugs and biologicals that are furnished as part of an outpatient hospital service:</P> <P>(1) <E T="03">Orphan drugs.</E> A drug or biological that is used for a rare disease or condition and has been designated as an orphan drug under section 526 of the Federal Food, Drug and Cosmetic Act if payment for the drug or biological as an outpatient hospital service was being made on August 1, 2000.</P> <P>(2) <E T="03">Cancer therapy drugs and biologicals.</E> A drug or biological that is used in cancer therapy, including, but not limited to, a chemotherapeutic agent, an antiemetic, a hematopoietic growth factor, a colony stimulating factor, a biological response modifier, and a bisphosphonate if payment for the drug or biological as an outpatient hospital service was being made on August 1, 2000.</P> <P>(3) <E T="03">Radiopharmaceutical drugs and biological products.</E> A radiopharmaceutical drug or biological product used in diagnostic, monitoring, and therapeutic nuclear medicine services if payment for the drug or biological as an outpatient hospital service was being made on August 1, 2000.</P> <P>(4) <E T="03">Other drugs and biologicals.</E> A drug or biological that meets the following conditions:</P> <P>(i) It was first payable as an outpatient hospital service after December 31, 1996.</P> <P>(ii) CMS has determined the cost of the drug or biological is not insignificant in relation to the amount payable for the applicable APC (as calculated under § 419.32(c)) as defined in paragraph (b) of this section.</P> <P>(b) <E T="03">Cost.</E> CMS determines the cost of a drug or biological to be not insignificant if it meets the following requirements:</P> <P>(1) <E T="03">Services furnished before January 1, 2003.</E> The expected reasonable cost of a drug or biological must exceed 10 percent of the applicable APC payment amount for the service related to the drug or biological.</P> <P>(2) <E T="03">Services furnished after December 31, 2002.</E> CMS considers the average cost of a new drug or biological to be not insignificant if it meets the following conditions:</P> <P>(i) The estimated average reasonable cost of the drug or biological in the category exceeds 10 percent of the applicable APC payment amount for the service related to the drug or biological.</P> <P>(ii) The estimated average reasonable cost of the drug or biological exceeds the cost of the drug or biological portion of the APC payment amount for the related service by at least 25 percent.</P> <P>(iii) The difference between the estimated reasonable cost of the drug or biological and the estimated portion of the APC payment amount for the drug or biological exceeds 10 percent of the APC payment amount for the related service.</P> <P>(c) <E T="03">Limited period of payment.</E> CMS limits the eligibility for a pass-through payment under this section to a period of at least 2 years, but not more than 3 years, that begins as follows:</P> <P>(1) For a drug or biological described in paragraphs (a)(1) through (a)(3) of this section—August 1, 2000.</P> <P>(2) For a drug or biological described in paragraph (a)(4) of this section—the date that CMS makes its first pass-through payment for the drug or biological.</P> <P>(d) <E T="03">Amount of pass-through payment.</E> Subject to any reduction determined under § 419.62(b), the pass-through payment for a drug or biological equals the amount determined under section 1842(o) of the Social Security Act, minus the portion of the APC payment amount that CMS determines is associated with the drug or biological.</P> <CITA>[65 FR 18542, Apr. 7, 2000, as amended at 69 FR 832, Jan. 6, 2004; 69 FR 65863, Nov. 15, 2004]</CITA> </SECTION> <SECT